McDonald’s lays out plan it hopes can reverse drop in visits

The world's biggest burger chain made the announcement Wednesday during its investor day

McDonald's Golden Arches logo at a McDonald's restaurant is covered with snow in Robinson Township, Pa. (AP Photo/Gene J. Puskar, File)
(AP Photo/Gene J. Puskar, File)

NEW YORK (AP) — McDonald’s acknowledged on Wednesday that it lost 500 million customer transactions in the U.S. since 2012 and laid out its plans to get more people back into its restaurants — including by letting them order and pay on their mobile phones by the end of the year.

The world’s biggest burger chain said during its investor day in Chicago that it lost some of its loyal fans to other major fast-food chains, rather than to newer rivals. It also said it will more aggressively market items such as coffee and pastries to draw customers, and hinted that it is looking to expand delivery in major markets.

McDonald’s outlined its plans after having recorded its fourth straight year of declining guest counts at established U.S. locations in 2016, despite the fanfare over the rollout of an all-day breakfast menu. The company also trimmed its domestic store base for the second year in a row.

The chain has said it needs to do a better job of making ordering convenient, but hadn’t previously specified when it would make mobile order-and-pay and curbside pickup available. Starbucks Corp. already offers mobile order-and-pay, an option the coffee chain has hailed as a success but also blamed for creating congestion at pickup counters. The Seattle-based company reported a decline in transactions for its las quarter.

In addition to letting customers order on their phones, McDonald’s noted it is transforming restaurants so that they incorporate elements such as ordering kiosks and table service. CEO Steve Easterbrook, who took over in March 2015, also noted Wednesday the potential for delivery, with 75 percent of the population in the company’s top five markets — including the U.S. — living within three miles of a McDonald’s.

Richard Adams, a restaurant industry consultant and former McDonald’s franchisee, noted that the company has been catching up on the digital front, but that it’s not yet known whether options like mobile order-and-pay can help reverse a trend of declining visits.

“Nobody has proven that it’s a panacea,” he said.

Adams also noted that the restaurant industry has never been more competitive, with more options for eating out than ever before.

McDonald’s faces competition not just from other big fast-food players, but from newer rivals that largely emphasize freshness and taste, as well as the availability of food at convenience stores like 7-Eleven and supermarkets. The NPD Group has said it expects overall customer traffic in the restaurant industry to remain “stalled” this year, as it was last year.

McDonald’s, meanwhile, has touted the changes it is making to improve its core menu, such as cooking its Chicken McNuggets without artificial preservatives and testing fresh beef for some burgers. In April, a limited-time offer for $1 sodas of any size could also be quicker-fix for driving customers into stores.

For 2019 and beyond, McDonald’s said it expects to expand its operating margin from the high-20 percent range to the mid-40 percent range, as it sells more of its restaurants to franchisees and relies more heavily on royalty fees. By the end of this year, the company expects 93 percent of its restaurants to be franchised.

Other chains such as Burger King and Dunkin’ Donuts are almost entirely franchised, while Starbucks and Chipotle own most their restaurants.

After having been halted before the company’s announcements, shares in McDonald’s gained $1.72, or about 1.3 percent, to $129.37.

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