Mc’Donalds Vision of the Future

Double burger with french fries on white paper

 

I have four young boys that love Happy Meals. For that reason, I’ve become quite familiar with the McDonald’s (MCD:NYSE) service model. According to the conference call after their earnings release, the Golden Arches are going to give off a very different feel in the next few years. Perhaps the days of getting short changed at the cashier and then having your order screwed up by the high school kid in back are behind us??????

McDonalds seems to be interested in changing their brand to have more of a premium feel to it. A few months ago, there was a rumor going around that McDonalds was interested in acquiring Shake Shack (SHAK:NYSE) . I was a little puzzled by that but, after listening to the conference call, it makes a little more sense. The advantage that Shake Shack has is that premium experience. You walk in and someone seats you and the look of the restaurant doesn’t have that “Dollar Menu” feel and the food that they serve is presented in a manner somewhat more impressive than what you experience at McDonalds. Whether or not that rumor was true, I can now see the logic behind it.

I suppose that rather than buy the premium experience, McDonald’s is just going to create it themselves. Take a look at a Shake Shack if you have one near you. That’s pretty much what I think McDonalds is going to look like in the next five years or so.

Here are the three components of McDonald’s strategy, as explained on their conference call. The call it their “Velocity Growth Plan”. Now that is some corporate speak at its  best!!!

 

1.) Digital : the company is reshaping its relationship with customers whether they eat in, take out, or drive through. Mobile order and pay will be available in 20,000 restaurants around the world by the end of this year. In the U.S. alone, mobile order and pay will be in 14,000 restaurants by the end of the year.

2.) Delivery: this is an interesting one. McDonalds has been running a delivery pilot in Florida and seem to be very encouraged by it. According to the conference call, Through delivery, we’ll bring the McDonald’s experience to more customers, whether it’s in their homes, their dorm rooms, to their workplace and beyond.”  I believe that this could be part of the “UberEATS” plan where Uber drivers will be delivering food. It will be interesting to see what the minimum order size is , etc.. I cant imagine that they are going to be delivering Dollar Menu items. Maybe, just maybe, they roll out a premium burger similar to that which is offered by Shake Shack.

3.) Experience of the Future (EOTF): this also comes back to the digital aspect. There will be self serve kiosks to place your order as opposed to the human interaction. I think that the “Experience of the Future” for McDonalds, is one in which you order and pay through a kiosk, which then interacts with the kitchen and your order is brought to you, either to your vehicle or to your table.

So, what about the jobs that will be lost to this automation?? Well, the company did say on their conference call that “What we are seeing is a reallocation of labor positions in the restaurants and we need less people at the front counter taking orders…..which could be repurposed into the dining areas.”

In addition to the three drivers listed above , the company is moving from frozen beef to fresh beef in their hamburgers. With the willingness to spend on technology and evolve with the needs of people, I think Mc Donald’s presents an attractive investment opportunity. I believe that it would hard to take significant market share from them.

 

DISCLOSURE: This article was written for informational purposes only. It is not intended as investment advice and should not be relied upon as such. Consult with a qualified financial advisor or tax professional to determine the proper investment plan for you and your circumstances. I do not personally own or plan to purchase any investments spoken of here.