McDonald’s launched a 24-hour global “day of joy” in 24 cities around the world on Tuesday in an attempt to revive slumping fast-food sales. In January, the company reported a 14% fall in annual profits, to $4.7 billion, and its worst sales in a decade—a cumulative 1% drop from its 34,000 restaurants in 114 countries. The company replaced its CEO in January, but the downward trend continues. In February, sales slumped by 1.7% globally and 4% in the U.S., leading the company to admit earlier this month that there was an “urgent need to evolve with today’s consumers.”
In the U.S., McDonald’s has been losing market share to competitors like Five Guys and Shake Shack. And in China, a scandal over using outdated meat caused the company’s sales in Asia to drop 4.8% in the fourth quarter of 2014. But amidst the gloom there is one promising front, which is expansion into the last two countries in Latin America and the Caribbean that do not have any McDonald’s presence: Bolivia and Cuba.
On Monday, Bolivian press reported that McDonald’s will be returning to the country in April, 13 years after its globally-unprecedented departure in 2002 due to a lack of local interest. It had operated for eight years in five Bolivian cities, but despite trying to adapt to Bolivian tastes and use local products, persistently low earnings pushed the company to leave. The bottom line being that a low-quality McDonald’s meal cost about $3, triple the price that could fetch a full meal elsewhere in La Paz. The exact menu offerings and prices for the upcoming launch haven’t been revealed yet, so it remains to be seen whether or not the market will be more favorable this time around. An investor from the automotive sector is willing to take that gamble, however, and will bring the McDonalds franchise first to the city of Santa Cruz, and later to other parts of Bolivia.
Meanwhile, in January, one of Fidel Castro’s sons, Alex Castro-Soto, said that “Coca-Cola and McDonald’s are welcome in Cuba,” as the country takes “a break from socialism.” This is a sea change from Cuba’s historic denunciation of all manifestations of U.S. “imperialism,” of which McDonald’s is the quintessential economic example, perhaps surpassed only by ExxonMobil in global notoriety. With ties between the U.S. and Cuba on the mend since December, there is a tremendous surge in tourism to see Cuba now – before the widespread predictions of big multinationals like McDonald’s and Starbucks claiming spots in Old Havana come true.
Arcos Dorados, the largest operator of McDonald’s in Latin America, would likely carry out a Cuban expansion. Brazil accounts for half of its total revenues, but Arcos Dorados also has locations in Mexico, Panama, Costa Rica, and nearby Puerto Rico, so Cuba would be a natural extension. It would also help offset the political and economic upheavals harming sales in Venezuela and Argentina, according to the Motley Fool.
Any expansions will provide jobs for locals, and may help McDonald’s global sales to recover. The franchise system that McDonald’s uses means that it will be up to the Bolivian and potentially Cuban entrepreneurs who operate new branches to make them viable. The only McDonald’s in Cuba so far has been operated by the U.S. Navy at its base in Guantánamo Bay, but expect more to be established elsewhere in the coming years.