Don’t look now, but McDonald’s now sells more delivered food than any other quick-service restaurant chain, including Domino’s.
At the company’s Investor Day presentation last week, CEO Chris Kempczinski noted that the chain generates $16 billion in annual systemwide sales worldwide from delivery, most of which comes through third-party delivery companies like Uber Eats and DoorDash.
According to Restaurant Business sister company Technomic, Domino’s in 2022 generated $17.5 billion in global system sales which, based on our math, is more than $16 billion. But much of that $17.5 billion is in the form of carryout sales, which represents about 40% of Domino’s business in the U.S. Even if Domino’s did 100% of its non-U.S. sales through delivery, McDonald’s would still be bigger at $16 billion to about $14 billion.
The figure demonstrates how rapidly third-party delivery has grown in the U.S. and worldwide and how much major fast-food chains like McDonald’s have latched onto it as a substantial part of their business.
It also illustrates the challenge for Domino’s and other pizza players as major fast-food chains push harder into the market. In just a short time, McDonald’s went from a bit player in the delivery market to a major, global behemoth.
In 2017, for instance, McDonald’s generated just $1 billion in global system sales through delivery. “We had a delivery presence in Asia, and we had just begun testing delivery in a couple hundred restaurants in the U.S.,” Kempczinski told investors. “McDonald’s is now No. 1 in QSR delivery orders around the world, and we continue to grow share faster than our competitors.”
In the U.S., McDonald’s has exceeded its delivery sales every year since it first started testing the service through Uber Eats in 2017. In the first half of this year, while industry traffic was “flat to negative,” Kempczinski said, “Our delivery guest counts grew over 15%.”
(Read “McDonald’s and Domino’s are bigger competitors than ever.”)
McDonald’s has some natural advantages when it comes to delivery, namely that much of the U.S. population is relatively close to one of its locations, given its omnipresence. And with more than 40,000 locations globally, that’s increasingly true in many international markets, too.
That means drivers don’t have to travel as far. The food arrives to customers’ doors fresher than other concepts and the restaurants don’t charge some of the markups that other chains might.
“We have better rates, better pricing, better driver availability, more locations,” Kempczinski said in an interview. “We expect it’s going to continue to grow.”
Where is this business coming from? For the most part, it’s coming from consumers dining inside restaurants less often and shifting business to takeout options. But it’s also coming from existing delivery players, Kempczinski said.
“We’ve been able to go after the delivery part of the business and take share from existing delivery companies, pizza guys, local restaurants, etc.,” he said.
McDonald’s goal now is to build delivery sales within its own app, where the company can develop a relationship with customers. The company gets more data on those customers and can send them personalized offers.
The fast-food chain’s goal is to get 30% of its delivery orders through its app. “If we can get delivery orders through the app, it opens up all the benefits you get from the McDonald’s loyalty program,” Kempczinski said.
How will the company do that? Perhaps using incentives to encourage delivery customers to use its app, rather than one of the delivery platforms. Perhaps there are benefits loyalty members can get, for instance, that make it more attractive to order delivery through the app. Maybe merchandise, Kempczinski said.
“There’s a lot of things we can do to make it more attractive,” he said.
That said, it’s worth noting that the third-party ecosystem has its own set of customers with their own desires and own loyalties. As Domino’s is discovering, a lot of customers simply prefer using a single app for all their restaurant needs. They don’t care if the restaurants themselves have their own easy-to-use apps.
But it also shows just how much this industry has changed over the past five years.