In this segment of the Motley Fool Money radio show, host Chris Hill, Million Dollar Portfolio's Jason Moser and Matt Argersinger, and Supernova and Rule Breakers' David Kretzmann reflect on the remarkable bounce the world's biggest burger chain managed in the second quarter. It's not so much about McDonald's (NYSE:MCD) food but the technology and the restaurant experience.
Chipotle (NYSE:CMG), meanwhile, is back on the hot seat over food safety, even if its latest health scare had nothing to do with its food or cleanliness.
A full transcript follows the video.
This video was recorded on July 28, 2017.
Chris Hill: Shares of McDonald's hitting a new high this week after global same-store sales in the second quarter grew more than 6.5%. David, they have 37,000 locations. How are they getting that kind of growth?
David Kretzmann: Steve Easterbrook, that's the short answer. He's breathed new life into the company since he became CEO in 2015, and he's really done a lot to push the technological side of the business. They're rolling out mobile order and pay to the majority of locations worldwide by the end of this year. Delivery is promising. They did a pilot test with Uber Eats in January, and they found that people who order McDonald's delivery end up paying close to two times average order size. So, they're expanding that pilot to 4,000 stores in the U.S. and Australia and other markets. Then, within the stores themselves, they're working with the franchisees to renovate the restaurants to the experience of the future, which includes adding some touch screen kiosks in there, and adding different options as far as ordering goes. All these different initiatives seem to be driving more people to the stores. It's working out well.
Hill: You know, it's interesting, because we've seen this over the last couple of years, probably first and foremost with Panera Bread, and Ron Shaich's comment about the mosh pit, and the move to mobile ordering. It's one of those things, Jason, that you want to see if you own any kind of a restaurant stock or a coffee stock, that sort of thing. But they have to execute on the back end. This is good for McDonald's, that they're making this move, but I also hope they realize that they have a challenge in terms of throughput.
Jason Moser: There's no question that it adds another dynamic of labor, essentially, to that store that they may not be fully prepared for. So, yeah, you're right, not to make that leap to automatic success. I think about this experience at the future this stuff is getting bandied about like it's losing all meaning. Let's be very clear here, we're talking about experience of the future. We were talking about this back when Bojangles' was coming public, Chris. You remember the experience of the future of Bojangles', right? You go in there and there's a biscuit theater, you're watching the make the biscuits, Chris! Now, that is the experience of the future.
Hill: Are you just bitter because we're not talking about Bojangles' quarter?
Moser: Oh, we'll talk about it.
Hill: Let's hit Chipotle really quick, we have about a minute left. They came out with their second quarter results. The stock was actually up slightly this week. But it kind of seems, Matty, like investors are holding their breath with this stock, because it came down recently with the incident in Virginia. As a shareholder, I have to say, I'm still not wild about the way that Steve Ells, the CEO, talks about their food safety protocol.
Matt Argersinger: Yeah. With a lot of the things he's said, he's always touting what Chipotle is doing, he's putting the company on a very high pedestal, but then you see instances like this. I know I think there's a bit of a media bias which gets Chipotle at the top of mind with everyone. But again, this is a big setback. It's one store, it's not related to their food, but we were just seeing a pickup in same store sales, and I can't imagine things are going to get better for the rest of the year.
David: Don't underestimate queso, possibly a national rollout coming mid-September. I'm still bullish, I think Chipotle can turn this around.