After a Rough 2nd Quarter, McDonald’s Plans Marketing Blitz and to Focus on Drive-Thru, Delivery, and Digital
After being pummeled during a difficult second quarter, McDonald’s is optimistic about the rest of the year. The burger chain plans to focus on the 3D model, drive-thru, delivery, and digital, for the rest of the year. Moreover, after cutting advertising by nearly 70% in the U.S. during the first part of 2020, it also plans to open up its sizable marketing war chest in the third and fourth quarters.
Like many businesses, the pandemic has played havoc with McDonald’s, too. In it’s most recent quarterly earnings report announced on July 28th, it reported that sales fell 30% compared to 2019, and net income plunged 68% during the same period. On top of that, the fast food giant also announced it would be shuttering 200 U.S. locations.
In order to adapt to the business conditions created by COVID-19, McDonald’s had some heavy lifting to do.
"Within a matter of weeks, the McDonald's system made operational modifications across 30,000 restaurants while closing and then reopening another 9,000 restaurants," CEO Chris Kempczinski said during the call.
However, despite the doom and gloom in the earnings report, McDonald’s is optimistic about the rest of 2020. 96% of the company’s 39,000 restaurants worldwide are now open. At the beginning of the second quarter, only 75% were. Additionally, comparable store sales for June were down just 12% after April saw that same number hit 39%.
Many locations had to close their dining rooms during the second quarter, but Kempczinski said its drive-thru, delivery, and digital options have helped drive business.
"We introduced new safety procedures in all our restaurants, modified our menus, and developed new contactless ways to serve our customers," Kempczinski said.
In the U.S., drive-thru accounted for up to 90% of its sales during that period. At the same time, drive-thru is credited with getting 70% of its locations in its five largest international markets functioning.
“This safe and convenient service channel has been particularly appealing to our customers during the pandemic," the CEO added.
In most major markets, McDonald’s made drastic reductions in its marketing spending during the second quarter. The company plans to spend that money in the third and fourth quarters.
“We’ve amassed a sizable marketing budget to invest in the back half of 2020,” Kempczinski explained. "McDonald's will also invest an incremental $200m in marketing spend across our US and international operator markets in the second half to accelerate recovery. That's equivalent to one additional month of media in every market. These actions will result in a sizeable increase in our marketing spend for the rest of the year."