McDonald's (MCD) may never be the same if new initiatives to drum up sales and increase customer satisfaction pan out.
The world's largest restaurant chain announced some bold initiatives late last week during an investor presentation. How does adding a third drive-thru window and replacing prep tables with larger areas that can accommodate a broader variety of fresh ingredients sound?
If that doesn't seem like the McDonald's you know today, that's pretty much the point.
After nearly a decade of consistent growth in same-restaurant sales, the master burger flipper proved it was mortal 13 months ago. The chain's monthly metrics have been mixed since then, leading investors to wonder why folks aren't going to McDonald's the way that they used to. Everything from chicken wings to premium chicken wraps to moving up its annual Monopoly promotion haven't panned out, and now the chain is going to get aggressive.
Closing a Door, and Opening a Window
One of the more interesting developments will be the third drive-thru window at new or rebuilt locations next year. The Fast Forward Drive-Thru update doesn't involve adding a third order screen. Things seem complicated enough at the recently updated units that have dual order stations for drivers. This will be a third window added beyond the first window where customers pay and the second window where they typically pick up their food. The third window will come into play when a customer places a highly customized order for items that take additional time to prepare.
Instead of inconveniencing drivers behind that car by having to wait longer than they have to -- or making things more unpleasant for the person placing the order by asking to pull off to the side of the restaurant -- the third window will be an attended pick-up location.
A third window probably didn't seem necessary back when the menu was as simple as the ones now at Five Guys or In-N-Out. However, now that folks can order everything from fancy McCafe Iced Caramel Mocha to McWrap Sweet Chili Grilled Chicken, speed and execution are being tested. A third window isn't the ideal solution, but it does make things less of an inconvenience for the person placing the order, those waiting behind him, and the employees who currently have to leave the restaurant to hand over complicated orders.
The bolder initiative -- and one that will be incorporated across all the more than 14,000 domestic locations -- is a high-density prep table that will have room for dozens of fresh ingredients. The push here is to offer broader flavors for the fast food behemoth's sandwich options.
%VIRTUAL-article-sponsoredlinks%McDonald's is already testing a "build your own" sandwich at a California location with the new prep area, allowing customers to choose from 20 different toppings. Patrons can order off of two iPad stations with employees standing by to help out. Incorporating touchscreen tablets across the entire chain isn't likely in the near term, but the high-density prep tables are a no-brainer.
Fast food operators have been losing traffic to fast casual chains that offer quick-service meals that are higher in quality, with a relatively minor sacrifice of speed. Offering a wider variety of fresh ingredients would help McDonald's offer more taste bud-tantalizing options. The test location even allows guests to have their burger "chargrilled to order."
As long as McDonald's can do this without messing up too many orders or slowing down progress, the Fast Forward Drive-Thru initiative and the rollout of new prep tables next year could change the way consumers approach the now tired burger champ.
If McDonald's is right, you may never settle for Chicken McNuggets again.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our newsletter services free for 30 days.
5 Less-Known Restaurant Chains You Should Eat At and Invest In
You Won't Recognize McDonald's by This Time Next Year
If investors are hungry for something a little more exciting, thankfully there's no shortage of faster growing publicly traded restaurant chains that are doing just fine.
So sorry, Olive Garden. You may still offer tasty breadsticks, but that's not the kind of rising dough that investors -- and diners -- crave these days.
One of this summer's hottest IPOs was for Noodles & Company (NDLS), a fast casual restaurant chain that specializes in all types of noodles. Olive Garden bashers will find plenty of Italian pastas on the menu, but diners can also be globetrotters by checking out Asian noodle bowls or come closer to home with the classic Americana comfort food of mac and cheese.
Unlike the many table service restaurants facing an alarming number of empty tables, Noodles & Company has delivered positive comps in 29 of the past 30 quarters. Revenue climbed 17 percent to $300.4 million last year, and it's on pace for similar growth through the first half of this year.
Ignite Restaurant Group (IRG) owns and operates 134 Joe's Crab Shacks and 16 Brick House Tavern + Taps. The operator essentially doubled in size in April when it acquired smaller Olive Garden rival Romano's Macaroni Grill. The 186-unit Italian casual dining chain was once owned by Brinker, and it's a work in progress. Comps were positive at Ignite's two original concepts in its latest quarter, but the same can't be said for Macaroni Grill.
Then again, the sluggish performance at Macaroni Grill also led to an attractive acquisition price. With Macaroni Grill butting pasta bowls with Olive Garden and Joe's Crab Shack fishing against Red Lobster, we can possibly call Ignite a mini Darden. That's a good thing, especially since Ignite has a lot of room for any of its three concepts to grow before it saturates the market.
Casual dining and Mexican don't mix well over time. There's probably a shuttered El Torito, Chi Chi's or Chevy's somewhere near you.
However, Chuy's (CHUY) has raised the bar by creating a lively environment filled with Elvis shrines and customer-submitted dog photos, and it's winning over patrons with its extensive happy hour specials and a bargain-minded menu where nearly every entree costs less than $10.
Chuy's sales surged 23 percent in its latest quarter, and with just 45 locations across twelve states, there are still plenty more places for pooch snapshots and Elvis busts to go up.
As one of the largest franchisees of Buffalo Wild Wings (BWLD), Diversified's (BAGR) largest concept is no stranger to most sports bar enthusiasts. However, the reason that Diversified makes the cut is because it's in the process of rapidly expanding its proprietary Bagger Dave's Legendary Burger Tavern.
There were just 13 of the full-service, ultra-casual restaurant and bar units open by the end of June, but Diversified is hoping to open another six locations later this year. It may soon rival the nearly three dozen Buffalo Wild Wings eateries that it currently watches over. The genius here is that it's probably putting a lot of what it learned at Buffalo Wild Wings into practice at Bagger Dave's.
Revenue soared 61 percent in its latest quarter, propelled almost entirely by new restaurants, but there was still a healthy 7 percent spike in same-store sales during the period.
Customers looking to trade up from fast food without shelling out more in time and money at a casual dining concept are flocking to fast casual chains that deliver quality ethnic dishes quickly.
Fiesta (FRGI) owns and operates 96 Pollo Tropical restaurants (primarily in South Florida) and 164 Taco Cabana eateries (mostly in Texas). The company also has dozens of franchised locations, especially overseas, as its Latin American-inspired Pollo Tropical rotisserie chicken has proven to be a potent export.
Revenue climbed 9 percent in its latest quarter, fueled by a healthy 6 percent spike in same-restaurant sales at Pollo Tropical.