February 11, 2019

Why is McDelivery Just Like McCafe?

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 $$$.
.

5 comments:

Anonymous said...

McDelivery is a flop - and should be a flop if MCD took the QUALITY in QSC seriously. It adds cost to the operator, adds chargebacks to the operator, adds complaints to the operator matrix. Everywhere, 3 strikes is an out - only in McDonald's is it a HOMERUN. For the small added sales, always hits TOP LINE - while CASHFLOW declines.

All operators hear is "but the competition is doing it" - well, call me old fashion - but grandma used to say, "if Johnny jumped off a bridge, does that mean you need too?" Well, with group think - apparently so.

Average Restaurant Technology fees are closing on $15,000 per location annually - without delivery. Promotion from the Global Mobile APP can add nearly 10% cost - and labor cost with skyrocketing minimum wage is outrageous. All hitting the operator bottom line - and know how much does McDonald's contribute to McDELIVERY - NADA!

I monitored a call today, where the plan to reduce turnover is to have planned amusement days for employees. I was thinking we do have those days... its called BSV's, CEV's and all the other "TOOLS" used, which always resemble a HAMMER.

But I digress. Please rest assured, the MONUMENTAL cost for those GEN 2 espresso machines will be recouped, as restaurants now do DECAF on them! . Guess that was the simplification plan for 2019.

Howard Penney said...

McDelivery is worse than McCafe... Delivery sales come at a much lower margin McCafe..
Seriously, nobody is going to get leaded cheese and bacon fries delivered..

Anonymous said...

Its different. McCafe sold in grocery always competed with 100% of the restaurants. And it still does. MCD pays no service fees or rent on that income, either.

Anonymous said...

https://www.economist.com/business/2019/02/07/a-25-year-battle-to-improve-the-image-of-mcdonalds

This is an interesting article that was perhaps overlooked. It was within the Economist Magazine. Take a read, it's pretty interesting. And I think the Author is correct about McDonald's in his conclusion.

He points out that McD has catered to these societal complaints over time ie. "super size me" but the same people who make those complaints are the same people who do NOT EAT at MCD.

So mcd makes changes, it impacts service times, operations, etc. and we alienate our actual customer base. We're our own worst enemy when we chase the tide of societal change.

Anonymous said...

I am amused when I hear operators complain about McCafe in grocery stores. Where were they when it was announced at the Co-Op meetings and only a couple operators pushed back. Think about all the free advertising, funded mainly by operators, that McDonald's got for McCafe which bled over to grocery store sales. Amazing con job!