McDonald’s Sets Digital Goals Fuelled by Loyalty, Drive-Thru

Need to Know

• McDonald’s anticipates its digital growth to top $10-billion this year.
• The McDonald’s growth strategy centers on the company’s MCD identity: Maximize our Marketing, Commit to the Core, and Double Down on the 3 D’s (Digital, Delivery, and Drive-Thru).
• The fast-food chain plans to launch a newly updated loyalty platform, MyMcDonald’s, across its six top markets by the end of 2021, which will consolidate its tech investments.
• McDonald’s is expecting mid-single-digit sales growth in 2021 and 2022 and forecasts annual capital expenditures of $2.3 billion.

Analysis

Fast-food giant McDonald’s has unveiled a robust digital growth strategy, as the company’s digital sales this year are anticipated to top $10-billion due to customer behavior changes due to COVID-19.

The plan relies on the fast-food chain’s “MyMcDonald’s” program, a loyalty platform that will incorporate its technological investments (including its app and digital menu boards) across its six top markets by the end of next year. The platform, which will make it easier for customers to order and pay for their food, will also include a new loyalty program, which McDonald’s is planning to text first in Phoenix.

Drive-thru ordering has become a cornerstone of McDonald’s business, as indoor dining has declined due to the pandemic. As a result, the company plans to test automated order taking, drive-thru lanes reserved exclusively for digital orders, and a new restaurant design that does not incorporate any indoor dining. McDonald’s added that the “vast majority” of new restaurants in the U.S. and its International Operated Markets locations, which includes France and the U.K., will have drive-thru lanes.

The company’s investment in digital and drive-thru tech is part of its three-tiered growth strategy, which centers on its MCD identity: Maximize our Marketing, Commit to the Core, and Double Down on the 3 D’s (Digital, Delivery and Drive-Thru).

“In countries around the world, we have seen customer behaviors change at an unprecedented pace over the last several months,” said McDonald’s president and CEO Chris Kempczinski. “We believe this presents an opportunity to do something special as we write the next great chapter of McDonald’s. With our new growth strategy, we will build on our inherent strengths by harnessing our competitive advantages and investing in innovations that enable us to continue to offer fast, easy moments for our customers.”

Two recent acquisitions—Apprente and Dynamic Yield—will likely be key to McDonald’s new digital strategy. Apprente is a voice technology solution, while Dynamic Yield is a personalization company; both were acquired by McDonald’s in 2019 with the express purpose of updating drive-thru technology. However, on Monday, McDonald’s did not offer any insight into how these two companies will factor into its strategy in the coming months.

Customers have not only gravitated towards online ordering with McDonald’s throughout 2020 but have also shifted their orders towards more “classic” McDonald’s items—such as the Big Mac and Chicken McNuggets—with those items now comprising about 70% of orders overall. The company is planning to improve upon these items by enhancing grilling techniques and experimenting with toasted buns.

Because the company’s chicken category is growing faster than beef, McDonald’s plans to introduce a new menu offering, a Crispy Chicken Sandwich, in the US early next year. The item will directly compete with crispy chicken offerings from Popeye’s and Chick-fil-A.

McDonald’s is aiming to refresh its commitment to connecting with customers, by responsibly sourcing quality ingredients, committing to climate action, connecting with communities in times of need, and increasing focus on equity within its staff. The company will also increase its support for farming communities, and reduce barriers to employment for more than 2 million people worldwide.

The company also said that it expects annual capital expenditures of $2.3 billion, about 50% which will be spent building new restaurants.

In ramping up its commitment to digital and drive-thru infrastructure, McDonald’s joins several other fast-food companies that have done the same, as COVID-19 has changed consumer habits across the industry. Restaurant Brands International, which operates Burger King, Tim Horton’s, and Popeye’s, announced a massive drive-thru revamp last month, which will involve contactless ordering and predictive selling (much like what McDonald’s will be able to offer with Dynamic Yield). Other companies, such as Chipotle, are enjoying success during the pandemic due to an early commitment to digital infrastructure, including in-app ordering, loyalty programs, and Chipotlanes: windows that allow consumers to place digital orders and grab them via drive-thru.