Leslie Patton
Bloomberg News
McDonald’s Corp.’s build-your-own- burger experiment, under way in four Southern California restaurants, could be coming to many more locations as the chain seeks to pull out of the worst sales slump in a decade.
The test, which lets customers pick out burger toppings such as jalapenos and tortilla strips on a touch screen, will be taken to additional markets depending on how the trial goes, said Lisa McComb, a spokeswoman for McDonald’s. The program started late last year at an Orange County restaurant and then expanded to three more McDonald’s in August.
The world’s largest burger chain, which for years shunned customization in favor of speed and efficiency, is now playing catch-up with fast-casual restaurants. Millennials are flocking to places like Chipotle Mexican Grill Inc. and Potbelly Corp. in search of fresh ingredients and the ability to dictate their orders. McDonald’s same-store sales fell 0.2 percent last year in the U.S., while they rose 5.6 percent at Chipotle and 1.5 percent at the Potbelly sandwich chain.
“McDonald’s sales are declining, so they’re looking for another way to generate revenues and reach a different crowd,” said Joel Cohen, president of the Cohen Restaurant Marketing Group in Raleigh, North Carolina.
Last week, McDonald’s posted its worst monthly same-store sales decline since 2003, hurt by sluggish demand in the U.S., as well as a food-safety scare at a supplier in China. Sales at stores open at least 13 months slumped 3.7 percent in August, the Oak Brook, Illinois-based company said in a statement. Analysts had estimated a 3.1 percent drop.
Stock Slide
McDonald’s stock also has been underperforming its peers. The shares have dropped 3.7 percent this year, while the Standard & Poor’s 500 Restaurants Index slid 2.2 percent. McDonald’s rose 0.1 percent to $93.47 at the close today in New York.
While the burger-building program could broaden the appeal of McDonald’s, the chain also risks turning off loyal customers if it takes too long to prepare a meal, Cohen said.
“I’m just wondering if they’re forgetting about their strengths, which are speed and convenience,” he said. “What’s going to be too long when you customize a burger, and is that going to upset a lot of customers?”
Service Line
At Chipotle, customers stroll down a service line, adding pinto or black beans, tomato and corn salsa, cheese, lettuce and sour cream to their burritos. Potbelly also lets diners choose from a lineup of toppings, such as hot peppers, tomato and oil. At Five Guys, customers can top their sandwiches with grilled mushrooms, green peppers, relish and hot sauce.
It’s not like that at McDonald’s, where customers order from a set menu and cheeseburgers come topped with the standard: American cheese, pickles, minced onions, ketchup and mustard. With the build-your-burger test, there are 22 topping options, including guacamole, bacon, grilled onions, chili-lime tortilla strips and spicy mayo.
There are two bun choices and three cheeses: American, sharp white cheddar and pepper jack. Customers tap their options into the screen themselves, which may help reduce communication errors -- though it doesn’t keep a slow diner from holding up the line with an indecisive moment.
Slow Kitchens
The idea upends what fast-food restaurants are famous for: carbon-copy food, really fast. Earlier efforts to offer more choice haven’t gone smoothly. McDonald’s and rivals such as Burger King Worldwide Inc. have bogged down their kitchens and slowed service by introducing too many new items too quickly.
McDonald’s Chief Executive Officer Don Thompson has acknowledged this. The company is “streamlining” its food offerings to reduce complexity and speed up service, he said during an earnings call in July. Burger King has said the same: It’s focused on introducing fewer new items to make its kitchens faster.
Testing new fare is a big deal for McDonald’s, which has more than 14,200 locations in the U.S. alone. Some items can take four years or more to develop internally. They must go through multiple tests and receive the executive stamp of approval before rolling out nationally.
It’s too soon to tell if the build-your-burger concept will work nationwide, McComb said.
“It’s a test, so a lot could change,” she said.
In addition to helping lure choosy millennials, the program also may coax customers into paying a bit more for their burger. That’s the case for 32-year-old Nicole Taylor, a McDonald’s customer in California who used the new system to make a burger with cheddar cheese, mushrooms, tomato and lettuce.
“It tasted great,” she said. “It was worth it to get white cheddar and the artisan bun.”
The stay-at-home mom, who usually gets her fast-food fix at In-N-Out Burger, stops into McDonald’s once every couple of months for some chicken McNuggets and French fries. While the customized approach was nice, McDonald’s still has an uphill battle against her go-to place for burgers, Taylor said.
“I still prefer In-N-Out,” she said.