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As consumers shelter at home, delivery and mobile orders have become key ordering channels for McDonald's.

Drive-thru, expanded delivery is paying off for McDonald’s during COVID-19 pandemic

Many U.S. franchisees, whose cash flow is hurting more in the second quarter, have received PPP loans; delivery and mobile orders have become key ordering channels for the business.

McDonald’s and its franchisees were having a banner first two months of the year with U.S. same-store sales increasing 8.1% in the first two months of 2020. Then, March comps tanked due to COVID-19, but expanding delivery partners and other digital innovations are paying off during the crisis.

Ahead of its first quarter earnings conference call, the company released results early Thursday morning for the quarter ended March 31.

McDonald’s president and CEO Chris Kempczinski said the Chicago-based quick-service chain began 2020 with “exceptional momentum” from a strong 2019 but that changed when “shelter-in-place” orders swept the world.

Global comparable sales declined 3.4% for the quarter. China has resumed operations in 99% of restaurants, but the “market continues to experience a reduced level of demand as consumers have not fully returned to their pre-COVID routines,” the company said.  

“The global crisis caused by the COVID-19 pandemic has significantly disrupted our business, and we continue to operate in a very challenging and unpredictable environment,” Kempczinski said in a statement released early Thursday morning.

Here’s a snapshot of McDonald’s Q1 earnings, along with details about the company's reopening plans and relief for franchisees. 

Stay tuned to NRN for a full report after this morning’s earnings call.

- Despite the downturn in same-store sales, the company said it expects to emerge from this crisis in a position of competitive strength because of its prior investments digital drive-thru technologies and delivery. Last year, the brand expanded its delivery partnerships to include DoorDash and Grubhub, in addition to Uber Eats. As consumers shelter at home and look for contactless ordering options, delivery and mobile orders have become key channels for the business. 

-Prior to COVID-19, drive-thru sales accounted for about two-thirds of all sales in the U.S. That's now on the rise. Drive-thru now accounts for nearly 90% of sales in the U.S. “We’re also seeing an uptick in delivery and digital transactions per restaurant, and all of these trends are similar to what we’ve seen in China and other markets,” chief financial officer Kevin Ozan said.

-In the U.S., March same-store sales were down 13.4% as previously mentioned by the company in an April 8 business update; Ozan said same-store sales in April are down about 20%.

-In Canada, delivery sales are up 40%

-Globally, 75% of restaurants remain open. In the U.S., 99% of restaurants are open for delivery, drive-through and carryout. A majority of restaurants in China have reopened. 

-Breakfast business is down.

-Before the pandemic, cash flow among U.S. franchisees was at an all time high, putting them in a stronger position to weather the challenges of dine-in closure mandates. The company is offering rent and royalty deferrals to franchisees.  Franchisee cash flow will be squeezed harder in the second quarter, compared to the first quarter. In addition, many U.S. franchisees have been approved for federal relief through the Paycheck Protection Program. The amount of funds received was not disclosed.

-When restaurants are allowed to reopen for dine-in service, each restaurant will follow local and state guidelines.  Since the crisis, the company has changed about 50 operating procedures in restaurants to ensure the safety of guests and employees.

-Consolidated revenues decreased 6%.

-Systemwide sales decreased 4%

-Quarterly net income of $1.1 million declined compared to $1.3 million in the same quarter, last year.

For our most up-to-date coverage, visit the coronavirus homepage.

Learn lessons in leadership during a crisis from our panel of experts on Friday, May 1.

Contact Nancy Luna at [email protected] 

Follow her on Twitter: @fastfoodmaven

Update: This story was edited to include more details from the earnings call.

TAGS: Coronavirus
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