McDonald’s was once more secretive than the CIA, and we don’t mean the chefs’ school. The chain’s jaw-dropping turnaround has fostered an openness that’s nearly as remarkable as the comeback itself. Witness the revelations that were aired by an official this week at the Morgan Stanley Consumer & Retail Conference. Here are some of the secrets that were shared, along with a head-turning bonus surprise from outside parties.
1. The real reason for adopting fresh beef
A key next step in the chain’s rebound plan is a switch to fresh beef for its Quarter Pounder sandwich. The expected payback will be an improvement in taste, but not because unfrozen beef is inherently more flavorful than a patty taken from the freezer, said McDonald’s CFO Kevin Ozan. Rather, it’s all about the shorter cook time.
“It’s not the fresh beef, it’s the fact that you can get a hot, juicy burger right off the grill,” he explained. “What fresh beef allows us to do is, it’s got less of a cook time than the frozen beef.” That means a patty doesn’t have to be slapped on the grill until someone actually orders a Quarter Pounder; no longer will the sandwiches have to be made ahead of time and held in anticipation of an order.
“Fresh beef is the way we get this hot and juicy, hot-off-the-grill burger,” said Ozan.
2. Next year’s value offerings
A mantra of McDonald’s President Chris Kempczinski, according to Ozan, is, “We need to compete on value; we don’t necessarily want to win on value.”
McDonald’s is “not looking to be at the lowest price, because we think that’s kind of a race to the bottom,” Ozan explained.
With that guideline in mind, the chain’s standing bargain deals—McPick 2 for $2 and McPick 2 for $5—will be replaced next year with a tiered menu of $1, $2 and $3 selections, Ozan revealed. The price levels will be constant, but the products offered within each bracket will change in accordance with food costs and competitive considerations, he added.
The new deals are expected to account for more than the 10% to 15% of sales generated by the McPick 2 offers because “we’ve got several price points that reach farther into the menu,” said Ozan.
3. Delivery’s impact on the business
About 70% of McDonald’s delivery sales are newfound business, and the tickets for those orders tend to run 1.5 to two times as high as the chain’s average ticket, Ozan revealed.
The consumers who opt for delivery tend not to be McDonald’s customers trying to figure out the most convenient way to get McDonald’s food, he explained. Rather, “someone is at home and knows they want to get some food delivered and now they go see what can they get delivered.”
McDonald’s delivery time through UberEats averages about 25 minutes, considerably below the 35 minutes a mystery-shopper firm learned in an in-depth study to be the average for all UberEats restaurants.
Speedier delivery means McDonald’s automatically moves up on the list of delivery choices offered on the UberEats app, Ozan explained. “While you can’t advertise to get yourself pushed up to the front, if you’re able to deliver faster, you kind of self-advertise because you’re getting pushed up farther.”
Awareness, he indicated, is McDonald’s biggest challenge in raising delivery sales.
4. Coffee is a challenge
About 25% of McDonald’s sales now come from breakfast, Ozan revealed, though it was unclear if he was talking about the daypart or business generated throughout the day from breakfast products. Either way, that chunk of sales is now the largest segment for the chain, according to the CFO.
But Ozan also indicated that the chain’s intensified focus on coffee won’t necessary trigger a spike in the sales figure. “You shouldn’t think of it as a huge sales driver in 2017 or 2018,” he told his audience of financial analysts. “It’s a business that we believe has a lot of potential, and we’ll continue to foster that business over time.
“Coffee drinking and breakfasts are very habitual for customers,” he continued. “To start changing behaviors and have people used to doing this will take some time.”
5. Could these products be next?
Ozan did not divulge what products might be the next additions to McDonald’s menu, but two news reports collectively provided a glimmer of what could be in the offing.
First, TheStreet.com revealed the United Kingdom has become the chain’s test market for big ideas, including delivery. But the report did not say what innovations currently being tried across the pond might be exported to the U.S.
That information came from a second report, aired by a British website called Echo. It spotlighted two decidedly non-Christmas-y items on McDonald’s British holiday menu. The Beef & Cheese Feast is a bacon-topped cheeseburger served on a flour-topped artisan bun. The Chicken Warmer sandwich packs two pieces of chicken and a pepper sauce into a glazed sesame bun.