Now Testing: Mobile Ordering On the McDonald’s App
After the launch of its mobile application last year, McDonald’s (NYSE:MCD) now appears to be going full steam on its digital initiatives. The company’s chief digital officer said in a recent interview that McDonald’s will be piloting ordering capabilities through mobile devices in some regions outside the U.S. later this year. While the company is playing catch up as far as digital initiatives are concerned, McDonald’s mobile app has already seen 10 million downloads since its launch late last year. Competitors such as Domino’s Pizza and Starbucks have benefited tremendously via mobile ordering. Digitally derived sales comprise about 50% of Domino’s U.S. business and Starbucks processes nearly 6 million mobile- order – ahead transactions in a month. Mobile ordering should benefit McDonald’s by making its services more efficient, thus attracting more customers as queues become shorter. However the challenge of ensuring fresh food at the time of delivery needs to be tackled intelligently by the company.
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Mobile Ordering Can Increase Ticket Size, Total Sales
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Fast food companies have found that that app ordering is leading to larger orders. People who use Taco Bell’s app to place an order spend as much as 20% more than people who take the traditional route to order. Mobile ordering can also ensure more efficient service while lowering the risk that people turn away from a restaurant due to long queues. As quick service restaurants link their mobile apps with loyalty programs, there is a marked increase in use of these apps. McDonald’s will soon be launching a rewards program and mobile ordering should complement this initiative. (Read Why McDonald’s Is Working On A Loyalty Program? ).
As per our estimates, the average spend per customer visit at a McDonald’s restaurant will remain steady around $3.35-$3.40 over our forecast period. There can be a 10% upside to our price estimate if this spend increases to $3.80 by the end of our forecast period.
We expect the annual customers at McDonald’s restaurants to grow moderately from around 650,000 in 2016 to nearly 690,000 by the end of our forecast period. An increase in this number will lead to a further upside in our price estimate.
McDonald’s has been lagging behind competition in its digital initiatives. As the company increases its focus on technology as part of its transformation program, it should see a positive impact on sales and customer traffic in future.
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