McDonald's Expands Further Into Nordic Countries

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In this segment from the MarketFoolery podcast, host Chris Hill is joined by Motley Fool Asset Management's Bill Barker to discuss McDonald's (NYSE: MCD) global expansion efforts. The fast-food giant is planning to open 200 restaurants in Finland, Sweden, Norway, and Denmark over the next 10 years. The two note how successful the company has been since CEO Steve Easterbrook took the reins in 2015.

A full transcript follows the video.

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This video was recorded on April 10, 2018.

Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such.

Chris Hill: McDonald's is expanding its footprint in the Nordic part of the world. McDonald's announced plans to open 200 restaurants in Sweden, Norway, Finland and Denmark. This is going to be over the next decade. I guess the thing that caught my attention was, wow, McDonald's, still expanding. There's still places in the world where they can do that. And by the way, you can look at this story and say, "Well, even collectively, this isn't the biggest market in the world." But on a percentage basis, it's increasing by about a third the number of restaurants that currently exist in those four countries. So, you're welcome, Sweden. More McDonald's coming your way.

Bill Barker: [laughs] You're playing to Sweden. You still feel like you need to apologize for all the times you've botched the Swedish language.

Hill: It was just the one time that I botched the Swedish language. I think Swedish people are keenly aware of how challenging their own language is. They probably are. It's not the easiest language.

Barker: Do you think that's been one of the impediments for McDonald's, getting in there and nailing the language issues? That this is why the delay?

Hill: Maybe. Quentin Tarantino, when he's writing Pulp Fiction, it's a lot easier to write the Royale with Cheese scene because it's French. I don't know what quarter pounder with cheese translates to in Sweden.

Barker: I'm sure you'll be hearing, because there's an avid Swedish audience to which we are playing right now.

Hill: I would say that one of the dozens is in Sweden, yeah.

Barker: You've had multiple Swedish emails, haven't you?

Hill: Well, yeah. I mean, a dozen is more than one, so, sure.

Barker: Oh, one dozen of the dozens.

Hill: Yeah.

Barker: Got it. Yeah, I don't have a lot to say here, because as you say, in absolute terms, it's over a decade, it's 200 restaurants, over four countries. Not that big of a needle mover. But, it's nice that McDonald's still has some places to grow. They've kind of stalled out in some of the bigger markets. On the whole, look, it's a big world. Some places are going to be going well, some places are not going to be. They're having trouble and struggling in India right now, in terms of their franchiser there. And that has taken a break that Domino's is the biggest fast food provider in India now, they supplanted McDonald's. I'm sure over time, they'll improve that situation. But in the meantime, they have the Nordic countries to work with.

Hill: Two things before we dip into the Fool mailbag. The first is, once again, shout out to Steve Easterbrook, the CEO at McDonald's, because he's been CEO for a little over three years, and that stock is up about 75% since he took over. And when I think back on how he entered that job, specifically how he became CEO in early February of 2015, and right out of the gate it was clear that he was going to take his time, that he was going to start talking to franchisees, and he laid it out, saying, "Listen, the first few months of my tenure as CEO, this is what I'm going to be doing. I'm going to be asking a lot of questions, doing a lot of listening, and I'm going to come out with my plan for the future of this restaurant." I think it was May, maybe it was late April, early May, something like that, that's when he came out with the plan that included, "Yeah, of course we're going to do all day breakfast," and that sort of thing.

But just, the confidence that he had when he took over the job to say, "I'm going to take a little bit of time." And, knowing that long-term shareholders, or, I would say, investors who have a long-term mindset, were going to give him that time. He didn't feel the need to rush. He said, "No, I'm going to talk to a lot of people. This is a big company, I'm going to try to get this right." It's really been incredible, what he's done in terms of rewarding shareholders while he's been CEO.

The second thing, and this is a minor thing, but you mentioned it this morning when we were chatting, the word restaurant as associated with McDonald's, you are saying that it still makes you do a little bit of a double take.

Barker: Yeah, it's a little jarring, "McDonald's restaurants," because I guess the image I have, in my head at least, of a restaurant is a little bit more of a sit-down experience than the counter experience. This is not a shot at McDonald's, although we could go in that direction if you have a good line or something, but I feel the same way about Starbucks (NASDAQ: SBUX) also included in the restaurant category.

Hill: For me, I was thinking, the thing that makes me do a double-take is the use of the word store with respect to Starbucks. I see that more often, and that's the thing that gives me pause. It's like, "Starbucks stores." I just think of it as a coffee shop. Yes, there are other things going on. Maybe it's too arduous, and maybe part of this is just, certainly in the business media, they're grouping things by category, so yes, it may not be with wait staff, but McDonald's is a restaurant because you can sit down and eat there. So, I totally understand why, but for me, it's Starbucks, it's the "Starbucks stores" that makes me go, "No, they're not really stores, they're coffee shops."

Hill: I guess my point is, that one doesn't bother me as much as the use of the word store with Starbucks.

Bill Barker has no position in any of the stocks mentioned. Chris Hill owns shares of Starbucks. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.