McDonald’s may soon be more like Chipotle.
The McDonald’s empire was built
on simplicity and consistency: Your cheeseburger comes out exactly like
the one the next guy gets. But thanks in part to lackluster sales, the
fast-food giant is increasingly letting customers customize their meals.
On Monday, McDonald’s (MCD)
reported a 0.3% drop in sales at restaurants open longer than 13 months
around the globe; U.S. same-restaurant sales fell 1.4%. Though the
company is still the world’s largest restaurant chain by revenue and
worldwide sales, the trend is troubling, executives say, but one that
can be reversed. “Looking ahead, we believe that we are taking the right
actions to more clearly align with our customers’ needs and build
momentum to drive long-term profitable growth,” says CFO Pete Benson.
One
way is through customization. While their famous ad described the Big
Mac as “two all-beef patties, special sauce, lettuce, cheese, pickles,
onions on a sesame seed bun”--the world’s largest restaurant chain is
experimenting with changing that. Last year, the company began testing a
“build-your-own-burger” concept in Laguna Niguel, Calif., which lets
you pick what you want on your burger using a tablet computer, rather
than just having to say something like “no onions” to a cashier. During a
speech to investors at the time, Kevin Newell, the chief brand and
strategy officer for the U.S., said, “customization represents another
important opportunity for our business.” And a few weeks ago, the
company announced it will expand the build-your-own-burger concept to
more stores, likely in Southern California. Newell told the Associated
Press that this concept has been a driver of sales and was helping
McDonald’s attract a different clientele and more of a dinner crowd.
The
move toward customization is becoming more common in the fast-food
industry, analysts say. “It’s one of the biggest trends,” says Andy
Brennan, an analyst with IBISWorld. Or as Darren Tristano, the executive
vice president of food industry research and consultancy Technomic puts
it, “consumers have been looking for greater variety and
customization…this is something that many fast-food restaurants have
figured out but McDonald’s is just starting.”
The industry, says Brennan, may be taking a page from the likes of Chipotle (CMG)
and Five Guys, which offer more customization than other fast-food
spots; at Chipotle consumers point to what ingredients they want on
their meal and watch as the staff makes it, while at Five Guys you can
list everything you want on your burger. Indeed, in terms of system-wide
sales, which includes sales for company-owned restaurants and
franchised restaurants, both Chipotle and Five Guys grew more than 100%
from 2009 to 2013, while McDonald’s grew just 16%, says Brennan.
“McDonald's’ [revenue] growth rate pales in comparison,” says Brennan.
Another
thing that’s contributing to Chipotle’s success—and something that’s
likely to be mimicked by fast food chains—is the addition of
high-quality, natural ingredients, says Tristano. “Customers really
respond to this,” he says. We’re already seeing some of that as
McDonald’s added apple slices to the Happy Meal menu in 2011 and this
year is offering consumers the option to get a salad, fruit or vegetable
instead of french fries as a side for their value meals. Tristano adds
that McDonald's in Canada along with their supplier partner Cargill just
produced a YouTube Video that shows the process their supplier uses for
making chicken McNuggets. “They are taking a page out of Chipotle’s
book where they recently produced a video called the Scarecrow that
promoted natural farm to fork process,” he says.
Analysts
also say we can expect more healthy options and possibly the addition
of more natural foods in the coming years. Tristano says that he expects
McDonald's to focus on cage free eggs, sustainable fish and more
options for fruits and vegetables.
By Catey Hill
0 comments: