“Because of our extraordinary footprint, McDonald’s is uniquely positioned to become the global leader in delivery,” the company said in a statement, adding that nearly 75 percent of Americans live within three miles of a McDonald’s.
“Restaurant delivery is a $100 billion market and it’s exploded,” McDonald’s senior vice president Lucy Brady said at an event with investors this week, according to Bloomberg. “There’s significant opportunity.”
The food-delivery business — dominated by pizza for the better part of a century — has grown robust in recent years. Much of that growth, analysts say, has come from third-party services such as Seamless, Postmates and DoorDash, which partner with restaurants to deliver food to consumers’ homes. Chains including Burger King and the Cheesecake Factory now offer delivery, as do a number of local full-service eateries.
“Delivery is the single biggest trend in the restaurant industry right now,” said Jonathan Maze, senior financial editor of the trade publication Nation’s Restaurant News. “Numerous restaurant chains are moving in this direction, and there’s no reason McDonald’s shouldn’t do the same.”
The fast-food giant already offers delivery in Asian countries including China, South Korea and Singapore. Last year, its delivery business in China grew 30 percent.
But analysts said success in those markets may not necessarily translate to the United States.
“The cost of labor is pretty low in those places, so you can see how delivery would make economic sense,” said Ajay Chopra, general partner at Trinity Ventures, a venture capital firm in San Francisco. “It will be trickier for them to make the economics work here.”
McDonald’s partnered with UberEats for its pilot in Florida and, according to the Chicago Tribune, has also been in talks with other third-party services including Postmates and GrubHub. Analysts said those partnerships make sense for McDonald’s — the company won’t have to hire extra delivery employees or invest large amounts of money to get the program started — but may not be ideal for customers.
UberEats, for example, charges a flat $4.99 delivery fee on all orders. While people may be willing to pay that for a $30 order from a Thai restaurant, some analysts questioned whether customers could justify paying that much of a premium on a $7 Extra Value Meal. UberEats is currently available in 32 American cities, including Washington, Houston and Philadelphia.
“The cost associated with delivery may make it cost prohibitive for many people, especially in smaller towns and cities where people aren’t used to paying high prices for delivery,” said Bonnie Riggs, a restaurant analyst for the market research firm NPD Group. “You’ve got to remember this is fast food.”
Analysts said there may be other issues, too.
“Pizza has been successful because cheese is a good insulator and the product can withstand a 20-minute delivery journey,” a recent JPMorgan report said. “The same goes for Asian, Italian and sandwiches. Other categories don’t fare as well. Coffee for example has some impediments, as do burgers and fries, which tend to get soggy quickly.”
The move to delivery is just one way McDonald’s is hoping to win back customers. The company — which has lost an estimated 500 million transactions since 2012 — also plans to offer mobile ordering and payment options, as well as curbside pick-up, table service and self-serve kiosks to a number of U.S. locations.
“All of this is kind of a no-brainer for McDonald’s,” said Maze, of Nation’s Restaurant News.
“But,” he added, “McDonald’s fries are absolutely the best when they’re served fresh. How will they hold up? That’s a big question here.”