McDonald's New Growth Strategy Leverages 3Ds
McDonald’s Corp. is doubling down on the three Ds – digital, delivery and drive-thru – and plans to leverage its competitive strengths and build “a powerful digital experience growth engine” that provides a fast, easy experience for customers.
It’s a key part of McDonald’s new growth strategy, named Accelerating the Arches, which encompasses all aspects of McDonald's business. The strategy also includes “a refreshed purpose to feed and foster the communities” McDonald's and its franchisees serve around the world, and updated values that guide actions and behaviors.
- The brand plans to invest in new, culturally relevant approaches to effectively communicate the story of brand, food and purpose.
- Commit to the Core by tapping into customer demand for the familiar and focusing on serving its most popular items: burgers, chicken and coffee.
New Formats, New Technology
Like Taco Bell, Burger King, Tim Horton’s and Chipotle, McDonalds is also testing new store formats centered around the drive-thru, digital ordering and off premises.
McDonald's says it will test new drive-thru technology to make the customer experience even faster, including automated order taking; a new drive thru express pick-up lane for customers with a digital order; and a restaurant concept that offers drive-thru, delivery and takeaway only. The majority of new restaurants in the U.S. and international markets will include a drive thru.
As restaurants face the realities of doing business during the COVID-19 pandemic, they’re increasingly leaning in to off-premises. McDonald’s focus on the three Ds coincides with similar moves by other brands. Chipotle just announced its first digital-only restaurant. Red Lobster is opening its first ghost kitchen. Brands such as Brinker International and Fazoli’s are launching virtual brands centered around wings, and Wow Bao is among the brands that is leveraging “dark kitchens.”
A New Digital Experience
The acquisition of Dynamic Yield in 2019 adds heft to McDonald’s capabilities to provide customized experiences through its app – and the drive thru as well. The company will begin testing MyMcDonald’s, its “digital experience growth engine” and pilot a new loyalty program in the Phoenix area in the coming weeks. Through the digital tools across this platform, McDonald's will offer customers tailored offers, a new loyalty program and easy way to order and receive McDonald's food through the channel of their choice.
Digital sales are expected exceed $10 billion or nearly 20% of systemwide sales across its top six markets in 2020. McDonald’s plans to launch MyMcDonald's across its top six markets by the end of 2021.
In the past three years, McDonald's has expanded the number of restaurants that offer delivery to about 28,000 restaurants. The brand plans to add the ability to order delivery through the McDonald's app, which is already available in select markets.
Industry-wide, delivery had the strongest visit growth in the quarter, up +106%, but held the smallest traffic share, 9%, of off-premises services, reports The NPD Group. Carry-out held the largest traffic share at 46% with visits up +9%, and drive-thru visits grew by +27% in the third quarter and represented 44% of off-premises visits.
Demand for Drive-Thru
McDonald's has a drive-thru in approximately 65% of its restaurants around the world and, in the U.S., nearly 95% of the approximately 14,000 locations have a drive thru. “In most markets, our drive-thru sales percentage peaked during the second quarter and remains elevated when compared to historical norms. This safe and convenient service channel has been especially appealing to customers during the pandemic,” said CFO Kevin Ozan in a Q3 earnings call with analysts. Drive-thru will be even more critical in the future to meet demand for flexibility and choice. McDonald's is among the brands seeing sustained demand for drive-thru.