McDonald's digital delivery is a long game, not a fast food fix

Profile picture for user slauchlan By Stuart Lauchlan April 30, 2018
Summary:
McDonald's CEO is taking a commendably pragmatic approach to digital transformation.

McDonalds
Self-Serve

When it comes to takeaway food, despite the upbeat confidence of the likes of Domino’s CEO yesterday, burgers lead the pack, but as McDonald’s CEO Steve Easterbrook observes, even for the market leader there are retail issues today:

The reality is footfall is down. So I’m not sitting here thinking that there’s share going to any particular competitor. It’s just a market share fight overall..we’re going to continue to sharpen our plans.

Those plans have, as noted previously, included a lot of tech and digital initiatives, ranging from self-service kiosks in-stores through to mobile ordering and the much vaunted - and tech-enabled - Experience of the Future when customers walk through the Golden Arches. That last program is ramping up more and more, says Easterbrook:

Since the start of the year, the market has modernized and improved hospitality in nearly 1,000 restaurants, setting the pace to bring the Experience of the Future to an additional 1,000 restaurants every quarter this year. This is an aggressive pace - 1,000 projects would be like modernizing every McDonald’s restaurant in Australia and we’re doing that each and every quarter in the U.S.

He also points to:

Digital menu boards, self-order kiosks, and mobile apps that build awareness of the breadth of our menu and quality of our food. Enhanced drive-thru is helping us quickly serve more of our time-pressed customers whilst creating a culture of hospitality with table service that unlocks the potential of the investments in technology for capacity optimization by creating a low-stress, personalized experience.

This is a long game transformation of course, especially when dealing with a global brand. As such there are learnings along the way that need to be fed back into the digital transformation strategy and rolled out to locations worldwide. Easterbrook explains:

As we enhance the customer experience and provide greater convenience for our Experience of the Future, delivery, and digital initiatives, we’re learning more about what is most important to our customers and rapidly scaling what works.

Table service, which was developed in France, and enhanced hospitality, which was perfected in Canada with their guest experience leader program, have proven to be critical drivers of customer satisfaction. This has helped us unlock the potential of our self-order kiosks to build capacity, frequency, and average check.

With the self-order kiosks, what’s really important about the self-order kiosk is not just the customer-facing user interface but actually physically where you position them in a restaurant, for example. So you can better understand customer flow. It provides another ordering option for a customer apart from the front counter. So the devil is in the detail.

Delivery and mobile

Domino’s and other pizza providers have made much of their roots in a delivery-based operating model as being a competitive advantage. For McDonald’s, delivery remains a work-in-progress. According to Easterbrook:

More than 11,500 restaurants now offer delivery. Whilst we continue to expand the base of participating restaurants, we’re working closely with Uber Eats and our other partners to optimize the model, building awareness, trial, and more frequent repeat orders, and, most importantly, customer and career satisfaction. In most of our major markets, delivery is already a meaningful contributor to overall comparable sales.

Rather less so, mobile ordering. In a remarkably candid admission, Easterbrook says:

Current adoption is pretty low actually. The platform is getting more reliable. We’ve still got things we’re trying to improve on our end, from the user experience perspective and training our teams in the restaurants and just getting the technology more reliable. But the adoption is still relatively low. We’re certainly seeing the curbside pick-up being the most favored benefit that customers are seeing from it.

But we’ll continue to work away on it. It’s not anything that we’re going to put a massive emphasis behind, in terms of anything promotional, for example. However I think it’s pretty inevitable that our customers will increasingly engage with us as a brand and as a business through their phones. So the fact that we’ve got a product out there that’s decent at the moment, I think there’s a lot of upside. And we’re excited about the potential but, at the moment, we’re not seeing it drive significant business for us.

That said, there’s more work being undertaken to enhance the mobile proposition:

With mobile order and pay now active in over 20,000 restaurants, we’ve turned our focus to building customer awareness, encouraging more app downloads, and driving active usage. One great example of this is Germany. The market had great success as it launched the McDonald’s mobile app with an Easter Countdown Calendar, offering 32 straight days of different and compelling offers only available through the app. This generated over 5 million downloads, making it the most downloaded app in Germany in February, and it drove business results - double-digit comp sales increases and the best guest count growth in 12 years.

So overall it’s a case of keep on keeping on for digital transformation. Getting the physical store network aligned is inevitably taking time, but the spadework can’t be avoided. It does however take a toll, concedes Easterbrook:

That does slow us a little bit on the like-for-like. It’ll be fine once we start to get into the routine year-on-year, because we’ll be doing another 1,000 next quarter, another 1,000 first quarter of 2019. But this current year, it will hold us back on the comp side a little bit, yes. But as I say, we’re playing the long game. We know what the upside can be. It’s a small price to pay for the benefit we believe the business will have.

My take

Long term vision and commitment to staying the course goes a long way. Too many digital transformation projects are launched with the flawed expectation of jam tomorrow. McDonald’s is chasing the digital secret sauce over a far more pragmatic time frame.