McDonald's cheap, classic food is driving sales

The new look of McDonald's is helping bring people into its restaurants, and its cheap, classic foods are driving sales.Sales at US restaurants open a...

Posted: Jul 26, 2019 9:26 PM

The new look of McDonald's is helping bring people into its restaurants, and its cheap, classic foods are driving sales.

Sales at US restaurants open at least 13 months rose 5.7% in the second quarter, McDonald's said Friday. It cited growth in the burger chain's core menu items, along with strength in its two-for-$5 mix and match promotion and its modernized stores.

The sales increase exceeded Wall Street's expectations. Analysts anticipated sales to jump just 4.5% in the quarter, according to data from Refinitiv. Shares of McDonald's ticked higher on the news.

The company has been pruning its menu to focus on classics to give customers what they want and help streamline work for employees. This spring, McDonald's began limiting its late-night menu and announced plans to discontinue its line of craft sandwiches because of lack of consumer interest.

Other efforts to shake up the menu have also fallen flat. Earlier this year, the company brought international menu items to locations in the United States. Customers didn't bite, according to a group of McDonald's franchisees.

"They may be favorites abroad, but they are not our customers favorites," wrote the National Owners Association board of the items in a recent letter to its members.

On the other hand, McDonald's has succeeded by improving its signature foods. Switching from frozen to fresh beef in the quarter pounder helped increase sales of the burger by 30% on average during the 12 months ended in June, McDonald's said last month. Happy Meals also got a boost from a partnership with Disney.

In addition to focusing on its core foods and values, McDonald's is using advanced technology to make its restaurants sleeker and attract customers.

The burger chain announced the acquisition of Israeli AI company Dynamic Yield in March.

Dynamic Yield is helping McDonald's install smart digital menu boards that display certain items based on the weather, time of day and how busy the restaurant is — promoting items that can be made more quickly to decrease customer wait times. Boards can also recommend extra items based on initial orders.

The tactics are working, CEO Steve Easterbrook said during an analyst call discussing the results. He said the dynamic menu boards are getting customers to add french fries, drinks, Chicken McNuggets and other items to their orders.

"We're already seeing an increase in average check," he said.

He added that about 800 restaurants use the technology, but that the number will rapidly increase in the coming weeks.

McDonald's is also improving restaurants with digital order kiosks.

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