November 15, 2017

Franchise Times onThird-Party Delivery

Franchise Times magazine just wrapped their Restaurant Finance Conference in Las Vegas
and reporter Thomas Kaiser covers the discussion on delivery.

Third-Party Delivery No Longer Optional - FranchiseTimes.com


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Revenue Management Solutions Goes Rogue

Number Two of the Five - "More business isn't better if it doesn't make you money".

Apparently RMS didn't get the McMemo.

5 things to consider before partnering with a third-party delivery provider - RMS
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November 13, 2017

Next Remodel Initiative - After EOTF

Click to enlarge


As long as they can force their 
tenant to pay for rebuilds - 
sky's the limit.

World’s fanciest McDonald’s is full of leather, gold and marble - NY Post

Feel Free To Check My McDelivery Math...

And to comment on my assumptions.

I'm sure many McDonald's Operators have discussed the following in meetings but since I don't attend those meetings I'll contribute here. 

Assumptions: The delivery service charges something like 15% commission (paid by the McDonald's Operator) and McDonald's Corp. charges the Operator full rent and service fees on 100% of the retail value of the order. 

Let's say a store is paying 10% rent and 4% service fees. The store gets a delivery order that totals $20.00. Rent/Serv. Fees are $2.80 to McDonald's (14% X $20.00). The delivery service sends the Operator 85% of $20.00, or $17.00.

In this example effective rent and royalties on the transaction are 16.5% ($2.80/$17.00), 
2.5% over the 14% paid on in-house sales.

So the operator is paying a total of 17.5% (15% commission + 2.5% increased McD fees) on 
all delivery orders. With higher rent stores that 17.5% becomes 18%, 19%, 20% and beyond.

Why would anyone do that?
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November 11, 2017

Uber EATS Operator Profits

Regarding McDelivery profitability - this is what McDonald's CEO told investors on the October 24 conference call:
Analyst question from Sanford C. Bernstein & Co.
So in terms of delivery, do you now have a large enough sample to draw some conclusions about the impact on comps? And also, can you talk a little bit about profitability? One of the things we hear from some of the private companies we speak to is that it's difficult to make delivery profitable even when it's outsourced to third parties and, therefore, doesn't require as much in upfront investments. Could you talk a little bit about what kinds of fixed and variable costs your franchisees incur and what kind of profitability you anticipate? Thank you.
McDonald's Corp. CEO responds
Right. I'll have a stab at that one. So I mean, clearly, we're getting enough of an early read to be encouraged by delivery. So we've pursued – delivery have pursued a very aggressive rollout program. And our primary lead partner on this one has been UberEATS. And effectively, we've looked to expand wherever UberEATS has coverage around the world. And they've actually been doubling-down on their expansion to help meet our ambition as well, so it's been working well as a partnership between the two of us. And yes, we're getting good early trading results.
What we are finding is, not surprisingly, the number of guest counts per store per day does correlate pretty highly to consumer awareness of this. So the markets that have been able to more effectively promote and raise the customer awareness are getting higher take-up per day. I'm not going get into the actual comp buildup on this one, but it's a meaningful contributor in the restaurants that offer delivery. As I say, I want to just make sure we're guarded about what we're saying. We're in 5,000 restaurants so far out of 37,000. So it's meaningful in those that offer it, but clearly we've got some ways to go to get the further scale across the global system.
In terms of profitability, it's important that the vast majority of our business is incremental because the way that we're working with the third party operators is – obviously, there's a commercial relationship between ourselves and a third party operator that would take some of our margin. So we need certainly more than half of this business, if not more than that, to be incremental. And we're certainly finding that we are well up that scale actually. It's really, really encouraging for us.
And part of the reason we know that is because we're beginning to collect the consumer data now as well. So we can actually get repeat visit information, daypart information. And the fact that more than 60% of our business comes in evening and overnight, we know is reinforcing the fact this is an incremental business opportunity, revenue stream that we weren't previously tapping into.
But we're also getting very strong repeat business from those that use it as well, which again further encourages us. And one of the things we are focusing on internally is what is there that we can do to get the awareness of the fact that we're offering delivery higher up in consumers' minds. So, yes, it's profitable. It's incremental business. And we're looking to continue to go hard at this. And we certainly know our operators are enthusiastic, as are we, as a corporation.
Source: Seeking Alpha transcript
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"our margin"? ... Lots of words to say that Operator profits don't matter and all that matters is the small incremental sales increase on which the company and the shareholders take their full profits.

November 7, 2017

Heard It Through The McGrapevine

It's surprising to hear that the goal for Mobile Order and Pay is 15 - 20 GCs/day. That's sure tiny. I assume that goal will increase as adaptation increases.

Also, it's surprising that UberEats GCs are a couple of dozen a day. Or, maybe that's a good thing - less money losing transactions the better. 


And yet McDonald's Operators will be forced to spend marketing resources to increase McDeliverys.


The above numbers are surprising but it's shocking to hear that the level of commission paid 
to UberEATS (by McDonald's Operators) is supposed to be a secret. The Operators involved 
in McDelivery can't discuss it and have signed non-disclosure agreements.

Now I've seen it all. McDonald's Operators not allowed to discuss sweeping system changes with their fellow Operators. 

What else is hidden by those NDAs?
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Trump Sends Bodyguard to McDonald's

Trump bodyguard would go to McDonald’s when WH chef couldn’t get burger just right
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November 4, 2017

McChickens Are Flying All Over Philly

Uber's PR department seems to be operating independently of any of their "partners".

* If a McDonald's Operator gave out product mix information to the local press they'd
  get a call from the region or a nasty letter from Oak Brook legal.

* A hamburger is not a sandwich? Then how is a cheesesteak a sandwich? Strange.

* I hope this doesn't indicate a national trend. If delivery customers are ordering
  bags full of a deeply discounted sandwiches delivery is going to be very unprofitable.

UberEATS' most-delivered sandwich in Philly? You're McKidding
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Chili’s Streamlines Menu - McDonald's Goes Other Direction

Chili’s streamlined menu speeds up service times
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November 1, 2017

Extra, Read All About It

The pool of reporters we deal with are pretty well educated as to the reasons existing McDonald's Operators rarely, if ever, speak to the press. However, some reporters are
open to the idea of working with former McDonald's Operators.

If visitors to this website are former McDonald's Operators they might consider this 
media opportunity. Or, if visitors know of a former Operator who might be interested, 
please pass on this idea.

So far there are only two criteria: A) The former Operator(s) should be familiar with contemporary issues like EOTF, B) They should not expect to do this anonymously, it's
hard to tell a human interest story without naming the human.

Interested parties should contact ... adams@fegroup.com
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Krispy Creme Owner to Buy Dunkin?





JAB could acquire Dunkin in its quest to build a coffee empire
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