McDonald’s has gone from a fast-food chain struggling to capture Americans’ attention to an industry leader.
On Tuesday, the fast-food chain reported sales at stores in the US open for at least one year rose 4.1%. Analysts had forecast 3.4% growth.
This is the third quarter in a row that McDonald’s US comparable sales have grown, and the ninth quarter of global comparable sales growth for the chain. Over the last two years, same-store sales have increased 5.4% in the US, according to UBS.
“We’re building a better McDonald’s and winning back customers with great tasting food, compelling value, and an enhanced experience,” CEO Steve Easterbrook said in a call with investors on Tuesday.
It’s a stark improvement for the fast-food icon, which struggled to substantially grow sales in the US for years. Here’s how McDonald’s turned business around – plus its game plan to continue growing sales.
In September, McDonald’s announced it had added a new set of espresso-based drinks to the menu: a caramel macchiato, a vanilla cappuccino, and an americano.
The new drinks were controversial among franchisees, who said that they took too long to make and required unnecessary, expensive equipment. However, on Tuesday, executives said that the McCafe initiatives had paid off in sales.
Coffee is “a $30 million business in the US,” McDonald’s US President Chris Kempczinski said.
He continued: “We’re excited about the category. It’s high margin, and we’re under-penetrated there.”
McCafe also helps convince casual customers to visit more regularly, and it prompts orders from the breakfast food menu, according to executives.
Improving ingredients in classics
- Hollis Johnson
McDonald’s has rolled out a number of new menu items that use higher-quality ingredients – and cost customers more money.
“Signature crafted” sandwiches made with ingredients like sriracha, guacamole, and artisan grilled chicken, as well as the new Buttermilk Crispy Tenders, have proved to be a hit among customers, according to executives. And, according to franchisees, “hot of the grill” fresh beef burgers have also boosted sales where they’ve been available.
Often, McDonald’s menu items that emphasize quality or trendy ingredients are a bust. However, improving upon classics is proving to be a somewhat unlikely success story for the chain.
“When we improve the taste and quality of our products to meet customers’ rising expectations, they reward us with business,” Easterbrook said.
Finding a Dollar Menu replacement
After McDonald’s killed the Dollar Menu in 2014, the chain seriously suffered.
Finally, in 2016, McDonald’s found a suitable replacement: The McPick 2. The promotion continues to evolve, but in its current form, it allows customers to order two items from a list (which varies regionally), paying just $5.
With the McPick 2 and $1 beverage deals (or $2 for McCafe drinks), McDonald’s has finally rediscovered the secret to winning over bargain shoppers.
On Tuesday, the chain announced it would roll out a new value menu in 2018, focused on $1, $2, and $3 price points.
Rolling out digital
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In addition to McPick 2 promotions, targeted digital deals helped attract bargain shoppers.
By the end of 2017, all US McDonald’s will offer mobile order-and-pay, which executives believe will continue to attract customers and boost sales.
- Getty/Tim Boyle
13% of McDonald’s US locations have been remodeled for the chain’s “experience of tomorrow” layout, which includes ordering kiosks and optional table service.
“We are continuing to make improvements inside our restaurants to make the customer experience more personal and less stressful,” Easterbrook said.
Finally delivering food
- Business Insider/Sam Shead
By the end of the year, 5,000 of McDonald’s US locations will offer delivery, thanks to a partnership with UberEATS. According to executives, delivery has helped attract new customers in younger, more urban regions.
“I truly believe you’re only just beginning to scratch the surface on this opportunity,” Kempczinski said.