Recently, McDonald's (NYSE:MCD) announced that it will add a third drive-thru window to its remodeled and newly built restaurants. The third window will act as a second pick-up window for customers whose orders take longer to prepare. This announcement came after McDonald's performed worse than both The Wendy's Company (NASDAQ:WEN) and Taco Bell, owned by Yum! Brands (NYSE:YUM), on average drive-thru time, and after McDonald's received loads of complaints from customers upset about having to wait much longer than expected.
McDonald's estimates it will spend $3 billion next year to open 1,500 to 1,600 new restaurants and modernize about 1,000 locations to include the third drive-thru window. McDonald's hopes that by adding a third window, its drive-thru service will become more efficient, thus generating more revenue.
Fast-food in its early days
Fast-food restaurants have actually been around since the early 1900's. Automats were first introduced as early as 1902, but did not become popular until 1912. To some historians, Automats have been seen as the first food service because customers could choose from prepared foods behind a glass wall by placing coins into a slot, similar to a vending machine within a cafeteria. Other researchers believe A&W, which was founded in 1919 as a root beer float stand, was the first fast-food chain within the United States. This was followed by White Castle in 1921, which sold cheap hamburgers. McDonald's later invented the first restaurant assembly line process in 1948 to speed-up food preparation in order for customers to receive their orders even faster.
Drive on up
Drive-thru windows first debuted in the late 1920's and early 1930's in the banking industry. City Center Bank was actually the first to invent the drive-up window to allow customers to easily deposit their money. Fast-food restaurants such as Jack in the Box started using a drive-up window in the early 1950's, but were unsuccessful. The intercom system was also introduced in the 1950's with two-lane drive-thru windows not appearing on the scene until the 1980's. Wendy's has been recognized as the first fast-food chain to implement the "first modern day drive-thru window" in 1971. McDonald's later copied the idea and installed its first drive-thru window at its Sierra, Arizona location in 1975.
Life in the third lane
McDonald's believes its third window, Fast Forward Drive-Thru, is exactly what the company needs to speed up service and boost sales. McDonald's United States division president acknowledged that McDonald's added too many new products to the menu too quickly over recent years. Adding new menu items such as egg-white breakfast sandwiches, chicken McWraps, and pumpkin spiced lattes created challenges due to these items' more complicated assembly processes. The Fast-Forward Drive-Thru will enable cars to keep moving while keeping customers happy.
Fastest drive-thru times
McDonald's average drive-thru time was tested recently along with other fast-food competitors to see who was the fastest. Wendy's had the best speed at 134 seconds followed by Taco Bell at 158 seconds, and McDonald's came in last place at 189 seconds. In addition, the fast-food industry did worse this year than last year in terms of order accuracy. Last year, order accuracy was at 88.8%, whereas this year it fell to 87.2% this year. Privately-held Chick-fil-A did the best for order accuracy at 91.6%, with Burger King doing the worst at 82.3%. The drive-thru is crucial to fast-food chains' sales. In fact, McDonald's drive-thru makes up 70% of sales, and for restaurants like Wendy's, Burger King, and Taco Bell, the drive-thru service is responsible for 60% to 70% of total business.
Foolish advice for fast-food lovers
In a way, McDonald's is being forced to open up a third drive-up window partially because of its own success. The company had so many popular items, most of which require longer prep times than the traditional burger and fries that was the company's staple meal for so long, that its drive-thru window turnaround times suffered.
Foolish investors should take to heart that the company is making an effort to fix the problems, and competitors Wendy's, Burger King, and Taco Bell would do well to pay attention as McDonald's changes the game again. If the Fast Forward Drive-Thru is successful, other fast-food chains may also implement the design into their own drive-thru operations.