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McDonald’s is renegotiating its deals with delivery providers

The burger giant says it draws more traffic to third-party apps and should pay a lower rate as a result.
McDonald's delivery
Photo courtesy of McDonald's

McDonald’s is looking to get a better deal from its delivery providers.

The Chicago-based burger giant, which has generated considerable growth from that channel over the past four years, said on Wednesday that it is in talks with its largest delivery partners on a global basis.

“We’re actively engaged in discussions with our largest delivery providers to support the extraordinary growth in our delivery business,” CEO Chris Kempczinski told investors.

“What we’re trying to do through these conversations is leverage the fact that we are the largest restaurant company in the world, that we have an ability to drive traffic onto [third party delivery] apps that we think is second to none,” he added. “And that should be reflected in the rates that we’re paying.”

It was the bluntest assessment of the relationship between McDonald’s and delivery providers since the company first began working more heavily with the companies in the U.S. in 2017.

It also signals that the relationship remains a work in progress and that larger companies will have more say over this relationship even after the pandemic pushed a lot more business toward delivery.

Yet it is also an indication that restaurant companies recognize delivery as a permanent fixture in their businesses. While McDonald’s is saying it has a lot to offer those companies, in other words, it also needs them to keep delivering Big Macs to houses. “There is good recognition on both sides that we need each other,” Kempczinski said.

McDonald’s has long had delivery in a number of its restaurants around the world, particularly in Asia where that business is more mature. It began making an even bigger bet on the service mode in 2017, when it began working with Uber Eats.

In the years since then, the company has renegotiated deals with its providers, such as in 2019 when it negotiated lower fees with Uber Eats and ended the exclusivity of its deal, working with other partners.

The delivery business has grown, however, in the years since. It then exploded during the pandemic to become an even greater part of McDonald’s overall sales.

While the exact percentage is unknown, total digital orders now make up 20% of sales in the chain’s six biggest markets, executives said on Wednesday. The service is now available in 32,000 restaurants globally.

“Suffice it to say, delivery continues to be a really important driver for us,” Kempczinski said. “The business has grown by billions and billions.”

And, he said, that business has continued to remain “elevated” even as markets have reopened and more diners returned to restaurants.

Kempczinski said that McDonald’s has traditionally held its negotiations with delivery providers “at the market level.”

The company is now looking at these negotiations on a global basis. Those conversations, Kempczinski said, “are proceeding.”

“When you are a company the size and scale of McDonald’s, we certainly have, we believe, a great proposition for [third-party delivery providers] on a global basis,” he said. “I’m optimistic that we’ll be able to get a good resolution on that in the next couple of months.”

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