Despite a drop in guest counts, McDonald’s reported positive global and domestic same-store sales during its Q4 2018 earnings call, which took place this Wednesday, January 30.
Among the many numbers and initiatives discussed, delivery was highlighted during the call as a particularly lucrative area for McDonald’s moving forward. The mega-chain has been delivering since 2017, when it launched a partnership with Uber Eats. According to the call transcript, 19,000 McDonald’s restaurants globally offer delivery, making it a $3 billion business for both international and domestic stores. CEO Steve Easterbook noted the company will make delivery a “high priority” in 2019.
That’s great if you’re in corporate, or if you want a Big Mac delivered to your office or dorm room. For McDonald’s franchisees, however, delivery appears to be yet-another point of tension lumped on top of an already large pile of grievances.
The National Owners Association (NOA), formed in 2018 and representing about 400 McDonald’s franchisees, conducted a survey recently wherein the majority of 800 franchisees surveyed said they were not “satisfied with the economics” of delivery, and want McDonald’s to push for a better commission split with third parties. McDonald’s has a massive partnership with Uber Eats, who takes roughly 30 percent of each transaction.
“We need to have several vendors delivering for us, not just Uber,” on franchisee surveyed said. “Paying rent and service fees on Uber commission is not fair. Delivery is a necessary service these days, but we must be able to do it profitably.”
The other side of that coin, of course, is that multiple delivery services can become overwhelming very quickly because of the many disparate sales channels they add to a restaurant’s ticket stream, not to mention the extra devices. Loads of different software options to streamline these issues exist, but they cost money, and so McDonald’s franchise operators would have to factor in those costs to their idea of “profitability” were McDonald’s to ever welcome other delivery partners.
These recent comments from McDonald’s and franchisees follow on the heels of a year of aggressive initiatives around McDonald’s Experience of the Future store redesigns, which have sparked concern and frustration among franchisees. McDonald’s revamped 4,000 stores in 2018, bringing its total Experience of the Future stores close to 8,000. But the NOA has said these redesign elements don’t necessarily drive competitive sales, and that McDonald’s is launching too many expensive initiatives that don’t pay off.
Kiosks are one such effort. McDonald’s has self-order kiosks in roughly 17,000 McDonald’s restaurants worldwide. But some franchise operators cite them as another area that doesn’t pay off. “What good will new buildings be when we cannot deliver service because we are short-staffed. Employee turnover is at an all-time high for us. Our restaurants are way too stressful, and people do not want to work in them. Kiosks are not the answer,” one operator stated. But on the call, Easterbrook noted that previous trials show how guests adopt the technology over time, indicating they will become more comfortable with the kiosk process as we go along.
Shake Shack is a good example in action of Easterbrook’s statement. The company unveiled a cashless, kiosk-centric store in October 2017 and abandoned the concept less than a year later, due to an influx of customer complaints around those kiosks. But in August of 2018, Shake Shack made an about-face and announced it would expand its kiosk locations (with some adjustments based on customer feedback). The company received much more favorable feedback the second time around.
Meanwhile, McDonald’s has extended the deadline of its Experience of the Future stores, giving operators the option to complete them by 2022, rather than the original date of 2020. Roughly 2,000 stores are expected to be overhauled in 2019 and 2020.
Super clear that delivery is a growing part of the restaurant business model.
The challenege for operators is to ensure they set themselves up for success from the start of the concept phase and design instead of after.
Doing after will cost more money and I’d advice like I’ve done with mltiple businesses – incorporate in design from the start.