Now McDonald’s Wants to Be Like Panera Bread

Following Panera's lead, McDonald's is now testing mobile ordering and payment via its new McD Ordering app.

Jul 6, 2014 at 9:00AM

McDonald's (NYSE:MCD) is following in the footsteps of Panera Bread (NASDAQ:PNRA) by testing a new mobile-payment app at 22 of its restaurants in Columbus, Ga. McDonald's is hoping the test goes well and that its restaurants see a boost in same-store sales numbers. Both McDonald's and Panera are hoping their new mobile apps will improve customer service and provide a better customer experience. 

Mcdonald

Source: McDonald's

What about the McD app?
McDonald's new test in Georgia is different from its McD app. The McD app is basically an electronic coupon delivery service that is offered at about 2,000 McDonald's locations. It alerts customers to daily deals in their area, such as a buy one, get one free breakfast sandwich or a $1 McChicken sandwich. So far, the major criticisms of the McD app have been a lack of deals in a customer's area, cell phone battery drain, and the inability to order food and pay for purchases. Customers want a mobile app to be useful, not just coupons and ads; they want everything to be seamless, from ordering to payment to checkout or pick up.

The test in Georgia looks to be an improvement
The new app, called McD Ordering, looks to address these issues. The app allows customers to link their credit or debit card with their email addresses. Once registered, customers can order and then drive to their local McDonald's for pick-up. When payment is made, McDonald's then starts cooking the orders. The orders can then be delivered curbside or customers could go inside and get their food.

Mcd Ordering

Source: Business Insider

McDonald's goal is to allow customers to place their orders and skip the drive-thru and in-store lines. By doing so, it'll streamline service and hopefully capture business from customers who would ordinarily have chosen not to wait. The new app will also allow McDonald's to collect customer data and better tailor its promotions.

Panera becomes Panera 2.0
Panera is undergoing a radical transformation at all of its bakery cafes. CEO Ron Schaich is calling the transformation Panera 2.0. Panera's efforts are more advanced than McDonald's and feature not only a mobile app but also iPad kiosks within each bakery cafe for ordering. From there, the orders go to the new Kitchen Display System and then the customers' orders are delivered to their tables.

Paneralogo

Source: Panera Bread

Where I see Panera having the edge over McDonald's is with its Rapid Pick-Up system. This ordering option allows customers to place online/mobile orders up to five days in advance and then pick up those orders at predetermined times without waiting in line. Each Panera location will have a special pick-up area with dedicated seating. What Panera is in effect doing is remodeling its locations to provide a more seamless customer experience for dining in or to-go orders.

Panera Bread

Source: Panera Bread

Panera expects to have the Rapid Pick-Up features in all of its restaurants by year-end. Over the next three years, Panera expects all of its locations to have all the features of Panera 2.0. The good news is that all of its franchisees are committed to implementing Panera 2.0. Panera has about 1,800 bakery-cafes that are either company-owned or franchised.

Foolish final thoughts
I know mobile apps can help boost sales. They have worked for Starbucks, Domino's Pizza, and Papa John's. McDonald's, as usual, is late to the party. McDonald's needs to start doing much more to make this test work. So far, only about 10 customers a day have been using the app since McDonald's has not been advertising it in the Columbus, Ga. area.

Both Panera and McDonald's need to boost their U.S. sales. In its most recent quarter, Panera posted a same-store sales increase of only 0.1%. McDonald's, for the month of May, saw its U.S. same-store sales drop 1%. This explains why shares of Panera Bread are down almost 20% in the past year and McDonald's shares are unchanged.

Right now it looks like Panera has a more thorough game plan than McDonald's. Panera realizes that to make this work, changes need to happen inside the restaurant to support the mobile app. There cannot be a crowd of customers inside the restaurant waiting in the same line.

For McDonald's, 22 restaurants is a start, but it has more than 14,000 restaurants in the U.S. I'm curious to find out the results of the trial. Will the kitchens be able to handle normal orders as well as orders from the mobile app? Which orders will be prioritized? What happens during rush hours? These are some of the questions this Fool has, and hopefully McDonald's can make the McD Ordering app work.

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Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends McDonald's and Panera Bread. The Motley Fool owns shares of Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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