Last week, McDonald's (NYSE:MCD) unveiled its latest initiative to reverse sliding sales. The company is launching "TasteCrafted" -- a new customizable menu to complement to the "Create Your Taste" option, which the company plans to roll out to 2,000 U.S. locations this year. Many franchisees, however, have balked at the Create Your Taste offering, complaining of high equipment costs and slower service times, as well as the fact that it will not be available at drive-thru windows.
TasteCrafted, then, seems like a happy compromise between the company and the franchisees as the limited menu will be less expensive to implement and also available in the drive-thru lane. McDonald's will initially test the menu in stores in Atlanta, Portland, and Southern California, and if successful, it could be introduced nationally in just a few months. The menu offers customers the option to choose from a number of "chef inspired flavors" for their sandwiches or salads and also presents a choice of three buns and four topping flavors such as bacon clubhouse and hot jalapeno.
TasteCrafted comes at a time when the Golden Arches suffer declining sales, while fast casual chains like Chipotle Mexican Grill enjoy quarterly double digit comps growth. According to the conventional wisdom, McDonald's is losing customers, especially millennials, to the fast casual brands, because they offer customizable options.
With the Create Your Taste and TasteCrafted menus, McDonald's is clearly trying to grab a piece of the pie that has been driving growth at its competitors. However, the plan could backfire for a number of reasons.
This fast food ain't so fast
McDonald's reputation has been built on speed, and for many in the world, the brand is synonymous with traditional fast food. However, in recent years, service speed has faltered. In 2013, drive-thru wait times were estimated to be the longest in 15 years at over three minutes. New menu items have slowed down operations and been the source of much frustration for franchisees. Long wait times have also sparked many customer complaints.
The TasteCrafted menu may exacerbate this problem. Not only does adding options slow down prep time and take up additional space in the kitchen, but it also makes the ordering process slower. Instead of simply ordering a #1 with Coke, for example, an uninitiated customer will now have to answer at least three questions regarding their choice of meat, bun, and topping. For a single or double-file drive thru, those extra options could result in long waits. As a result, the Create Your Taste Menu is only available from kiosks inside the restaurant to prevent expected delays in the drive-thru lane.
McDonald's is also well aware of its menu bloat as it recently axed 9 offerings, but adding new options may negate any improvements in service from the simplified menu.
Customization is not the key
While it is fair to point out that customization is central to the menu at Chipotle, that is not the case at many of the currently popular fast casual chains. Shake Shack, which has grown from a hot dog stand into a $2.5 billion publicly traded company in the past ten years, offers only five types of burgers on its menu with little customization. In-N-Out Burger, perhaps the original cult favorite of burger chains, has just three burger options on its official menu.
The difference, then, between the growing chains and McDonald's is not customization but quality. Shake Shack and In-N-Out simply offer a better product.
For Mickey D's, the remedy to that solution is not to compete in the $8 gourmet burger space which is already too crowded. The company serves a different clientele. Keep in mind that Burger King saw its same-store sales in North America jump nearly 7% in the first quarter, while McDonald's fell by almost 3%. McDonald's needs to recapture those customers first, before it worries about falling too far behind fast casual competition.
Offering customers a choice is not a bad thing in and of itself, but it is a problem when it comes at the expense of speed of service and efficiency. McDonald's needs to streamline operations, improve quality, and remember that its target customer is looking for a tasty $5 meal. As the company has already learned, more choices does not equal more profits.