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McDonald’s is making a big bet on delivery

Grab delivery worker outside a McDonald's restaurant in Malaysia.
REUTERS/ Lim Huey Teng
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  • Michelle Cheng
By Michelle Cheng

Reporter

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Even as dine-in restrictions lift at restaurants around the world, McDonald’s is betting Big Mac deliveries will remain in demand.

Over the last five years, the fast food chain has expanded its delivery capacity tenfold from just 3,000 of its restaurants to more than 32,000 restaurants globally, said Christopher Kempczinski, McDonald’s CEO, on a conference call with investors today (Oct. 27). The company does not break out the numbers for delivery, but “the business has grown by billions and billions,” Kempczinski said. The orders via delivery have also gotten larger, as customers tend to order for several people, he said.

Tech-savvy customers are forcing the restaurant chain to adapt. So far this year, more than 20% of sales—or about $13 billion—in McDonald’s six biggest markets come through digital channels, whether that’s through the app, kiosks in restaurants, or delivery, said Kempczinski. Those markets are the US, the UK, France, Germany, Canada, and Australia.

That’s helping to drive profits: In the third quarter, McDonald’s net income increased to $2.1 billion, up 22% from the same period last year.

The pandemic had accelerated the sudden demand for food delivery, which Kempczinski admits wasn’t something the company saw coming. “[W]hat has become apparent is delivery was meeting a customer need that I don’t think any of us fully appreciated even maybe a few years ago,” he said. “So it’s here to stay.”

The future of McDonald’s delivery

An ongoing tension for restaurants is the commission fee charged by food delivery companies—an issue even a multi-billion dollar global restaurant chain faces. McDonald’s is continuing to negotiate with third-party operators on delivery rates, using its massive scale at the bargaining table. “[W]hat we’re trying to do through these conversations is leverage the fact that we are the largest restaurant company in the world, that we have an ability to drive traffic… and that should be reflected in the rates that we’re paying,” said Kempczinski.

McDonald’s executives on the call also said they are also thinking about how the popularity of delivery will change the customer experience at sit-in restaurants, and the potential scenarios for how to reuse the space if dine-in doesn’t come back to the level it was before the pandemic.

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