Alas, All-Day Breakfast Won’t Be Enough to Save McDonald’sl
MCDONALD’S IS IN trouble.
The company’s global same-restaurant sales fell consistently for 12 straight months until in June it decided to stop reporting the numbers altogether. According to an AP report, more Golden Arches restaurants would close this year than would be opened for the first time since 1970. McDonald’s embattled CEO stepped down at the beginning of the year, amid a string of unfortunate mishaps: a tainted meat incident in China, poor handling ofemployee strikes, and an unfavorable employment ruling from the National Labor Relations Board that could shake up the way McDonald’s has conducted its business.
So, yeah, the fast-food chain is kind of in a slump right now. But hey, it has a solution: all-day breakfast!
You’ve probably already heard about this, but here’s the rundown one more time: Starting today, McDonald’s is debuting all-day breakfast across 14,300 US locations. The initiative was in testing as early as March, according to The Wall Street Journal. But now the infrastructure (read: new grills and toasters) is officially in place so that the fast food restaurant can offer “core” menu items, including sausage burritos and hot cakes, well past the traditional breakfast cutoff of 10:30am. Unfortunately, McDonald’s will offer other items like Egg McMuffins in a limited capacity, depending on the region. (Vicious rumors aside, McDonald’s will reportedly be offering hash browns all day at most of its locations.)
If all-day breakfast sounds like a bit of a gimmicky tactic, that’s because it, uh, kind of is. It’s all part of the plan from Steve Easterbrook, who took over as McDonald’s CEO in March, to turn the ailing Golden Arches into a “modern, progressive” burger company. “The message is clear. We’re not on our game,” Easterbrook said in a video statement announcing the company’s turnaround plan. “The numbers don’t lie.” McDonald’s did not return WIRED’s request for comment.
Easterbrook’s intention is good, of course, as McDonald’s finds itself in increasingly stiff competition against so-called “fast casual” chains that are gaining in popularity, such as Chipotle and Shake Shack. To boost its position, it’s promised more healthful approaches to food, like removing human antibiotics from its chicken supply, shifting to cage-free eggs, and using milk from cows that are not treated with artificial growth hormones. It’s also started testing an artisanal chicken burger and is expanding its customizable burger program, called “Create Your Taste.”
But as much as we all love all-day breakfast, as much as we appreciate being able to satisfy the hankering for an Egg McMuffin when it’s, inconveniently, dinnertime, all-day breakfast might not be enough to save McDonald’s. The company might do well to take a page from another close competitor’s playbook, a competitor that’s been killing it all along: Starbucks. But the edge for Starbucks isn’t just pumpkin spice. Unlike McDonald’s, Starbucks has shown that it gets our current technological moment.
How Starbucks Is Winning
These days, Starbucks operates on about the same scale as McDonald’s. It runs about 20,000 stores around the world—just behind the fast-food giant in number of stores. And Starbucks has always been smart about incorporating the latest consumer tech into its marketing strategy. It’s been a leader in the mobile space, for one, from the very beginning. In 2002,Starbucks launched Wi-Fi in stores. (By 2007, it was providing free access to the iTunes Music Store, in partnership with Apple.) In 2008, the company launched Pick of the Week, that program that let you get free iTunes music downloads when you picked up one of those in-store card thingies. Today, its mobile app is widely used: of 45 million transactions at Starbucks locations every week, according to CEO Howard Schultz, 9 million customers pay at the counter with their phones.
Most recently, Starbucks has also rolled out Mobile Order & Pay, which lets users order a latte via app and pay even before arriving at a Starbucks branch to pick it up. You don’t even have to stop at the counter.
“Starbucks’ technology focus spans multiple areas including payments, loyalty and rewards, and content,” says Jack Kent, director of mobile at research firm IHS. “The main aim for all of these is to drive sales.”
Richard Adams, a former McDonald’s franchisee and now founder of Franchise Equity Group, says it’s not surprising that McDonald’s is behind Starbucks in its digital strategy—and it’s probably going to continue to lag behind the coffee company. The problem, he says, is that while Starbucks can make decisions about coupon offers and loyalty programs and implement them broadly and quickly, McDonald’s often rolls out unique promotions for its different clusters of franchises. “Starbucks, meanwhile, can do whatever it wants because it doesn’t have franchisees,” Adams says.
Though Adams thinks an aggressive mobile strategy might not be the best fit for McDonald’s right now, he acknowledges the possibility that in time it could ultimately help the company reach new audiences. “It can grow,” he says. “One thing I know is McDonald’s want to attract millennials.” And mobile is where millennials are. But even if McDonald’s move towards mobile is inevitable, Adams believes the process will be more slow-going than it would be at other, smaller, more nimble chains.
Mobile Is King, Smartphones are Shoes
In France, the McDonald’s mobile app is pretty successful, which Thomas Husson, a principal analyst at research firm Forrester, studied last year. Apparently in France, you can order a Big Mac anytime on a mobile device and pick it up later at any of McDonald’s 1200 restaurants. But it’s the only country in the world where you can do this. “I would certainly not say McDonald’s does not have a mobile strategy,” Husson says. And where it’s actually in place, it may be working. McDonald’s drop in sales in June was not as dismal as some analysts thought it would be, thanks to a 2.3 percent increase in sales in—you guessed it—Europe.
But Husson agrees that convincing US franchisees is another battle altogether. “Executing a mobile strategy requires time and lots of changes in culture, organization and processes,” he says. “It is tougher to convince franchisees since they may want to prioritize other opportunities that could have a faster return on investment.”
That’s not to say that all-day breakfast will fail for McDonald’s. In fact, it will probably work quite well, especially at the beginning. An analyst for RBC Capital Markets told the Journal that by extending breakfast to all day, the sausage burritos and pancakes and other meals we enjoy in the morning could push 29 percent of McDonald’s sales. Either way, for a beleaguered company, that’s a boost.
But the big-picture argument is over. Mobile is king. Smartphones are shoes. And at least in that arena, McDonald’s would do well to emulate the clear leader in mobile apps and retail ordering. “The Starbucks app is now a reference of a mobile payment success story over the world,” says IHS’ Kent. “Mobile has changed people’s expectations to be served in context, in their moments of need.”