- McDonald's will require U.S. operators to pay into a new digital marketing fund starting next year, according to a memo seen by CNBC.
- The company encourages franchisees to leverage their existing marketing contributions to invest in the fund.
- The switch is aimed at modernizing the company's marketing strategy and expanding its competitive advantage by doubling down on mobile ordering and digital business.
McDonald's U.S. franchisees will begin paying into a digital marketing fund next year as the fast-food giant looks to expand its fast-growing digital business, according to a memo seen by CNBC on Thursday.
The changes are aimed at modernizing the company's marketing strategy and expanding its competitive advantage, according to a memo written by Tariq Hassan, head of U.S. customer experience, and Whitney McGinnis, chief information officer. There is. The memo also said McDonald's plans to invest hundreds of millions of dollars over the next few years to improve its loyalty program and add ordering channels, such as web ordering without having to download an app. This should also strengthen the company's digital business.
Loyalty program members accounted for more than $6 billion of McDonald's worldwide systemwide sales in the first quarter. The company has 34 million active digital customers in the United States. By comparison, Chipotle Mexican Grill has 40 million loyalty members and Starbucks has 32.8 million.
McDonald's announced in December that it aims to have 100 million loyalty program members by 2027.
According to the memo, the franchisor is currently encouraging franchisees to use their existing marketing contributions to pay for the new funds by spending at least 4% of their gross sales. It is said that it is necessary. As a result, the new approach will likely force McDonald's to cut back on traditional marketing tools, such as TV commercials, and focus on areas that can visibly increase sales.
Next year, U.S. carriers will tip 1.2% of the projected value of identified digital sales, such as transactions that occur when a customer logs into a loyalty program or orders a delivery, according to the memo. It is said that it is necessary. This rate changes each year based on forecasts made at the beginning of the year.
As a result of this change, McDonald's projects that starting in 2025, cash flow for all U.S. restaurants will increase by approximately $2,600. This windfall comes as digital investment costs move from the franchisee's P&L to marketing contributions.
Franchisees in the UK, Canada, Australia and Germany will also pay into the Global Digital Marketing Fund. The remaining McDonald's markets will later transition to this approach.
