McDonald’s makes changes to increase mobile sales

McDonalds U.S. franchisees will begin contributing to a digital marketing fund next year, as the fast-food giant seeks to expand its burgeoning digital business, according to a memo seen by CNBC on Thursday.

The move is aimed at modernizing the company’s marketing strategy and broadening its competitive advantage, according to the memo written by Tariq Hassan, U.S. head of customer experience, and Whitney McGinnis, chief information officer. The memo also said McDonald’s plans to invest hundreds of millions of dollars over the next two years to improve its loyalty program and add ordering channels, including placing orders on the web without downloading an app, which which should also strengthen its digital activity.

Loyalty program members accounted for more than $6 billion in global sales during McDonald’s first quarter. The company has 34 million active digital customers in the United States. In comparison, Chipotle Mexican Grill has 40 million loyal members, while Starbucks has 32.8 million.

In December, McDonald’s announced its goal of reaching 100 million members of its loyalty program by 2027.

For now, the franchisor recommends franchisees pay for the new fund using their existing marketing contribution, which requires them to spend at least 4% of gross sales, according to the memo. As a result, the new approach will likely lead McDonald’s to scale back its traditional marketing tools, such as TV ads, and focus on areas that actually lead to increased sales.

Next year, U.S. carriers will be required to contribute 1.2% of identified digital sales, such as transactions made when a customer logs into the loyalty program or orders delivery, according to the memo. The rate will change each year, based on projections created at the beginning of the year.

As a result of this change, McDonald’s projects that every U.S. restaurant will see its cash flow increase by approximately $2,600 starting in 2025. This windfall comes from digital investment costs, from the franchisee’s income statement to marketing contribution .

Franchisees in the UK, Canada, Australia and Germany will also contribute to the global digital marketing fund. The rest of McDonald’s markets will adopt this approach later.