McDonald’s makes changes to increase mobile sales

A Big Mac is displayed on a page of the McDonald’s app

Daniel Acker | Bloomberg | Getty Images

McDonald’s U.S. franchisees will start paying into a digital marketing fund next year as the fast-food giant looks to expand its booming digital business, according to a memo viewed by CNBC on Thursday.

The change is meant to modernize the company’s marketing strategy and widen its competitive advantage, according to the memo, which was written by U.S. Customer Experience Officer Tariq Hassan and Chief Information Officer Whitney McGinnis. The memo also said that McDonald’s plans to invest hundreds of millions of dollars over the next couple of years to improve its loyalty program and add ordering channels, including placing web orders without downloading an app, which should also bolster its digital business.

Loyalty program members accounted for more than $6 billion in system-wide sales globally during McDonald’s first quarter. The company has 34 million active digital customers in the U.S. By comparison, Chipotle Mexican Grill has 40 million loyalty members, while Starbucks has 32.8 million.

In December, McDonald’s said it aims to reach 100 million loyalty program members by 2027.

For now, the franchisor is recommending that franchisees pay for the new fund using their existing marketing contribution, which requires that they spend at least 4% of gross sales, according to the memo. As a result, the new approach will likely lead McDonald’s to cut back on legacy marketing tools, such as TV commercials, and focus on areas that tangibly lead to higher sales.

Next year, U.S. operators will have to chip in 1.2% of projected identified digital sales, such as transactions that occur when a customer logs into the loyalty program or orders delivery, according to the memo. The rate will change annually, based on projections created at the start of the year.

As a result of the change, McDonald’s is forecasting that every U.S. restaurant will see its cash flow increase by roughly $2,600, starting in 2025. The windfall comes from the digital investment costs moving from a franchisee’s profit and loss statement to the marketing contribution.

Franchisees in the U.K., Canada, Australia and Germany will also pay into the global digital marketing fund. The rest of McDonald’s markets will transition to the approach later.

Don’t miss these exclusives from CNBC PRO

Source link

Related Posts

US banks announce big shareholder payouts as Fed eases stress tests

Stay informed with free updates Simply sign up to the US banks myFT Digest — delivered directly to your inbox. Investors reaped the rewards of looser bank supervision as Wall…

Read more

Eurozone inflation rises to ECB’s 2% target

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Eurozone inflation hit 2 per cent in June, rising back…

Read more

Revised UK welfare reforms to push 150,000 into poverty

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Watering down the government’s flagship welfare changes will cost taxpayers…

Read more

Labour rebels await details of welfare concessions ahead of key vote

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Liz Kendall, work and pensions secretary, will on Monday set…

Read more

Carmaker Lotus plans to end production in the UK

Stay informed with free updates Simply sign up to the Automobiles myFT Digest — delivered directly to your inbox. Lotus plans to end production in the UK after more than…

Read more

UK Jewish body suspends deputies over letter criticising Israeli offensive in Gaza

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. The UK’s largest Jewish representative body has suspended five of…

Read more

Leave a Reply