Posted: May 22, 2017
McDonald's (MCD) on Wednesday said it will widen its new delivery service to restaurants in Los Angeles, Chicago, Phoenix and Columbus, Ohio — the latest industrywide effort to tap a growing population that does business via their smartphones.
Customers can order food on a mobile app or through UberEats, which McDonald's has partnered with for deliveries. The expansion now means that delivery is offered at some 1,000 U.S. McDonald's restaurants, including 300 in LA.
"We are bringing a new level of convenience to more of our customers as we continue to transform the McDonald's experience," CEO Steve Easterbrook said in a statement.
McDonald's, a member of the Dow Jones industrial average, last month said it would expand deliveries from its trial run in Florida, which began this year, to other cities in the U.S. during this quarter. Jack in the Box (JACK) has also expanded delivery to Los Angeles and Phoenix via its delivery partner DoorDash.
McDonald's has also said it would launch a mobile order and pay platform in 20,000 restaurants in the U.S. and other areas by the end of the year. The burger chain is also rolling out its new restaurant format, called "Experience of the Future," which will have digital ordering kiosks and table service.
Wendy's (WEN), which also has self-order kiosks at some restaurants, is also rolling out a mobile order and pay system. Restaurant Brands International's (QSR) Burger King wants to expand a mobile platform of its own.
The digital expansion has the potential to make ordering food easier than ever, and analysts have said smartphone ordering marks the biggest change to the way people buy fast food since the drive-thru.
But the technology raises questions about how restaurants will manage margins as they spend on technology and how they handle traffic-flow through their restaurants.
IBD'S TAKE: Even as restaurants race to expand delivery, Restaurant Brands International has been growing by acquisitions.
Starbucks (SBUX), which has its own mobile order and pay platform, had reported some knots in in-store customer traffic after launching the system.
McDonald's, which is already testing fresh, cooked-to-order hamburger patties at some restaurants, reported minor slowdowns at the drive-thru that were later corrected.
McDonald's edged down 0.6% to 146.41 in the stock market today after hitting a record high Tuesday.
Wendy's fell 3.4% after setting a fresh decade high on Tuesday. Restaurant Brands retreated 1.1% from an all-time best. Starbucks dipped 0.4% to 59.73, holding just above a 59.64 buy point. Jack in the Box, which late Tuesday topped earnings views and said it would explore "alternatives" for its Qdoba Mexican Eats chain, rose 5.6%.
The industry's delivery expansion also raises questions about competition for driver's. Domino's Pizza (DPZ), whose mobile-ordering technology has fit in well with its decades-old delivery service, is currently testing GPS technology.
CEO Patrick Doyle, during the Domino's earnings call last month, also said his company was a better place for drivers to work.
" ... for those drivers who are listening to this call," he said, "my pitch is you're going to be more consistently busy and receiving tips at Domino's than working somewhere else, and that is ultimately what keeps drivers happy is that they're busy."
By Bill Peters
May 17, 2017
Source: Investor's Business Daily
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