McDonald’s makes changes to increase on-the-go sales

Big Mac displayed on McDonald’s app’s page

Daniel Acker | Bloomberg | Getty Images

McDonald’s U.S. franchisees will begin paying into a digital marketing fund next year as the fast-food giant looks to expand its booming digital business, according to a memo seen by CNBC on Thursday.

The change is intended to modernize the company’s marketing strategy and expand its competitive advantage, according to a memo written by U.S. customer experience officer Tariq Hassan and chief investment officer Whitney McGinnis. . The memo also said McDonald’s plans to invest hundreds of millions of dollars in the next few years to improve its loyalty program and increase ordering channels, including the ability to order online without downloading an app, which will also boost its digital business.

Loyalty program members accounted for more than $6 billion in McDonald’s first-quarter global system sales. The company has 34 million active digital customers in the U.S. By comparison, Chipotle Mexican BBQ It has 40 million loyalty members, while Starbucks has 32.8 million.

In December, McDonald’s said it aimed to reach 100 million loyalty program members by 2027.

Currently, the franchisor recommends that franchisees use their existing marketing contributions to pay for the new fund, which requires them to spend at least 4% of gross sales, according to the memo. The new approach could therefore lead to McDonald’s cutting back on traditional marketing tools like TV ads and focusing on areas that can actually boost sales.

Next year, U.S. businesses will have to pay 1.2% of estimated digital sales, such as transactions that occur when customers log into loyalty programs or orders are delivered, the memo said. This ratio changes every year based on forecasts made at the beginning of the year.

As a result of the change, McDonald’s predicts that each U.S. restaurant will see an increase in cash flow of about $2,600 starting in 2025.

Franchisees in the UK, Canada, Australia and Germany will also pay into the Global Digital Marketing Fund. McDonald’s other markets will transition to this approach later.