RetailAnalysis
02 March 2017
McDonald's: How does it plan to grow?

McDonald's presented its global growth plan at the Investor Day on Wednesday. We take a look at how it plans to grow in an increasingly competitive space...

Regaining loyalty 

Quick Service Restaurants is an increasingly competitive space as chains compete on value, convenience and quality. Aside from traditional rivals such as Burger King, McDonald's are pressured by newer QSRs which emphasise freshness and taste, as well as food-to-go specialists, convenience stores and supermarkets, which are evolving the food-to-go offer.

McDonald's acknowledged that it has lost millions of customer transactions since 2012. To regain customers lost, retain existing customers and convert casual customers to committed customers, are the three pillars designed to guide Mcdonald's through the following three initiatives. 

Use of mobile for greater convenience

McDonald's newly unveiled mobile app will enhance and speed up the ordering process and improve the customer experience for shoppers by giving them greater control.

In restaurants, shoppers will be able to place orders directly through the new app and have it ready for when they enter. At the drive-thru, shoppers can choose curbside delivery, where they read out an order code and skip the payment window, allowing more orders to be placed. The app is also personalised with customised favourites and preferred payment methods.

Mobile order and pay will be launched in 20,000 restaurants by the end of 2017. As one of our five trends for this year, we expect to see more food-to-go operators and QSRs enabling remote ordering through mobile apps.

Taking advantage of its reach through delivery

McDonald's is uniquely positioned for delivery due to its reach in its major markets. In the top five markets, the US, France, the UK, Germany and Canada, nearly 75% of the population lives within three miles of a McDonald's.

Delivery was rolled out in China in 2008, and delivery sales have since tripled, growing by 30% last year. McDonald's is currently experimenting with different delivery models throughout the world, and we can expect to significant development in this space, both in the UK and internationally.

'Experience of the Future' restaurants

The 'Experience of the Future' restaurant upgrades aim to elevate the customer experience by making it more convenience, more personalised and more of a treat. The upgrades include digital kiosks, mobile ordering, a more modern environment and table service.

The new restaurants that have been re-imaged so far worldwide have realised mid-single digit sales lifts above the market. McDonald's plan to redirect capital saved from re-franchising to modernising the US estate with the new format. In the US, the upgrades will be in place at around 2,500 locations by the end of 2017, according to Chris Kempczinski, the US president.

Progress on the turnaround plan and expectations

In 2015, McDonald's started a turnaround plan to re-franchise and extend and improve existing areas of strength, including the focus on family occasions, food-led breakfast, as well as being more present in underdeveloped categories, namely the coffee and snack offerings. 

The company re-franchised thousands of restaurants and is on track to reach global franchised percentage to around 93% by the end of the year.

For 2019 and beyond, McDonald's is now in a position to accelerate profitable growth by putting the three initiatives in place. It aims to expand its operating margin from high-20% range to the mid-40% range and has target sales growth of 3-5%. 

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