McDonald’s reported Q2 earnings of $5.3 billion, a 12 percent drop compared to the same quarter last year. The quick-service giant boasted considerable growth in the delivery space, as well as through the mobile app and restaurant kiosks.
Deals And Delivery
Last year, delivery was offered by 7,800 McDonald’s restaurants thanks to a partnership with UberEATS. That number has increased to 13,000. A saturation of restaurants throughout the country has made it easy for McDonald’s to take advantage of the growing delivery market. In fact, President and CEO Steve Easterbrook told investors that customers order twice as much through delivery than the average restaurant check. The restaurant used its FIFA sponsorship to push delivery and on July 19, the brand offered ’90s-inspired shirts to those who ordered delivery in a promotion called #McDelivery Day.
Easterbrook said the company has identified two kinds of patrons that frequent its restaurants: Budget Basics, those who expect every day low prices and Deal Customers—those who hop between brands depending on who offers the best deal at the time.
To counteract lost share in the breakfast market and appeal to Deal Customers, Easterbrook outlined plans to offer discounts and specials while allowing local franchises to customize the $1 $2 $3 menu based on neighborhood preferences.
McDonald’s reduced ad spend in the first quarter and considering the drop in Q2 income, acknowledged that the brand needs to be “more aggressive” to compete.
— McDonald's (@McDonalds) July 19, 2018
Spending Money To Make Money
Extensive remodeling efforts cut into McDonald’s profits in the second quarter, as did refranchising efforts in China. Restaurants lose between five to 10 days during the retail conversions. However, Easterbrook said the temporary loss of income is worth it, as consumers spend more using kiosks.
With unemployment down in the US, the company is investing $150,000 million over the next five years to educate and train its workforce amid criticism about employee atmospheres. Kevin Ozan, McDonald’s executive vice president and CFO, told investors that they are not alone when it comes to such pressures, calling the labor market “tight.”
Adding fresh beef to its Quarter Pounder burgers resulted in 80 percent awareness from the public at launch, but extra cook time extends serve times too, especially in the drive-thru. Easterbrook said they are trying to address this issue and chocks some of it up to a learning curve.
“Value” is a word that McDonald’s uses a lot to describe its mission statement and goals, but Ozan accepts the fact that their food won’t always be consumers’ first choice.
“We don’t strive to win on value but we won’t lose, either,” said Ozan.