Dive Brief:
- Drive-thru, which is featured at nearly 95% of McDonald's U.S. locations, allowed for nearly all of the chain's domestic restaurants to remain open during the novel coronavirus pandemic, McDonald's CFO Kevin Ozan said during a Tuesday earnings call with investors. During Q2 2020, drive-thru accounted for nearly 90% of sales as customers shifted to a more contactless experience. The market also saw an uptick in delivery and digital transactions, Ozan said.
- "The number of drive-thrus impacts a market's pace of recovery," Ozan said. "Our drive-thrus overall have proven to be a competitive advantage for us. Markets with a higher percentage of drive-thrus are showing a quicker recovery."
- McDonald's comparable store sales for the U.S. decreased 8.7% during Q2 2020 compared to an increase of 5.7% in the year ago quarter, according to an earnings release. Same-store sales improved as the quarter progressed from a decline of 19.2% in April to a decline of 2.3% in June. U.S. same-store sales have started to recover in July, which is seeing a slightly positive same-store sales growth, Ozan said.
Dive Insight:
McDonald's U.S. drive-thrus have been a bright spot for the company, especially with Q2 global comp sales down nearly 24% compared to an increase of 6.5% in the year-ago quarter. The declines were largely driven by a decrease of 41.4% in same-stores sales for international operated markets and a decline of 24.2% for international developmental licensed markets and corporate. Many of these larger markets rely heavily on dining room business, especially in Europe, where 70% of orders pre-COVID-19 came from dining rooms either for eat-in or takeout, Ozan said.
Drive-thru sales have increased within McDonald’s five biggest international operated markets of Australia, Canada, France, Germany and the U.K., where about 70% of its restaurants have drive-thrus, McDonald's CEO Chris Kempczinski said during the call. Having drive-thrus is a crucial part of getting customers back into dining rooms as well, he said.
"Consumers are more in the habit of going to that restaurant and then they see the dining room [is] open and that leads to a faster recovery on the dining room business," Kempczinski said.
While dining rooms have largely reopened in Europe, they are mostly closed in the U.S., where coronavirus cases have spiked. The chain was slowly reopening its dining rooms, reaching 2,000 units, but paused its plans until the end of August. That means its drive-thrus and delivery channels will continue to be important parts of its U.S. business.
While delivery in markets like Australia made up nearly 10% of sales, that was not true in the U.S. While a number for delivery growth in the U.S. was not disclosed, Ozan said the segment grew significantly during the pandemic, adding that it didn't take away from drive-thru orders and both of these channels grew concurrently.
The company has made significant investments in both of these areas of business, as well as digital transactions, all of which helped the company remain on a steady course during the pandemic. McDonald's plans to make additional investments across these three channels, but will provide details later in the year, Kempczinski said.
So far, it spent $300 million to acquire AI company Dynamic Yield and has installed the system across its U.S. drive-thrus. Last year, it also acquired Apprente, a voice-based conversational tech company, and established a McD Tech Labs team. Within the last 12 months, it has been working on improving operational efficiencies at the drive-thru as well, and globally decreased drive-thru times by an additional 15 to 20 seconds during Q2 2020, Kempczinski said during the call.
