McDonald's Sees Sustained Demand for Drive-Thru
Drive-thru, delivery and digital sales prove to be an enviable combination for McDonald's Corp.
McDonald's Corp. announced Q3 earnings and also released its new growth strategy which leans on the 3Ds: drive-thru, delivery and digital on Nov. 9.
The brand is among those that is optimizing its drive-thru and planning new store designs and new technology to improve CX.
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.
“In most markets, our drive-thru sales percentage peaked during the second quarter and remains elevated when compared to historical norms," said CFO Kevin Ozan in a Q3 earnings call with analysts. "This safe and convenient service channel has been especially appealing to customers during the pandemic. Similarly, delivery sales have also increased meaningfully across substantially all of our major markets."
With dining rooms closed (or closing again), drive-thrus have dominated off-prem, according to Service Management Group’s (SMG) third annual study of consumers. The NPD Group points to similar findings. 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. Consumers are showing a preference for picking up their own food. 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, according to NPD's research.
In the US, McDonald's comp sales were positive throughout the quarter, benefitting from benefiting from strong average check growth from larger group orders as well as strong performance at the dinner daypart. However, comparable guest counts remained negative for the quarter.
In international operated markets, limited operations remained and government regulations regarding COVID-19 impacted recovery. Negative sales comps for France, Spain, Germany and UK were reported.
- For Q3, global sales comps dropped 2.2%
- Systemwide sales were flat with the prior year
- Monthly comparable sales results improved sequentially for all segments throughout the third quarter of 2020.
- A full earnings release is available here
COVID-19 Update
“We’re pleased with our recovery to date, but we also understand there inevitably will be more starts and stops with virus resurgences. We’re already seeing this in many markets in all parts of the world,” said Ozan.
Q3 began with nearly all McDonald’s globally open for business. As COVID-19 resurges in the US and around the world, since September, there have been numerous instances of government restrictions on operating hours, limited dine-in capacity in most countries and, in some cases, mandated dining room closures. These restrictions are impacting most of the company's key markets outside of the U.S., including France, Germany, Canada and the U.K.
Menu Matters
McDonald's classics - like the Big Mac, Quarter Pounder, Chicken McNuggets and Fries -- make up about 70% of food sales across its top markets.
To improve upon the taste of its burgers, markets around the world are implementing a series of operational, process and formulation changes. These include using new buns toasted to golden brown and an enhanced grilling approach designed to unlock more flavor.
A Renewed Purpose to Drive Greater Impact
In other news, the company is focusing on four areas it says matter most to communities: responsibly sourcing quality ingredients, driving climate action to protect the planet, connecting with communities in times of need, and increasing focus on equity by providing opportunity for restaurant crew.
This purpose translates into action through: support for farming communities; the goal of sourcing 100% of guest packaging from renewable, recycled, or certified sources by 2025; donating millions of pounds of quality food from our supply chain and restaurants to neighbors in need in 2020; and reducing barriers to employment for over 2 million people worldwide.
Marketing Matters
This will all come to life in a new marketing campaign, "Serving Here." To drive connection with consumers, the company will continue to find opportunities to create cultural moments. For example, the Famous Orders promotion in the U.S., so far with Travis Scott and J Balvin.
Affordability is also crucial in today's environment and remains a cornerstone of the McDonald's brand. New packaging “with a modern, refreshing feel and playful touches” is in the works.