Enhancing Digital Capabilities and the Use of Technology to Dramatically Elevate the Customer Experience
To bring customers into the restaurants, McDonald’s must matter to people and be relevant in their daily lives. To do so, McDonald’s is 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 bringing greater control, convenience and personalization to our 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 right to their table. Additionally, customers will be able to place orders directly on the mobile app for pickup or have a kiosk recognize their app profile, which holds customized favorites and preferred payment methods. The result is a more stress-free, personalized experience, enhanced by technology and world-class hospitality that puts customers in control.
The same enhanced experience will be available outside the restaurant too. In the 1970s, McDonald’s revolutionized convenience in the drive-thru to make getting high-quality food easy. Now, that experience is being transformed once again. By enabling mobile order and pay through the McDonald’s app, customers can personalize their order while skipping the drive-thru line and instead choosing curbside delivery. If customers choose the drive-thru, they will simply read the already placed order code to the crew and their mobile order will be ready for pickup at the window. These more efficient enhancements will speed up the process and allow more customers to pass through our drive-thrus.
Mobile order and pay will be launched in 20,000 restaurants in some of our largest markets, including the U.S., by the end of 2017.
Redefining Convenience through Delivery
One of the most significant disruptions in the restaurant business today is the rapid increase in delivery. Through technology, delivery has changed the way customers order, pay, track and receive food and provide feedback. Coupled with the explosive growth in third-party delivery companies, the landscape has created an exceptional opportunity for growth.
Because of our extraordinary footprint, McDonald’s is uniquely positioned to become the global leader in delivery. In McDonald’s top five markets (U.S., France, the U.K., Germany and Canada) nearly 75% of the population lives within three miles of a McDonald’s. McDonald’s is already one of the largest providers of delivered food in the world, with annual Systemwide delivery sales of nearly $1 billion 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.
Accelerating Deployment of Experience of the Future Restaurants in the U.S.
Experience of the Future elevates the customer experience at McDonald’s to provide a more convenient, more personalized and more enjoyable visit. It leverages the convenience and technology of kiosk ordering and table service, increasing functionality of the mobile app to enhance the enjoyment of our 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, we have realized mid-single digit sales lifts above the market.
In the near-term, McDonald’s is redirecting a portion of capital saved from refranchising to modernizing the U.S. estate. The Company plans to reimage about 650 restaurants in 2017. When combined with previously modernized restaurants which will be updated with Experience of the Future elements this year, the U.S. will have approximately 2,500 Experience of the Future restaurants by the end of 2017.
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 U.S. restaurants modernized to reflect the Experience of the Future by the end of 2020.
Progress on the Company's Turnaround Plan and a New Cash Return to Shareholders Target
In November of 2015, the Company provided targets for its refranchising, G&A savings and cash return to shareholders. Today, the Company updated its progress against these targets, specifically noting the following:
Refranchising - the Company is on track to refranchise 4,000 restaurants by the end of 2017, a full year ahead of schedule. Once completed, this will bring the Company’s global franchised percentage to approximately 93%.
Cost Savings - the Company achieved more than $200 million in savings through the end of 2016 towards its goal of reducing net G&A levels by $500 million by the end of 2018, and expects to trim another 5 to 10% from its remaining cost base by the end of 2019.
Cash Return to Shareholders - 2016 marked the achievement of the Company’s 3-year target of $30 billion cash return to shareholders. Today, the Company announced a new $22 to $24 billion cash return target for the 3-year period ending 2019, reinforcing management’s confidence in the Company’s long-term strategies and financial targets.