McDonald's, Chipotle, Yum and Dunkin' double down on delivery
Over the past two weeks, the QSR heavyweights have announced changes to their off-premise initiatives and disclosed how third-party delivery partnerships are impacting sales.
From McDonald’s partnership with Uber Eats to Yum Brands’ rollout of delivery via Grubhub, third-party delivery is reaching more consumers nationwide than ever before, and restaurants are reaping the benefits of higher same-store sales and increased average checks as a result. Over the past two weeks, the burger chain and the holding company — along with Chipotle and Dunkin' Brands — announced changes to their current delivery initiatives and updated investors on how their off-premise programs have been impacting sales. Catch up on their updates here:
Delivery has become a $3 billion business at McDonald's, which offers delivery at more than 19,000 restaurants globally, Steve Easterbrook told investors during a recent earnings call. Delivery in the U.S., France and the U.K. grew delivery sales in the high double-digits among restaurants that offered the service for over 12 months, while restaurants with delivery in Canada, Italy and Russia posted even higher delivery sales growth. Average check size for delivery is about two times the average of in-store orders, according to Easterbrook.
"Overall, we expect operating performance will benefit from the company’s various initiatives such as modernizing restaurants, Experience of the Future and delivery to help address customers need for greater convenience choice and value," Moody’s vice president Bill Fahy said in an emailed statement. "Although only in its early stages, delivery will help address what seems to be a structural shift in how some consumers are eating, with many consumers finding delivery more compelling despite today’s relatively high delivery cost."
McDonald’s operators are less optimistic about the impact delivery will have on their restaurants. A recent survey of operators completed by the National Owner’s Association revealed that over 750 franchisees were not happy with the economics of delivery, according to Skift Table. Many did not believe delivery was generating cash flow and said they would like better commission rates between McDonald's and Uber Eats.
Chipotle, which partners with DoorDash for delivery, saw delivery gain traction last quarter. Sales spiked 13-fold during the fourth quarter compared to the year-ago period. Promotions have been particularly effective for not just increasing brand awareness, but also sales.
The chain’s free delivery bowl promotion during the college football bowl season in late December helped offset what is a normal drop in sales during the season. This initiative continued to bolster sales well beyond the promotions, executives told investors during a year-end conference call. Nearly half of the guests participating in its free bowl delivery during the college football playoff season were new or lapsed users, executives told investors. The company found success in this campaign, because customers had access via its app and the marketplace and connected it to an event, CEO Brian Niccol said during the call. Its Lifestyle Bowl campaign that began in January generated 1.3 billion earned media impressions during the first few days of the campaign, Niccol said.
The chain is also banking on its quick delivery times, which are under 30 minutes, and will provide easier ways for delivery drivers to pick up orders, such as pick-up shelves, to reduce lag time. The company also plans to launch prepaid, which will be available to delivery drivers, so they don’t have to stop during the pick-up process, Chipotle CFO Jack Hartung said on the earnings call. on Thursday, the chain announced it is testing drive-thru pick-up windows called "Chipotlanes" for digital orders in 10 locations.
On Thursday, Taco Bell expanded delivery to all 4,000 restaurants in the U.S. with capabilities to order on Grubhub or on Taco Bell’s website, so it may take a quarter or two before it is reflected in same-store sales. Through this partnership, which involved Yum investing $200 million in Grubhub, Taco Bell has integrated its POS system with Grubhub to better streamline the process.
For KFC, the company is working on click-and-collect kiosks and delivery, executives told investors. The kiosks are expected to be in 5,000 restaurants while delivery is expected to be in 70% of restaurants by 2020, Yum brands CFO David Gibbs said on the earnings call.
Yum CEO Greg Creed told investors that he expects higher check values and increased transactions for both brands.
Yum may have additional initiatives going forward, as it is planning to hire a senior leader to focus on global, digital and technology strategies.
While Dunkin' has already been offering delivery through DoorDash, CEO Dave Hoffman told investors on Thursday that the company will partner with Grubhub for a delivery pilot program that integrates with its POS system. The program will be tested on a small scale and potentially expanded to the larger market. It will continue to work with DoorDash, executives said.
Baskin-Robbins currently delivers via DoorDash and it is available at 70% of its U.S. stores, a 40% increase compared to the previous year, Hoffman said.
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