3Ds Are The ‘Difference Maker’ for McDonald’s
McDonald’s is among the restaurants increasingly leaning in to off-prem, including drive-thru, curbside and to-go operations.
And for good reason. Delivery and drive-thru have been boosting the brand’s bottom line, especially in the U.S. market where most of the 2,000 locations offer both. “They were the difference maker when the pandemic hit and are at the heart of our combined efforts to create a faster, easier better customer experience,” said McDonald's President and CEO Chris Kempczinski in a January 28 earnings call with analysts for Q4 and year ended December 31, 2020.
Digital sales are also on the upswing.
“Digital sales exceeded 10 billion; we are nearly 20% of systemwide sales in 2020 across our top six markets,” Kempczinski added.
Drive-Thru Excellence Defined
McDonald's is among the brands that are optimizing its drive-thru and planning new store designs and new technology to improve CX. McDonald’s has been able to decrease its drive-thru waits, an impressive feat as volume skyrocketed during the pandemic. “We've discovered capacity that we didn't even realize we've had. We think in the last year, we've moved something like 300 million additional cars through our drive-thrus,” said CK. “… A few years ago, I was thinking that we were pretty, pretty maxed out on drive-thru.”
Drive-thru wait times were slashed in 2019 and in again 2020. “Overall we reduced drive-thru times by roughly 30 seconds over the past two years in our major markets,” explained CFO Kevin Ozan during the earnings call.
Here’s how McDonald’s slashed its drive-thru times during the pandemic. “… I think that's a combination of a few things,” explained Ozan. “One is menu simplification and the more limited menu … but also just a big focus on operations around the world, which includes some non-sexy stuff like staffing and positioning of our crew, some certain technology that we put in the restaurants to help the crew monitor the times. And so there's just some basic kind of operating the restaurants efficiently that goes along with the right menu and menu boards.
“And so, there continues to be a big focus on drive-thru operations, especially because we've seen drive-thru continue to be a bigger percentage of our business.”
The global QSR is striving for additional excellence. “…There's still a big focus around the company on continuing to improve those service times,” Ozan added.
The Sales Report
For Q4: global comparable sales declined 1.3% while improving from the prior quarter, reflecting positive comparable sales in the U.S. of 5.5%, and negative comparable sales in the international operated market segment and international developmental licensed segment of 7.4% and 3.6%, respectively.
For 2020: global comparable sales declined 7.7%, reflecting positive comparable sales in the U.S. of 0.4%, and negative comparable sales in the international operated segment and international developmental licensed segment of 15.0% and 10.5%, respectively. Consolidated revenues decreased 10% , and systemwide sales decreased 7%. Full earnings report for Q4 and 2020 can be found here.
The Time to Market
Around the globe, McDonald’s is maximizing its marketing with “sales-building promotions” like 30 deals in 30 days in Australia and Monopoly in Australia, France and Canada, featuring customers’ core favorites. “They are great examples of using our marketing muscle to drive sales without adding complexity to our kitchens,” explained Kempczinski.
Early in the pandemic, McDonald’s rationalized its menu. Its “core classics” account for 70% of its food sales. “They drive growth and profitability and we saw that this past year,” said Kempczinski.
Now the brand is planning to expand its menu. With the chicken wars escalating across QSR brands, McDonald’s wants to be known for its chicken sandwiches and nuggets.
“Developing a reputation for great chicken represent one of our highest ambition. That's why markets are activating multi-tiered strategy and holistic approaches that integrate great products, strong and sustained marketing and operations excellence,” said Kempczinski. Next month the spicy Chicken McNuggets will return and a new crispy chicken sandwich will launch.
New Year, New Initiatives
One of the brands biggest initiatives for the year is rolling out its loyalty program across its top six markets, including the U.S., by the end of the year.
“Our expectation is that that chicken and loyalty, not just for 2021, but frankly, for a longer-term perspective, those are probably two of the most important things we need to get done in a high quality manner,” said Kempczinski.