McDonald’s fell short of expectations in the final quarter of 2020. Revenue amounted to $5.31 billion, short of the $5.37 billion expected, while earnings per share were $1.70, eight cents short of the expected EPS, reported CNBC. Global sales fell 1.3 percent, U.S. comparable sales increased 5.5 percent and comparable sales in the International Operated segment decreased 7.4 percent.
On a call with analysts, CEO Chris Kempczinski attributed both the chain’s success nationally and its poor performance internationally to the focus on off-premises dining amid the pandemic. He noted that the markets in which the chain is doing most poorly are those that tend to rely most on in-restaurant dining, and that the company expects those numbers to improve in response to the vaccine rollout. Notably, McDonald’s has performed well in Australia, which has contained the virus more successfully than most countries, and where many customers continue to eat inside restaurants.
Kempczinski did not provide specifics when asked about tensions between U.S. franchisees. Relations between the corporate office and the franchisees began to sour at the beginning of the pandemic. Most recently, the franchisees have spent the last seven weeks on “pause,” refusing to engage in any nonessential communication with the corporate office, Restaurant Business reports. Without providing any information about how the corporate office aims to resolve these conflicts, Kempczinski noted that these disagreements “flare up from time to time” and that “we always find a way to work through these.”
Menus And Marketing
The chain identifies its growth pillars as MCD: M for marketing, C for core menu and the D for “doubling down on digital, delivery and drive-thru,” according to Kempczinski.
For the first letter, McDonald’s spent $200 million on marketing to keep up momentum, with campaigns to position the QSR as a community stronghold and to generate awareness of national promotions. Marketing its new McCafé Bakery offerings, for instance, helped drive breakfast growth. Kempczinski described the company’s campaigns as “great examples of using our marketing muscle to drive sales without adding complexity to our kitchens.”
Regarding the core menu, the company has focused on classic and familiar menu items during this time of uncertainty. It has piloted new items as well, but has completed extensive testing before adding them to the menu. “What’s important is that our approach to our menu is thoughtful and judicious,” said Kempczinski. “… New items must earn their place on the menu.”
Digital, Delivery, And Drive-Thru
The focus on the digital, delivery and drive-thru as part of the company’s Accelerating the Arches strategy isn’t surprising, given the constraints that the pandemic has placed on dining. Even in the European markets, where the chain is experiencing losses, the company is seeing some success at driving the 3 Ds, according to Kempczinski. In the Order to Eat Tracker, PYMNTS researchers looked at how the fast-food giant slashed its average drive-thru wait times by 25 seconds during the pandemic.
The company expects some of the success of these channels to continue even after the vaccine rollout. Kempczinski explained, “What we’ve seen as we’ve gone through COVID and then the resurgence of COVID recovery is that channels like digital, like delivery, like drive-thru, they do remain elevated. We think that is going to be one of the more enduring parts.”
Accelerating The Arches
In response to a question about which initiatives would be most impactful in the coming year, Kempczinski said, “I think we’ve got to have great marketing. Great marketing has to come to life.”
The chain plans to launch its new loyalty program in 2021. Other than identifying it as one of the two most important initiatives in the short- and long-term future, Kempczinski did not provide additional details about the program. The company has previously explained that “customers will receive tailored offers, be able to participate in a new loyalty program and easily order and receive McDonald’s food through the channel of their choice.”
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