McDonald’s may soon be more like Chipotle
McDonald
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.
McDonald
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.
and never had them say no.
