McDonald’s will begin requiring its US franchisees to contribute to a new digital marketing fund from 2025 onwards to bolster its digital business, CNBC has reported.
The strategic move, detailed in a memo from McDonald’s US customer experience officer Tariq Hassan and chief information officer Whitney McGinnis, is aimed at modernising the company’s marketing efforts and expanding its competitive edge.
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The company plans to invest significantly to upgrade its loyalty programme and introduce additional ordering channels, including web-based orders, without the necessity of an app.
This investment is part of McDonald’s strategy to modernise its marketing and maintain its competitive advantage.
With loyalty programme members contributing to more than $6bn in global sales during the first quarter of 2024, McDonald’s, which has 34 million active digital customers in the US, is looking to expand its digital customer base.
The company aims to reach 100 million loyalty programme members by 2027.
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By GlobalDataThe fast-food giant’s memo recommends that franchisees allocate funds for the new digital marketing initiative from their existing marketing budget, which necessitates that they spend at least 4% of total sales.
This shift is likely to result in a reduced focus on traditional marketing methods, such as TV advertising, in favour of digital strategies that directly impact sales.
Starting from 2025, US operators will be required to contribute 1.2% of projected identified digital sales, such as loyalty programme logins or delivery orders, to the fund.
This rate will be adjusted annually based on sales projections at the beginning of each year.
It is anticipated that the introduction of the digital marketing fund will boost cash flow for every US McDonald’s restaurant by approximately $2,600 from 2025, as digital investment costs will be transferred from franchisee profit and loss statements to the marketing budget.
Franchisees in the UK, Canada, Australia and Germany will also contribute to the fund, with other McDonald’s markets set to follow at a later stage.
The company has reported a net income of $1.93bn for the first quarter of 2024, an increase of 7.04% compared with $1.8bn a year previously. Its revenues rose by almost 5% to $6.16bn from $5.89bn in the first quarter of 2023.
