When McDonald’s reported its fourth-quarter earnings for 2018, in many ways it was as if the burger giant was providing an update for the entire foodservice operator community.
These steps connect to four bigger trends that continue to shape the industry. First, let’s look at delivery. McDonald’s reports this has become a $3 billion global business. The growth in delivery shows no signs of slowing down for the industry at large and McDonald’s. From a consumer’s perspective, the best way to keep pace with the events of the day is by having restaurant-quality food delivered to them.
That leads to the second trend: competition for consumers’ share of stomach remains as competitive as ever. In fact, Technomic projects restaurant industry sales will grow at a rate of 1.9 percent in real terms for 2019. While positive growth in real terms remains a benefit for the industry, the fact remains that any company growing at a faster rate continues to take share from other competitors.
Specifically, the breakfast daypart remains particularly competitive. McDonald’s reported a decline in visits for the morning meal, which happens not so coincidentally as Taco Bell continues to rise and shine in this daypart. During a call with analysts, McDonald’s CEO Steve Easterbrook said the chain plans to reverse that trend with breakfast value menus, limited-time offers (LTOs), coffee promotions and special deals for customers who use the company’s app.
Third, menu evolution remains all the rage among operators, particularly in the form of LTOs and other specials. Value meals and special offers gained momentum during the recession and have yet to really lose any momentum. LTOs continue to strike a chord with consumers because new or updated food items keep the menu and concept fresh in the eyes of the customers.
Which brings me to the last point: the issue of remodeling existing locations. If they are not already, remodels and refreshes should be top of mind for most foodservice operators. As of the fourth quarter of 2018, McDonald’s had remodeled 4,500 of its 14,000 U.S. locations. The chain plans to remodel 2,000 more this year and intends to spend roughly $1 billion in this area. In fact, McDonald’s is bending over backward to help its franchisees with the remodels. Why? Because remodels ring the cash register for operators of all shapes and sizes.
Just last year, Famous Dave’s remodeled an Iowa location to reflect the chain’s new design. The net result: The updated menu and new design, which included a takeout area, generated a 21 percent increase in customer traffic and a 16 percent sales increase — numbers that would make most any operator smile.
The moral of the story? Today’s customer won’t reward foodservice operators for maintaining the status quo. It’s up to operators to work with their supply chain partners to keep their concepts fresh and appealing as they continue to evolve.