McDonald’s Has a Secret Weapon to Take Down Burger King, Wendy’s

The fast-food giant has a secret sauce that’s a bigger deal than its special sauce on the Big Mac.

McDonald’s had a stunning quarter, not just in the U.S. but globally. 

In fact, the numbers were so good that Chief Executive Chris Kempczinski was somewhere between exuberant and playful when he shared the numbers during the company’s first-quarter-earnings call.

“What’s notable about this earnings call is McDonald’s consistency, consistency in the strength of our numbers, consistency in the powerful drivers of our business, and consistency in the excitement that exists across the system about the opportunities that lie in front of us,” he said during the call.

“Let’s start with the numbers. At the top line, you only need to know one number, 12.6%. U.S. comparable sales, 12.6%, IOM comparable sales, 12.6%, IDL comparable sales, 12.6%, and global comparable sales, you guessed it, 12.6%.”

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Those numbers are incredible when you consider that McDonald’s put up its big numbers without major discounts. 

Restaurant Brands International’s (QSR) – Get Free Report Burger King grew comparable sales by 8.4% globally, while the global figure at Wendy’s (WEN) – Get Free Report was 6.4%, with a 5.9% increase in the U.S. McDonald’s (MCD) – Get Free Report had some deals, but Wendy’s relied on its 4 for $4, $5 Biggie Bag and its 2 for $6 deals, while Burger King heavily advertised its $6 Your Way offer. 

McDonald’s has a big edge over its two chief rivals that it has been able to build globally.

A person looks at the McDonald’s app.


McDonald’s Has a Major Edge

McDonald’s understood the importance of building out its digital operations well before its rivals did. That’s why the company took the painful steps to force its franchisees to embrace a digital-first approach built around delivery and drive-through.

During the call the chain’s chief financial officer, Ian Borden, explained just how well that has worked.

“MyMcDonald’s Rewards is yet another example of how we’ve tapped into our marketing engine to deploy our loyalty platform throughout the system,” the executive said. 

“Now in 50 markets, loyalty is building even stronger relationships with our customers, and the results continue to shine. In our top six markets, digital sales now represent almost 40% of systemwide sales, or nearly $7.5 billion, growth of more than 30% over the last year.” 

McDonald’s’ digital-membership numbers are particularly strong when you compare them with Starbucks (SBUX) – Get Free Report, the company generally considered the pioneer of app-based loyalty rewards programs and mobile order and pay.

Starbucks, which reports only U.S. loyalty program members, ended its most-recent quarter with more than 30 million active rewards members.

Across its top six markets, McDonald’s has an even bigger membership base.

“We have nearly 50 million, 90-day active members across these top markets, and our relationship with them continues to grow. We’re learning when they visit, how they visit, and what they buy,” Borden added.

Why Are Rewards Members a Big Edge Over Burger King and Wendy’s?

Most McDonald’s promotions have been run through its app. The company has avoided most traditional promotions and discounting and instead has run major app-based events like its “Summer Camp” promotion. Wendy’s and Burger King have been trying to do the same thing, but they are well behind their rival.

In addition, McDonald’s has been using data from its app to make other decisions.

“With more and more of our sales coming through identified channels than ever before, we’re also continuing to improve our customers’ mobile-app experience with new initiatives that provide a more seamless interaction. The U.S. market, for example, is piloting a new way of ordering through our app,” the CFO shared..

Essentially, McDonald’s has so much data from its customers that it can almost see the future.

“Using existing location data, it allows our crew to start assembling a customer’s order prior to their arrival at the restaurant, ultimately delivering hot, fresh food when customers arrive to pick up their order,” Borden added.

That’s not unlike the technology Amazon  (AMZN) – Get Free Report uses in its warehouses to begin packing orders before they’re even placed. Data like these enable McDonald’s to be more efficient in all areas. Yes, it can get you your food faster, but that’s only a piece of it as the data also help the company manage inventory and labor.

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