Updated 18:32ET
McDonald's (New York Stock Exchange:MCD) is asking its franchisees to help offset the huge costs the fast food giant is investing in digital marketing.
Starting in 2025, McDonald's (MCD) will require franchisees to dedicate 1.2% of their current marketing contributions to: Digital marketing costs are based on projected digital sales and change each year as forecasts are adjusted.
The company estimates that this change will have a cash flow effect of $2,600.
McDonald's (MCD) hopes that by investing hundreds of millions of dollars in digital marketing, it can expand its competitive advantage and close the gap with rivals that outperform in digital customer numbers. The company plans to add an ordering channel that will allow customers to order on the web without having to download an app.
A McDonald's spokesperson told Seeking Alpha: “The new model is a shift towards a higher ROI strategy digital platform that we know is working/driving the business. “The aim is to reallocate collective marketing investments.”
According to the latest industry data, McDonald's (MCD) spends about 80% of its advertising dollars on TV ads, with digital and radio at about 10% each.
(Updated to clarify franchisee contributions to the Digital Marketing Fund and include comment from a McDonald's spokesperson)
