Commentary

McDonald's Signals Turn In Delivery With DoorDash Deal In Houston

Home used to be where the hearth is. Now it’s where third-party delivery providers serve up prepared fast foods. The competition is heating up.

McDonald’s USA and DoorDash yesterday announced a new partnership involving more than 200 restaurants in the Houston area that dashes the expectations of Uber Eats, which has been the delivery provider for Big Macs and Happy Meals from more than 9,000 McDonald’s U.S. restaurants since 2017.

advertisement

advertisement

“The [DoorDash] partnership will likely expand nationally later this year if it succeeds in Houston, executives from both companies said. The companies declined to discuss terms,” Heather Haddon writes  for The Wall Street Journal.

“DoorDash’s army of contract workers, within delivery distance of about 80% of U.S. households, helped win over the burger giant, McDonald’s senior vice president of operations Bill Garrett said. ‘It was the reach that was really appealing to us,’ he said,” Haddon continues.

But apparently that was not the only factor.

“In April, Bloomberg reported that McDonald’s was chaffing under Uber Eats’ high fees and was thinking of turning to other delivery partners. Citing an internal memo, the burger chain’s senior leadership and franchisees met with Uber Eats to negotiate lower fees. That emboldened other restaurant chains, including Applebee’s and Cousins Submarines, to negotiate lower commissions while asking their delivery partners to spend more on marketing and promotional discounts, according to  a Wall Street Journal article last month,” Andrew J. Hawkins writes for The Verge.

Uber’s S-1 filing with the Securities and Exchange Commission prior to its IPO “said Uber Eats accounts for as much as 10% of food sales at some of the hamburger chain’s restaurants,” Hawkins adds.

“This isn't DoorDash’s first big deal with a fast food chain. You've had access to Wendy's for nearly two years, and that's on top of similarly big names like KFC and Taco Bell. McDonald’s is still a big coup for the service, though, and it doesn't hurt to have choices if all you crave is a cheap burger or some nuggets,” Jon Fingas writes  for Engadget.

Meanwhile, “Domino’s is in the process of doing something it calls ‘fortressing.’ Essentially, it means adding more locations in a concentrated area. The theory is that closer proximity to customers means better service in the form of shorter wait times and pizzas arriving hot,” Bloomberg’s Sarah Halzack reveals in the Washington Post.

“I’m typically very skeptical of any established chain -- restaurant or mall-based -- embracing a massive store opening plan, given how saturated the U.S. market is. But Domino’s is an exception. With its focus on off-premise eating, cutting the time it takes to get from stores to customers is crucial to keeping itself differentiated as third-party delivery services such as DoorDash, Uber Eats and GrubHub Inc. barrel into more metro areas and give diners an explosion of choice for eating at home,” Halzack says.

McDonald’s direction under CEO Steve Easterbrook is literally paying off. The folks at the Chicago headquarters clearly aren’t just experimenting with new recipes, delivery options and taglines and tweets to entice consumers.

“McDonald’s stock is up 20.5% in 2019, roughly neck-and-neck with the S&P 500 ’s year-to-date gain, although in the past year the shares have risen nearly 35%, putting them comfortably ahead of the market. Analysts like the company’s potential growth from delivery and the more defensive characteristics that have served the stock well during market turmoil,” Barron’s Teresa Rivas reports.

Yesterday, “Telsey Advisory Group bumped up its price target for the restaurant giant, ahead of what it sees as game-changing investments in technology,” Rivas writes. Telsey’s Bob Derrington “believes the company’s investments in this area are a 'game-changer' for its system -- further separating it from its fast food peers through better efficiencies and sales growth,” Rivas writes.

“Nor is Telsey the only firm that has applauded the company’s use of technology. The company’s newly remodeled Experience of the Future locations have earned analyst praise, as has its decision to invest in artificial intelligence,” Rivas adds.

We’re all old enough to remember when all it took was “good times, great taste” and a somewhat creepy Ronald to sell a burger, right?

Next story loading loading..