Dive Brief:
- McDonald's is developing packaging to ensure that delivery orders arrive hot and fresh, CFO Kevin Ozan said during the JP Morgan Gaming, Lodging, Restaurant and Leisure Forum on Friday
- While 2017 and 2018 were marked by the chain's delivery rollout to more than 9,000 U.S. restaurants, this year the burger giant will focus on growing awareness of the offering through additional advertising, he said.
- The restaurant chain will also work on improving drive-thru times this year, which slowed in recent years due to the launch of fresh beef quarter pounders, all-day breakfast and premium products that take longer to make, he said. Low unemployment rates and difficulty keeping restaurants properly staffed also contributed to declines in drive-thru times.
Dive Insight:
Considering McDonald's has already built delivery into a $3 billion business globally, it's no surprise that it is focusing on ramping up its delivery business in the U.S., which is less less established compared to international markets. Guest counts for delivery in the U.S. are still low per day per restaurant, but Ozan said there is enormous opportunity.
Ongoing societal factors are making delivery more important now than in the past, Ozan said, especially as QSR traffic has been declining. Fewer people are dining out in general, delivery is becoming more available, more people are working from home and the population is aging, Ozan said.
"Some of those folks just aren't out and about as much as they used to be," he said. "The challenge will be to continue to find ways to provide the right experience, convenience and value to customers wherever they want to get their food."
Delivery is a 60% to 70% incremental business for McDonald's since it's is still new, but over time it's expected to be less incremental, he said. But that shouldn’t keep people away from delivery, which he expects will just keep growing.
"At some point, you got to be in that game," he said. "If you're not in there, you're losing a whole new group of customers."
Once guests becomes aware of McDonald's partnership with Uber Eats, repeat order rate increase. Customer satisfaction is high and average check is higher than dine-in, Ozan said.
Delivery sales also typically occur in the evening and late-night hours, which are complementary to drive-thru and dine-in traffic, he said.
The fact that McDonald's is looking into new packaging to improve the delivery experience, one that can be hampered by soggy fries, could allow the chain to pull ahead even further against its closest competitors Burger King and Wendy's, both of which are ramping up delivery as well.
With fewer initiatives rolling out this year compared to the last two years, Ozan said he expects drive-thru times will improve since there will be fewer changes that impact operations. Outdoor digital boards will make it easier for customers to order, he said. Considering drive-thru makes up a bulk of sales for many fast food chains, improving drive-thru times will be increasingly important for McDonald's — especially since it had the slowest average time last year compared to its top competitors.
