To lure more mid-afternoon customers, McDonald’s Corp. is rejecting its recent health-food kick and rolling out the sweets: croissants, muffin tops and a new sundae-topping station for ice cream lovers.
The challenge is daunting. The hours between lunch and dinner are a fast-food dead zone. Only about 5 percent of McDonald’s customers show up at non-meal times such as 2 p.m. to 5 p.m., according to Peter Saleh, an analyst with BTIG in New York.
“You’re going to have to give customers a real reason to come in during that off-peak hour,” he said.
McDonald’s has a lot riding on the initiative. At a time when its standing as the country’s dominant fast-food restaurant has weakened — its share of the market slipped to 15.1 percent last year from 17.5 percent five years earlier, according to Euromonitor — Chief Executive Officer Steve Easterbrook has identified snacking and coffee as “underdeveloped opportunities” that could spur growth. The goal is to “bring the casual customer in the door more often,” Easterbrook said at an investor conference in May.
McDonald’s $1 and $2 drink specials are hurting others in the industry, according to Dunkin’ Brands Group Inc. CEO Nigel Travis, who called the discounts “pretty aggressive.”
“We’ve struggled somewhat in the afternoon,” Travis said last month. “Some of that will be competition from McDonald’s, Burger King.”
Others have attempted to capitalize on afternoon snacks. Wendy’s Co. has tried selling 50-cent Frosty desserts after lunch. Starbucks Corp., which among quick-serve restaurants is one of the few who are successful at boosting afternoon visits, has lured customers with “treat receipts” that give discounts for purchases after 2 p.m., along with pre-dinner happy hours that feature half-price Frappuccinos.
Despite the offerings industrywide, traffic in the afternoons was unchanged in the year that ended in May, according to data from NPD Group. Lunch and dinner customer visits were down, while the morning-meal period increased 1 percent, the data show.
Even some more upscale restaurants are trying to goose dead-zone sales. Zoe’s Kitchen Inc. this spring began selling grab-and-go snack boxes, which CEO Kevin Miles has referred to as an “adult lunchable.” The chain has three options: hummus with veggies, grilled chicken with pasta salad, and a Mediterranean version that has chicken, hummus, cucumbers and tomatoes.
“Our snack boxes, at less than 445 calories each, address the growing demand for convenient, healthy, better-for-you snacking options between traditional day parts,” Miles said in May.
Starbucks’ test of new food at about 100 stores in Chicago features smaller dishes, such as a 130-calorie cauliflower tabbouleh salad and a protein box with cheese, salami, snap peas and apples. It’s also trying to sell grab-and-go options from industry upstart Snap Kitchen at some cafes in Houston.
McDonald’s, however, is pushing the more indulgent side of snacking with its 620-calorie turtle brownie sundae, topped with hot fudge, caramel, whipped cream and salted pecans, according to spokeswoman Terri Hickey. A small McCafe chocolate-chip frappe, on sale for $2, has 500 calories and more than half a day’s worth of saturated fat. The company’s stock has remained strong. It’s up 22 percent in the last year.
As part of the chain’s so-called Experience of the Future, some restaurants are testing display cases that feature items like muffins tops, petite pastries, croissants and apple pies with lattice crusts that are baked in-store. About 700 U.S. McDonald’s are testing behind-the-counter topping stations for making different sundaes and desserts.
McDonald’s in Canada already sells more sweet snacks, including five flavors of muffins, such as cranberry-orange and banana chocolate chunk, as well as cinnamon rolls topped with cream-cheese icing.
But the chain might do better if it promotes more traditional McDonald’s food during slower afternoon times, according to data from NPD Group. The most-ordered snacks in the U.S. are burgers and fries.
©2017 Bloomberg L.P.
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