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McDonald’s to debut app this year

McDonald’s to debut app this year

Executives also discuss menu, customization, business model at investor conference

McDonald’s Corp. expects to launch a smartphone app in the U.S. this summer as part of an effort to catch up to its competitors on the digital front, executives said Thursday.

Speaking at the UBS Global Consumer Conference, newly anointed chief administrative officer Pete Bensen didn’t provide many details on the app. But he suggested it would have different functions in different parts of the world, depending on various priorities. He also said apps could provide elements that improve customer experience, such as a restaurant locator or ordering and payment.

“We are a little late to the game,” Bensen said. “But we’ve dedicated significant resources to get ahead of the pack.”

The app could increase consumer engagement with the brand and provide a vehicle for promotions, he said. Additionally, it could provide a place for a loyalty program, particularly for McCafé, enabling McDonald’s to catch up with coffee competitors Starbucks and Dunkin’ Donuts, which already have such programs.

Bensen, along with McDonald’s new chief financial officer Kevin Ozan, gave their presentation at the conference a day after the company said it would phase out the use of human antibiotics in chicken in the U.S. The presentation was mostly a question-and-answer session before investors, who have bid up the company’s stock by more than 12 percent in the six weeks since former CEO Don Thompson announced his retirement.

The executives touted McDonald’s new organizational structure, particularly in the U.S., which puts more marketing and product power on a local and regional level. According to Bensen, the strategy makes sense because the country is big and the battle for the domestic consumer is played at a national level.

“The battle for market share is different in the Northeast than it is in Houston or Seattle,” Bensen said. He noted that different regions have the freedom to offer and develop products that resonate with local consumers. “Some region heads are taking this and running with it.”

In recent weeks, customers in Maryland, Washington, D.C., and Virginia, could have their Filet O’ Fish sandwiches seasoned with Old Bay, which is popular in the region. And McDonald’s is testing new seasoning on French fries in California and on Chicken McNuggets in Nevada.  

“I think there could be more product news this year than last year,” Bensen said. “We’ll see some of that.”

The company continues to work on its new customization platform, Create Your Taste, but executives seemed to backtrack on earlier sentiments about the extent of the platform’s rollout.

Create Your Taste is being introduced at McDonald’s restaurants in Australia. The platform is currently in 15 locations in the U.S., Bensen said. But he wouldn’t say how many units it could roll out to domestically. The company previously said it would expand the program to 2,000 locations this year.

“We’re not going to suggest a specific number” of restaurants, Bensen said, noting that Create Your Taste is “still in early testing.”

Bensen hinted that McDonald’s is working with franchisees on the platform’s price tag. He said adding Create Your Taste costs about $100,000 to $150,000 per unit. The company may contribute to part of the cost, he said.

Executives also suggested that employee pay could be on the table as part of the company’s turnaround plan.

“A big part of our turnaround agenda is what are we doing around employment image and employer relationships,” Bensen said.

Any increase in wages should be incremental, given profit pressures on the part of franchisees, he said.

“As things happen, I think they should happen in a staged way versus a big change all at once,” Bensen said.

Executives also defended the company’s business model.

“We spend a lot of time and resources working with our franchisees,” Bensen said. “Our average unit volumes and our franchisee cash flow are both among industry leaders.”

While McDonald’s general and administrative spending per restaurant is two times as high as its competitors, cash flow per restaurant is five times as high, he said.

That doesn’t mean the company won’t make changes, including refranchising. It could even do something with its real estate. In the past, activists have suggested that the company spin off its real estate into a real estate investment trust, or REIT.

“We’re constantly challenging our thinking on the REIT,” Bensen said. “It isn’t something we haven’t seen before. We update our analysis and review it with the board. We’re always looking for ways to increase value.”

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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