So where is McDonald’s top-line expansion coming from? The brand has taken a multi-pronged approach to driving check and capitalizing on a confident customer. Currently, it’s comprised of 60 percent mix and 40 percent pricing for the brand—a relatively consistent equation throughout 2019. Between delivery and the self-order kiosks found in Experience of the Future stores, McDonald’s generally sees a higher number of customers per ticket than it used to.
BTIG analyst Peter Saleh estimated Thursday in a note that average check increased 7 percent (4.2 percent menu mix and 2.8 percent pricing). All dayparts had positive comps while traffic continued to decline, and McDonald’s lost share at breakfast given it’s the only daypart with positive traffic.
Kempczinski said the chain hasn’t been a “one-trick pony” when it comes to lifting check. Delivery, for one, is generating orders roughly twice the size of dine-in. Dynamic Yield, McDonald’s $300 million acquisition last year, is leading to add-ons thanks to its suggestive selling capabilities at the drive thru (deployed in nearly all outdoor digital menuboards in the U.S. and Australia, or 10,000 domestic locations). The kiosks have resulted in larger orders, too. McDonald’s $1 $2 $3 value menu is also a helpful check builder given guests often tack on items to other orders. Pricing can’t be discounted, either. “The inflation that we’re seeing out there, particularly on the labor side that does get priced through, and so I think as we head into 2020, the conversation we’ve been having with franchisees … is we’ve just got to make sure that we have balance. We need to have a balance between check growth and we need to get to transaction growth, and that’s what everybody in the U.S. is working toward right now,” Kempczinski said.
As it has for some time now, the traffic conversation always back to breakfast for McDonald’s, an occasion that accounts for about 25 percent of total sales. Kempczinski said its U.S. segment “is centered on stemming” guest count declines at the daypart by focusing on running better operations, introducing new menu items, and offering “delicious food at a compelling price point.”
It’s a straightforward concept. “… we have a really good understanding of what it’s going to take for us to drive guest counts to positive in the U.S.,” he said. “It starts with breakfast. Breakfast is the only daypart in the industry that’s seeing traffic growth. We have to win at breakfast.”
“There’s obviously a lot of focus and attention that we’re going to be putting on that in 2020.”
Kempczinski said McDonald’s has a “pretty strong breakfast plan,” this year. He didn’t telegraph too many details, only to say there will be a combination of menu news, “some service things” and, naturally, the need to remain competitive from a value standpoint. “But there is a lot of other things that we still have on the calendar,” he said.
“And so, if you think about a couple of years ago, we talked about really focusing on food and it was going to be a focus on burger, chicken, and coffee,” Kempczinski added. “And I think you’re going to see for us, in 2020, that there’s going to be burger news, there’s going to be things that we’re doing there that continue to keep driving our [Quarter Pounder] business, which really has been a standout performer for us the last couple of years.”
He also spoke briefly about McDonald’s chicken plans, which have surged into the spotlight lately thanks to the battle between Popeyes and Chick-fil-A. The brand said earlier in the week its Crispy Chicken Sandwich product “might blow your mind.” Piloted in Knoxville, Tennessee; and Houston, there hasn’t been much follow-up to the potential timing of a larger rollout.
Kempczinski said Wednesday McDonald’s was “committed to really updating it and competing in an aggressive way in the chicken segment, so you should expect something there,” but didn’t share any dates.
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