McDonalds's Changes Reflect The Need For Speed

McDonald's has announced two initiatives in response to changes in consumer demand.

This week McDonald’s announced that it is phasing out its line of Signature Crafted Recipes line of burgers, replacing them with a trio of Quarter Pounders, including a new Quarter Pounder Deluxe that features lettuce and tomato, and a Quarter Pounder Bacon.

Apparently, there were two issues. Despite the popularity of the signature line among some customers, these custom orders slowed down ordering, and service times. This was especially noticeable in the drive-thru lanes. Allowing customers to choose toppings and bun types, as well as a choice of chicken or beef, complicated the operations of a franchise built on speed and convenience. The introduction of ordering kiosks helped with the speed of ordering but gave customers more time to ask for even greater customization. In fact, McDonalds cited slow service as one of the major causes of its weak traffic last year.

The second issue was pricing. There has been a tremendous growth in fast-casual burger chains in the past 10 years with premium burgers priced just above burger chain levels. McDonald's as with many other chains wanted a piece of every pie (not sure how we got from burgers to pies here). The "grass is always greener" mentality. It turns out that most customers want their burgers from McDonald's fast, cheap and simple. As prices for premium sandwiches approached the fast-casual range, a lot of customers decided they would rather not pay that much at McDonald's.

So, in many ways McDonald's is returning to its roots. A simplified menu with the focus on decent quality, and speedy service. In addition to menu changes it is investing heavily in technology to speed up the order process and improve the drive-thru experience.

In a related move, McDonald’s is negotiating with its franchisees and its delivery partner Uber Eats to reduce commissions and provide some rent and royalty relief as the company works to make the rapidly growing on-demand food delivery segment profitable.

A 30% commission on an $8 order does not leave much room for anyone to profit. Uber Eats typically charges 30% commission but for a partner the size of McDonald's it is apparently willing to consider reducing this to 15%. As part of its negotiating leverage, McDonald's let it be known that it is considering other delivery partners in addition to Uber Eats.

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