McDonald’s to expand mobile phone orders and delivery

AUSTEN HUFFORD
March 2, 2017
AFP 

“Can I take your order?” may be a line of the past if McDonald’s has its way.

The fast-food giant says it will expand its delivery, mobile and kiosk-ordering options as it looks to cut costs and expand access.

The company unveiled a strategy that would try to use technology to keep existing diners, convert casual customers into frequent eaters and regain those lost to competitors.

Even as customers raised their expectations and turned toward restaurants viewed as higher-quality and healthier, “McDonald’s simply didn’t keep pace with them,” the company said in a release.

Chief executive Steve Easterbrook’s took the reins at McDonald’s two years ago, and has pushed the company to enhance operations, simplify the menu and improve the food. The launch of all-day breakfast in October 2015 was its biggest operational change since the 2009 rollout of McCafe coffee drinks.

More restaurants are expected to feature ATM-like kiosks where customers can place orders and skip the front counter entirely. Customers will also be able to order and pay for meals from their phones. McDonald’s will offer table service to some customers who order digitally.

On the road, customers will be able to order through the app and get kerbside delivery. The company derives nearly 70 per cent of its sales from the drive-through.

In the US, France, the UK, Germany and Canada, nearly 75 per cent of the population lives within 5km of a McDonald’s location and the company plans to use its massive footprint of restaurants to deliver directly to them.

Richard Adams, a restaurant industry consultant and former McDonald’s franchisee, noted that the company has been catching up on the digital front, but that it’s not yet known whether options like mobile order-and-pay can help reverse a trend of declining visits. 

“Nobody has proven that it’s a panacea,” he said. 

Mr Adams also noted that the restaurant industry has never been more competitive, with more options for eating out than ever before.

McDonald’s faces competition not just from other big fast-food players, but from newer rivals that largely emphasise freshness and taste, as well as the availability of food at convenience stores like 7-Eleven and supermarkets.

McDonald’s, meanwhile, has touted the changes it is making to improve its core menu, such as cooking its Chicken McNuggets without artificial preservatives and testing fresh beef for some burgers.

McDonald’s said it would spend about $US1.1 billion to renovate existing locations, including about 650 in the US.

The company said it expects system-wide sales growth starting in 2019 of 3 per cent to 5 per cent and earnings per share growth in the high-single digits.

Cost-cutting and refranchsing have been areas of focus. McDonald’s wants to boost its operating margin from the high-20 per cent range to the mid-40 per cent range for 2019 and afterwards. For this year, the company expects selling, general and administrative expenses to decrease about 7 per cent to 8 per cent. 

McDonald’s said it’s on track to refranchise 4000 restaurants by the end of 2017, a year ahead of schedule. 

The company said it’s testing ordering initiatives across many of its markets and is prepared to expand quickly based on the pilot results.

Dow Jones Newswires, AP