When a corporate bellwether such as McDonald’s stakes its bets on a horse, it’s usually worth the rest of the industry sitting up and paying attention because there’s a fair chance that industry benchmarks will be set in the process.
The US-based QSR company and its golden arches have been a symbol of fast food ubiquity for what seems like forever, although nobody can ignore the fact that the last five to 10 years have thrown up more new competitive pressures than at any time in its history.
The changing landscape, coupled with the emergence of some powerful commercial forces such as home delivery, have led to McDonald’s senior management team drawing up a new grand plan designed to recapture its position as the dominant QSR leader.
The new strategy, which is designed to unlock profit growth and regain customers lost to other QSR competitors, sets the tone for how the 36,000-unit chain thinks its business will develop in the next three years and beyond. The growth plan focuses on accelerating digital capabilities and enhancing its use of technology in restaurants, in the drive-thru, and on the go.
Inside the restaurants, McDonald’s is proposing to bring greater control, convenience and personalisation to its customers through the use of kiosks to place orders, staffed with ‘guest experience leaders’ to assist in the process. Customers can place their order and skip the front counter entirely, with their food brought to their table by an employee.
Additionally, customers will be able to place orders directly on the mobile app for pick-up or have a kiosk recognise their app profile, which holds customised favourites and preferred payment methods.
“The result is a more stress-free, personalised experience, enhanced by technology and world-class hospitality that puts customers in control,” says CEO Steve Easterbrook.
“Through enhanced technology to elevate and modernise the customer experience, a focus on the quality and value of our food and redefined convenience through delivery, we have a bold vision for the future and the urgency to act on it. We are moving with velocity to drive profitable growth and becoming an even better McDonald’s serving more customers delicious food each day around the world,” he adds.
The prospect of more automation linking guests to the kitchen is something the industry will need to get used to. Numerous chains are going down this route, convinced that automation provides consistency along with reduced labour costs.
But it is not without its challenges, says Shaune Hall, product development chef at Falcon Foodservice Equipment. “Automated self-service kiosks should make the ordering process quicker. However, if the customer has special requirements or wants to customise their order it could make the process take longer and would need a well-thought-out kitchen design,” he says.
In McDonald’s case, the same enhanced experience it is proposing will be available outside the restaurant, too. The chain revolutionised convenience in the drive-thru sector in the 1970s and it claims the new strategy will transform the business once again. By enabling mobile order and pay through the McDonald’s app, customers can personalise their order while skipping the drive-thru line and instead choosing curbside delivery.
If customers opt for the drive-thru, they will simply read the already placed order code to the crew and their mobile order will be ready for pick-up at the window. These more efficient enhancements are designed to speed up the kitchen process and allow more customers to pass through its drive-thrus.
“No other food company in the world has this reach and ability to be this convenient to so many customers through delivery”
Mobile order and pay will be launched in 20,000 restaurants in some of McDonald’s largest markets by the end of 2017. This includes the US, but it has not yet said whether it extends to the UK. However, the UK is one of the chain’s top five markets, along with France, Germany and Canada.
The focus on automation will ultimately place demands on back-of-house equipment, too. QSR operators such as McDonald’s will be seeking improved performance and flexibility as their kitchens strive to keep up with higher levels of throughput.
“It’s all about speed and ease of service,” says Neil Richards, managing director at Metcalfe Catering Equipment. “We are seeing a lot of demand from operators for our ‘high-speed cooking solutions’, which include the Roband high-speed grill stations and the new Atollspeed high-speed ovens. If operators are trying to speed up what they can offer customers by introducing new menus and self-service technology front-of-house then they need to invest in innovative, fast equipment to be able to deliver fast food without compromising the quality of menu items on offer.”
Richards points out that the new generation of high-speed ovens using a combination of microwave and impingement technology, such as the Atollspeed range, will allow operators to move away from the standard fryer and griddle and offer unlimited menu items. “In addition, these products will add savings in terms of time and space into the bargain, while also reducing energy costs,” he says.
Some commentators suggest that the pace of change will always be faster at the front end of an operation, simply because of the standardised approach to kitchen design that fast food kitchens follow.
Steve Morris, sales director at Jestic, says: “Although kitchen designs will change from site to site, mainly depending on the available space, building design and lay-out of an outlet, the fast food industry is always likely to follow a very templated design, with the same equipment across an entire estate. Not only does this result in menu and taste consistency no matter which store a customer visits, it also means that staff can be moved from site to site without the need for further training on new equipment. This consistency is key to the fast food sector and therefore the templated approach is not something we see changing in the future.”
However, Morris is convinced that disruptive changes to the industry, such as third party delivery and enhanced digital capabilities, do have the potential to influence future design and layout of kitchens and food prep areas within the fast food sector.
He points to the popularity of Deliveroo across the industry and the effect this is already having on big high street restaurant chains. “Traditionally, fast food kitchens are not set up with a delivery service in mind. Going forward, we would expect to see a general redesign of the kitchen layout with separate entrances, exits and even food preparation areas for delivery orders, in turn creating a kitchen with greater efficiency,” he notes.
McDonald’s new strategy has certainly been created to deal with the disruptive force of delivery. And Easterbrook sees “exceptional opportunity” for growth due to advancements in the way customers order, pay, track and receive food, and the explosive growth in third party delivery companies.
The company thinks its footprint makes it “uniquely positioned” to become the global leader in delivery, noting that nearly 75% of the population in its top five markets lives within three miles of a McDonald’s.
The chain is already one of the largest providers of delivered food in the world, with annual ‘systemwide’ delivery sales of nearly $1 billion (£814m) across various markets including China, South Korea and Singapore. China has tripled its delivery business since its launch in 2008. In 2016 alone, China’s delivery business grew 30%.
“No other food company in the world has this reach and ability to be this convenient to so many customers through delivery. Currently, McDonald’s is experimenting with different delivery models including partnering with third parties for ordering and fulfillment throughout the world,” says Easterbrook.
“The fast food industry is always likely to follow a very templated design, with the same equipment across an entire estate”
McDonald’s admitted to investors last month that it had lost customers to QSR competitors and as diners’ expectations increased it “simply didn’t keep pace with them”. It thinks the improvements it has outlined will win those customers back and it aims to become more present in under-developed categories and occasions, including competing more aggressively in coffee and snack offerings, in a bid to convert casual customers into more regular visitors.
McDonald’s now plans to ramp up its ‘Experience of the Future’ strategy in the US, with the emphasis on providing a more convenient, more personalised and more enjoyable visit for customers. The strategy leverages the convenience and technology of kiosk ordering and table service, increasing functionality of the mobile app to enhance the enjoyment of its food and the hospitality of the McDonald’s crew, all in a more modern, more exciting restaurant environment.
In restaurants around the world with Experience of the Future, it has realised mid-single-digit sales lifts above the market. In the near-term, it is redirecting a portion of capital saved from refranchising to modernising its estate in its home market.
The company plans to “reimage” about 650 restaurants in 2017. When combined with previously modernised restaurants, which will be updated with Experience of the Future elements this year, the US will have approximately 2,500 Experience of the Future restaurants by next year.
Because this investment represents one of the greatest opportunities to build on business momentum and grow guest counts, McDonald’s intends to have most of the traditional free-standing US restaurants modernised to reflect the Experience of the Future by the end of 2020.
“We have fundamentally changed the trajectory of our business over the past two years. Now, we are fit for purpose, ready to build on our momentum and transition to focus our efforts on profitable, long-term growth,” insists Easterbrook.
Its rivals, many of whom will claim to have taken a chunk out of McDonald’s business in recent years, will be watching on with interest.