Coalition of Franchisee Associations
Last week we posted a link to a research report from Real Vision featuring analyst Howard Penny. At the time the only thing was available was the transcript of the discussion.
It appears that Real Vision has unlocked the video portion and even if you read through the
transcript the video discussion is enlightening. It's eleven minutes.
Here's the original post: Analyst Howard Penny on NOA, Chris K, and McDelivery
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Delivery has to be a balance, and profitability is an issue. However, so is QUALITY - and
the chargebacks to restaurants because a product isn't meeting quality and accuracy -
with no ability for the restaurant to challenge that model is simply dumb. Add the complexities of MCD negotiated fees, service charges, etc. - you don't have to be a math professor to realize that McDelivery is a GOLD MINE! Where MCD gets the top line SALES (GOLD) - leaving
the operator with what's left - the loss (or the SHAFT)
Just like giving capital with $1 ANY SIZE DRINK - just "because". When the closest competitor small drink is $1.89 and their Large is over 2.89. Or $2 McCafe to build the supermarket sales - as the competition is selling for closer to $5
McDelivery worked in Asian markets due to population densities that far exceed even the largest US cities of NYC and LA. Completely different model here in the United States - even
if these larger markets can get close to the demographics. Still, wasn't that a KROCISM - to Local Store Market (LSM) those sorts of ideas? How is what works in NYC good for a highway market in Kansas? Its not like Asia, where its good in HONG KONG because there isn't a McDonald's outside the limits to be impacted with the expectation of delivery. Unlike the USA, where restaurant saturation fills even some of the most remote travel areas in the country.
Looking to build sales - simplify the damn menu to speed service. Declare MFY dead, as the current production engine is dead in its ability to resurrect service times. How dumb is the system simplification focus, when it cant even ELIMINATE the McDouble - a made up sandwich designed to address food cost when the Double Cheese was removed from the $1 menu?
You just have to sit back and scratch your head at the low hanging fruit - but wasting $$$ and synergy on far fetched projects... or taking years to develop simple projects... like digital food safety.
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Nigel Travis, the CEO of Dunkin’ Brands, regarding a reduced menu stated: “It really started with our franchisees being concerned about how complicated our menus are and how difficult it is to train employees, and find employees as a result”.
Fast Food Franchises Should Offer A Simple Menu
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"Sales through retail channels siphon all revenue/profit to McDonald’s Corporate,
essentially cutting out the franchisees that built the McCafe brand."
McDonalds breakfast: Market is forecast to be worth over $1 billion by 2020
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Jon Taffer states that delivery customers are different from restaurant customers and
delivery does not cannibalize restaurant sales.
Of course, his only source for such information would be from the restaurant companies
and the delivery providers. It may or may not be true.
But consider this, other than the pizza companies restaurant delivery has never been
aggressively marketed. Given the power of OPNAD, if McDelivery is on OPNAD, it's
easy to think that much advertising will change customer behavior and will cannibalize
in-store and drive-thru sales.
Restaurant delivery has never seen anything like the clout of OPNAD.
Will McDonald's Operators spend their advertising money to move profitable sales in the
restaurants to unprofitable sales with McDelivery?
Or has McDonald's Corp. already committed OPNAD $$$ in their deal with UberEats?
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Real Vision is a research firm and most of their video and audio products are only available
to subscribers. But, their recent interview with Howard Penny is available to the public
in transcript format. The "Transcript" button is on the right side of the page.
I suggest you print a copy since they might change the link.
Howard Penny - Not Loving It - Real Vision
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One of the McDelivery articles we posted last week discussed the advertising of McDelivery.
CEO said, "McDonald’s typically won’t invest in any sort of national marketing campaign
until at least 70 percent of the U.S. system can offer what’s being advertised".
Why is that like McCafe?
OPNAD launched McCafe nationally in April of 2009 when a little more than 60% of U.S. stores had the product. Many major markets did not have McCafe until months after the national launch.
Millions of McDonald's customers were misled and disappointed.
Prior to McCafe 2009 was going pretty well. The year started off nicely with a 1st quarter same-store sales increase of 4.7%. The McCafe OPNAD campaign launched in April The
2nd quarter of 2009 came in at + 3.5%, 3rd quarter +2.5%, and the 4th quarter was barely positive at + 0.1%.
In fact, the years 2003 thru 2012 were all positive same-store sales years but 2009 was the lowest full-year increase of all at +2.4%. No one can claim that OPNAD prematurely advertising McCafe built same store sales.
So advertising a poorly accepted product that was only available in a percentage of stores pretty much ruined sales momentum for 2009. Most of the money OPNAD spent that year
was wasted.
If McDelivery goes on OPNAD U.S. Operators should expect soft or negative same-store
sales for the duration of OPNAD advertising against McDelivery.
McDelivery is different than advertising a new product. It's a service, not a product. I don't recall a time when OPNAD advertised a service. Some markets will benefit, others won't. It makes sense that the New York City area would advertise the service. But, Sioux Falls? Albuquerque? Reno?
And keep in mind, one of the reasons McDonald's management pushes Operators to put something new on national television is to impress investors and analysts. Like McCafe, management has been hyping McDelivery with investors for several years. Once investors
see ads on T.V. it becomes successful in their minds and they raise their expectations for
sales and earnings. All accomplished with McDonald's Operator's advertising $$$.
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Anonymous has left a new comment on your post "McCashin In - Chicago Style":
Your gonna see board members bailing faster than a Crispy Crème Donut at a Weightwatchers meeting...
Remember. even the Costa Concordia was righted by the proper salvage company.
No one knows the MCD system better than its franchisee's.. as there is no one left in McDonaldLand with knowledge. The entire MCD Field Service in most areas has been vacated to BC's with two weeks HU training, a clipboard and a timing device.
Remember a Corporate structure with no history, is a Corporate Structure with no loyalty - even unto itself. They must now live with the monstrosity they created.
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"According to the data, 35 percent of customers who have used third-party delivery say
they have experienced a problem with their orders. Seventy-six said the restaurant was,
at least partially, to blame for the errors. Ninety-two percent said they expect food deliveries within 15–30 minutes of placing an order.
Jimmy John’s added the largest delivery services average close to a 50-minute delivery time."
Jimmy John's: We Will Never Use Third-Party Delivery - QSR magazine
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