2017 was a positive year for McDonald’s, and the company is hoping 2018 will bring an even stronger performance, finding hope in its digital initiatives, modernized new look, and worldwide refranchising initiative (as opposed to 81 percent three years ago, franchise restaurants now make up 91 percent of McDonald’s total restaurant base).
In the company’s earnings conference call on January 30, Steve Easterbrook, president and CEO, and Kevin Ozan, CFO, reviewed the brand’s year performance and laid out the team’s plan for the future, which involves bettering customer experience through digital initiatives like upping its UberEats delivery options and updating to digital menu boards and self-order kiosks.
“We're looking forward to 2018, because there are many opportunities that will build brand excitement with our customers and our people,” Easterbrook said. In the coming months, expect marketing campaigns geared to encourage customers to try out digital options to further engage with the brand. “We have opportunities in 2018 to raise consumer awareness of the enhanced convenience available with delivery and mobile order on pay,” Easterbrook said. McDonald’s hopes to show a new, innovative face to the world, and it is willing to spend money to make that happen.
“Through 2017, we realized about $300 million of net savings. In order to achieve those net savings, we save significantly more than $300 million on a gross basis related to maintenance spending, and then reinvested some of those savings primarily in technology and digital. So, at the same time we saved cost overall, we've also shifted more of our remaining spend from maintenance spending to investing in activities that drive growth,” Ozan said.
An example of how McDonald’s is hoping to be seen in the future is through its flagship restaurant in Chicago, which recently underwent a dramatic makeover to match the company’s “Experience of the Future” campaign. The updated restaurant includes the self-order kiosks designed for customer convenience and as a solution to bottlenecks during high-volume periods, as well as table service, mobile ordering and payment, and a modern look (that includes a few environmentally friendly features like onsite solar panels).
About one-third of the restaurants in the McDonald's system have been transformed in accordance to the Experience of the Future campaign, including nearly 3,000 restaurants in the U.S. “Customers increasingly expect to engage with brands by apps on their mobile phones,” Easterbrook said. “In the U.S. alone, we have over 20 million registered users of the McDonald's mobile app. We are well positioned to capitalize on that user base, ending 2017 with 20,000 restaurants around the world offering mobile order on pay.”
McDelivery, through Uber Eats, is also a priority for McDonald’s moving into 2018. It’s grown from a pilot program for 200 Florida restaurants to being offered in 10,000 restaurants in over 20 countries. “Delivery orders tends up above average check size by 1.5 to 2 times, and, with high customer satisfaction, we are seeing solid repeat business from those who try it,” Easterbrook said. “During [2017’s] fourth quarter, delivery gained traction and emerged as a meaningful contributor to our comparable sales in several of our largest markets.”
The goal of these digital initiatives? A more seamless, personable, and enjoyable customer experience. So far, from the launch of many of these digital perks in 2017, Easterbrook said customers are telling the team that they like the new McDonald's better. “They are rewarding us with more frequent visits, and they are spending more on average when they do,” he said.
It’s early for the app, kiosks, and delivery, but Easterbrook and Ozan are encouraged and moving forward with Experience of the Future. Most all freestanding U.S. restaurants are expected to be transformed by 2020. “We have realized that we are going to need to continue to invest in technology and digital in order to keep up with where the world is going and our customers' expectations,” Ozan said.
Key menu notes:
The Big Mac’s big 5-0: “We have exciting plans to celebrate the many fans who remained so passionate all these years later about this iconic burger,” Easterbrook said.
2018, the year of fresh beef: McDonald’s rolled out fresh beef menu offerings in 2017. Currently, they are in the process of converting facilities and are expecting a national launch this summer. “We are getting unsolicited feedback from customers on a notable improvement,” Easterbrook said.
$1, $2, $3 dollar menu: It’s only been on the marketplace for 20 or so days, but investors like Brian Bittner with Oppenheimer were interested in the sales benefits of McDonald’s new U.S. menu structure. Easterbrook is encouraged, noting that, in this deal, the company has included several successful menu items like the any-size dollar fountain drinks, as well as breakfast, chicken and beef products, and the $3 happy meal.
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