(Bloomberg) — McDonald’s Corp. is betting on everything from fancier chicken to new playgrounds as part of a campaign to make fast food feel less like fast food.
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New menu items including hand-breaded wings and filets are in testing as part of a wide-ranging wager on higher-quality food. This, along with more engaging social media campaigns and upgrades to restaurants, should help McDonald’s cement itself as more diners’ first choice — not just for a quick meal on the go, but also for family outings and other occasions.
McDonald’s will still focus on value and speed, but customers are “really demanding more for their money,” Chief Executive Officer Chris Kempczinski said. They’ve raised their expectations as competitors upgrade their menus and offer new options in fast-growing categories such as chicken, beef and beverages. This is raising the bar for McDonald’s, especially as inflation quickens and consumer sentiment weakens.
“It’s just that much more important to have an even better experience these days,” Kempczinski said in an interview with Bloomberg News at the company’s Chicago headquarters. McDonald’s is unveiling its vision at a global convention this week for franchisees, with whom it’ll work out the details. Independent operators run about 95% of McDonald’s locations worldwide.
McDonald’s shares fell 1.1% on Monday in New York trading. The stock has declined about 10% this year, trailing the 11% gain in the S&P 500 Index.
McDonald’s US sales have outpaced the fast-food industry’s growth for four straight quarters, according to restaurant research firm Technomic, powered by attention-grabbing campaigns such as a Minecraft-themed meal and a value menu that has appealed to price-sensitive diners. It’s looking to keep up that momentum.
But there’s a downside to McDonald’s consistency and predictability. “Very little tends to stand out about any one visit or order,” said Robert Byrne, senior director at Technomic.
With franchisees asking how McDonald’s can further differentiate itself, executives spent about six months plotting the answer: a strategy they’re calling “Next.” A key step is improving the food lineup, including with tests of new chicken items to compete with chains such as Raising Cane’s, whose menu revolves around chicken fingers. McDonald’s is experimenting with hand-breaded chicken, including a new filet for its Deluxe McCrispy sandwich.
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New colorful iced drinks will compete with the likes of Dutch Bros Inc., a rising star in beverages. McDonald’s is also tightening its coffee standards by, for example, reminding crew how quickly beans should be used once restaurant staff opens a bag. It’s looking at offering non-dairy milks that have become standard across the industry. For now, only whole milk is available at McDonald’s in the US. “We need to fix that,” Kempczinski said.
The other priority is improving consistency and attention to detail across its more than 45,000 restaurants around the world. McDonald’s is reviewing its training for general managers and crew while giving them more opportunities to try food that’s prepared exactly by the book, according to Tiffanie Boyd, the company’s global chief people officer. Senior leadership is also taking the sessions.
“Leaving a hamburger on the grill for 30 extra seconds — it may not feel like much, but once you can taste that difference, people will be much more motivated to deliver according to our expectations,” Boyd said.
Layout Changes
Over the past decade or so, McDonald’s has renovated its restaurants to make them sleeker and more modern. In the process, it has largely removed playful colors and mascots, sparking criticism that locations felt gray and generic. The company is now looking at “injecting some of the playfulness” back while making layouts airier and more open, according to Jill McDonald, who took over as the company’s chief restaurant experience officer last year.
Options include larger drive-thru windows that allow customers to see orders being made and refreshing the design of its playgrounds. Locations could also feature updated break rooms for staff, an updated layout for the McCafé beverage section of the restaurant to show orders being prepared and a more consistent design across the world, according to McDonald’s.
The company also needs to eke out more productivity from each location as franchisees face rising fuel, labor and food costs — or they may not have the bandwidth to invest in upgrading restaurants.
“The inflation issues that they’re facing are real. The geopolitical issues that they’re facing are real,” Kempczinski said. “We’ve got to find ways to make our restaurants work better, work more efficiently.”
McDonald’s sees automation as part of the solution. The company has been working with Google to develop AI-powered order-taking for its drive-thrus. The system is 90% accurate, Kempczinski said, declining to disclose the company’s target.
At the same time, the bar for hospitality is getting higher, according to Kempczinski, so McDonald’s wants to ensure customers get friendly service on each visit. This could include, for example, coaching workers on always greeting diners.
“I think if we got to a world where you went to a McDonald’s restaurant and you never had to talk to a person, that wouldn’t be a good thing,” Kempczinski said.
McDonald’s also wants to give customers more reasons to post online. That could include partnering with YouTubers with large followings to launch marketing campaigns, instead of waiting for the chain’s launches to go viral, according to Kempczinski. McDonald’s wants to replicate the success of promotions such as the Minecraft meal, which featured collectibles, in-restaurant decor and digital freebies for use within the video game.
Of course, that means giving up some control about what shows up online, as Kempczinski learned after his tentative taste test of one of the chain’s burgers went viral.
“There’s always risk when you put your brand out for other people to create with and play with. The reality is it’s happening with or without us,” said Morgan Flatley, the company’s global chief marketing officer. “I think we need to lean into it because it’s going to happen anyway.”
(Updates share performance in the fifth paragraph.)
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