A Big Mac is displayed on a McDonald's app page
Daniel Acker | Bloomberg | fake images
McDonald's U.S. franchisees will begin contributing to a digital marketing fund next year as the fast-food giant looks to expand its burgeoning digital business, according to a memo seen by CNBC on Thursday.
The change is aimed at modernizing the company's marketing strategy and expanding its competitive advantage, according to the memo, written by U.S. chief customer experience officer Tariq Hassan and chief information officer Whitney McGinnis. The memo also said McDonald's plans to invest hundreds of millions of dollars in the coming years to improve its loyalty program and add ordering channels, including web ordering without downloading an app, which should also bolster its digital business.
Loyalty program members accounted for more than $6 billion in systemwide sales globally during McDonald's first quarter. The company has 34 million active digital customers in the US. In comparison, Chipotle Mexican Grill It has 40 million loyal members, while Starbucks has 32.8 million.
In December, McDonald's said it aims to reach 100 million loyalty program members by 2027.
For now, the franchisor recommends that franchisees pay into the new fund using their existing marketing contribution, which requires them to spend at least 4% of gross sales, according to the memo. As a result, the new approach will likely lead McDonald's to cut back on legacy marketing tools, such as television commercials, and focus on areas that tangibly lead to higher sales.
Next year, U.S. carriers will have to contribute 1.2% of projected identified digital sales, such as transactions that occur when a customer logs into the loyalty program or requests delivery, according to the memo. The rate will change annually, based on projections created at the beginning of the year.
As a result of the change, McDonald's forecasts that each U.S. restaurant will see its cash flow increase by about $2,600 starting in 2025. The windfall comes from digital investment costs being carried over from a company's profit and loss statement. franchisee to marketing contribution.
Franchisees in the UK, Canada, Australia and Germany will also contribute to the global digital marketing fund. The rest of McDonald's markets will adopt this approach later.
