McDonald's is serious about custom burgers
The fast-food king is expanding a new build-your-own-burger test, readying for battle against Red Robin, Smashburger and Five Guys.
McDonald's (MCD) is taking its all-beef patties to a new level. The company wants to serve your burger your way -- and increase what you spend on your visit, too.
The monster fast-food chain is testing burger customization in two locations -- targeting millennials and other hungry folks by allowing them to customize their burger using tablets before they get in line.
Tapping in to e-technology, McDonald's allows customers to select their bun, patty, cheese and toppings. The burgers are assembled fresh moments after the specialized order is received.
In tests, McDonald's saw strong dinner crowds, while the average customized burger -- chosen from more than 20 premium toppings -- sold for $1 more than standard burger offerings on the menu.
McDonald's is expanding its current test. The option is not expected to appear at all of its 14,000 locations, but if you add up all those extra dollars, it may tempt a corporate culture change.
Oddly, the build-your-own burger concept flies in the face of its assembly-line economies. McDonald's perfected fast food with excellence in speed, convenience and price. Now with strong competition in fast casual and a new business class of millennnials who want good food fast, McDonald's is struggling to keep up with its own ideals.
McDonald's could certainly use the boost of new burger sales. In the last fiscal year, global sales rose only 0.2 percent. This was powered by new stores and rebounding sales in the European region. U.S. sales at stores open more than a year declined 1.4 percent in the fourth quarter. This year, same-store sales continue to fall. February U.S. same-store sales fell 0.3 percent.
Once a fast-food innovator, McDonald's is battling its imitators not only for burger sales but for other meals as well. Yum Brands' (YUM) Taco Bell restaurants' introduction of breakfast items at its 6,000 stores is pushing the envelope at McDonald's, the fast-food breakfast leader.
McDonald's customizable burger also places it in a clash with other fast-casual favorites. Five Guys Burgers and Fries and Smashburger have seen strong unit growth as they continue to be popular with millennials and achieve cult-like followings. McDonald's possible addition of premium burgers also puts it in closer competition with national burger chains like Red Robin (RRGB).
Perhaps McDonald's needs to more closely follow the Red Robin footprint of creating specialized premium burgers. In 2013, Red Robin saw strong unit growth and same-store sales growth. This led to a 108 percent increase in share price.
McDonald's shares were up only 8 percent in 2013. This year, shares have gained around 1 percent and continue to trade in the middle of their 52-week range.
With new menu offerings and higher guest check averages, McDonald's should be able to finally report positive same-store sales numbers later in 2014. Expect shares to follow suit and rise with the return to growth.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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McD will try anything.
How about trying good food & clerks who speak English!!!
A bloody triple prime Ruby Tuesday burger is the burger of choice for me.
Not minwage worker fare.
This move goes against all that. They were forced into it by competitors because they can no longer undercut other chains on price.
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These hot movers could rise by double digits in coming months.
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