Now McDonald’s Wants to Be Like Panera Bread

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. 

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.

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.

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.

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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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2014, at 11:08 AM, dclaudew wrote:

    Rapid Pick Up does not seem to work. A customer can't order eggs on RPU, so what good is a breakfast order without eggs? Also, there are no discount prices on RPU, so a customer can't order the Tuesday bagel special of 13 bagels for $7 on RPU. If you want 13 bagels on Tuesday, you have to stand in line, select your bagels, wait for the 13 bagels to be sliced one at a time, remind the counter person to throw in some plastic bags, pay, and exit.

  • Report this Comment On July 07, 2014, at 9:12 AM, WallaceNDavis wrote:

    Every chain is exploring similar technology but when McDonald's does it it's "trying to be like Panera"? That's just a cheap way to get both names in a headline. McDonald's is trying to improve its business. Period.

  • Report this Comment On July 09, 2014, at 12:00 PM, bigDD wrote:

    Motley Fool articles are usually worthless and full of errors. This article follows that same recipe.

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9/1/2015 4:00 PM
MCD $93.47 Down -1.55 -1.63%
McDonald's CAPS Rating: ***
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Panera Bread CAPS Rating: ****