Editor's note: This story has been updated with responses from McDonald's.
McDonald’s’ expansion of a test of an in-restaurant television channel in California could generate potential benefits but at a high cost, according to one industry expert.
While McDonald’s stands to boost its dine-in business by encouraging customers to linger longer over McD TV, Leo Kivijarv, vice president of research for PQ Media LLC, an expert on “digital out of home” networks, said such systems are “really expensive,” and the chain must determine how it will pay for the service.
This week, McDonald’s Corp. said it will expand a test of its McDonald’s Channel that began in 2008 at single units in Las Vegas and Los Angeles to 645 restaurants across central and southern California.
“While we continue to look at making this branded content available to our customers, it would be premature to speculate on what additional restaurants/markets may be added to the test,” Ashlee Yingling, a media relations representative for Oak Brook, Ill.-based McDonald’s Corp., wrote to Nation’s Restaurant News in an e-mail.
One result of McDonald’s implementation of an in-house channel is that it could help to boost dine-in sales and traffic. McDonald’s approximately 14,000 domestic restaurants currently do more than two-thirds of their business at the drive-thru.
“With its family-friendly, all-HD programming, the McDonald's Channel will offer our customers an enhanced dine-in experience that they can share with family, friends and colleagues," Brad Hunter, McDonald's USA senior marketing director, said in a written statement about the expanded test, which begins in the fourth quarter.
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McDonald’s still must answer logistical questions about the channel, including the cost of implementation and how many customers actually engage with it, according to Kivijarv.
If McDonald’s plans to pay for those costs by charging for outside advertising, then the company must determine how many targeted consumers are actually watching the channel, he said.
Kivijarv said demonstrating consumers’ engagement level is a challenge to the overall DOOH industry.
“And then there is the whole franchisee issue,” he added. “Does the franchisee bear the brunt of the costs?”
McDonald's said the test involves an unspecified mix of company and franchised stores in the San Diego, Los Angeles-Southern California, Bakersfield and California Central Coast areas.
Company officials declined to discuss the costs of the McDonald's Channel.
ChannelPort Communications LLC of Los Angeles is managing the development and implementation of the McDonald’s Channel. It said McDonald’s will install an average of two large, flat-screen, high-definition displays per participating restaurant in California in the next several months.
Typically, DOOH programming is not particularly customized or localized by brand, although restaurants may choose from a variety of news, sports or entertainment options. Such arrangements often allow for the chain to broadcast its commercials or other marketing messages.
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ChannelPort said it will compile programming with partners including reality TV veteran Mark Burnett, who produced Survivor and The Apprentice, BBC America and Los Angeles-based KABC-TV Eyewitness News.
Programming will include local content, such as spots on local high school and college athletes, and moms with unusual hobbies. Only a fraction of the programming will feature McDonald’s marketing messages, according to a Los Angeles Times article this week.
Displays will be visible to 70 percent of the dining room, with 30 percent reserved for “quiet zones,” the article said.
The network “could reach an estimated 70 percent of dine-in customers” in the 645 test restaurants, ChannelPort said in a statement, “and countless others through an extended mobile and web presence” that includes a @McDonaldsTV Twitter handle.
Contact Alan J. Liddle at [email protected].
Follow him on Twitter: @AJ_NRN