Fast food giant McDonald’s U.S. franchisees will start paying into a digital marketing fund next year as it looks to expand its booming digital business, as per a memo viewed by CNBC.
This change is meant to modernize the company’s marketing strategy and widen its competitive advantage, according to the memo. McDonald’s plans to invest hundreds of millions of dollars over the next few years to improve its loyalty program and add ordering channels, including the ability to place web orders without downloading an app, aims to bolster its digital business.
In McDonald’s first quarter, loyalty program members accounted for more than $6 billion in system-wide sales globally. The company has 34 million active digital customers in the U.S. McDonald’s aims to reach 100 million loyalty members by 2027.
For now, the franchisor has recommended that franchises pay for the new fund using their existing marketing contribution, which will require them to spend at least 4% of gross sales, according to the memo. Their new approach will likely make McDonald’s cut back on legacy marketing tools, such as TV commercials, and focus on areas that can directly lead to higher sales.
Next year, U.S. operators will have to chip in 1.2% of projected identified digital sales, such as transactions that occur when customers order delivery or log into loyalty programs. The rate will change annually and will depend on projections created at the start of the year.
Because of this change, McDonald’s has forecasted that every U.S. restaurant will see its cash flow increase by roughly $2,600, starting in 2025. Franchisees in the U.K., Canada, Australia and Germany will also pay into the global digital marketing fund. The rest of their markets will transition to this approach later.
(The referenced memo was written by U.S. Customer Experience Officer Tariq Hassan and Chief Information Officer Whitney McGinnis.)
