McDonald's (MCD) is finally stepping into the 21st century. But, while the move toward mobile ordering has been long anticipated on Wall Street, it won't be easy for the fast food giant to pull off with success.
Executives at the Golden Arches confirmed at an investor meeting this month that it will be launching mobile order and pay capabilities on its app for smartphone users in the fourth quarter of this year. Micky D's expects the option to be available in roughly 20,000 restaurants worldwide. The fast food giant said Wednesday that it's new mobile ordering capability is now live at 29 stores in Monterey, California. The company plans to expand the test to 51 more locations in Spokane, Washington shortly.
McDonald's move comes behind other fast food chains including Starbucks (SBUX) , Domino's Pizza (DPZ) , Panera Bread (PNRA) , Yum! Brands' (YUM) Taco Bell, Papa John's (PZZA) , Dunkin Brands' (DNKN) Dunkin Donuts and even Chick-Fil-A, all of which have seen sales increases from launching mobile ordering options and loyalty programs in recent year.
But McDonald's may not have as easy a time as its competitors have had shifting to digital.
"McDonald's is definitely late to the game (but) this may not drive growth," Jon Squire, CEO of CardFree, told TheStreet. "It's all in the consumer experience and having a large user base -- initial downloads does not necessarily mean conversion to sales." CardFree is an end-to-end enterprise mobile commerce platform.
Squire said if McDonald's employees are not properly trained, "it can sour the consumer experience, and in a worst case scenario, embarrass the consumer."
According to CardFree data, Dunkin Donuts' 18 million mobile loyalty members led to a 30% increase in store traffic and a 40% spike in weekly spending.
However, Starbucks said in its fourth quarter earnings release that while its mobile ordering was proving to be successful, it has resulted in congested stores and longer wait times.
"Consumers expect that they are not going to have to wait at all for their order when they walk up or drive for their pickup," said Russ Zack, senior VP of products and solutions at marketing platform HelloWorld.
Zack said while "mobile ordering is becoming not a good-to-have but a must-have," McDonald's challenges with digital offerings are going to be even more severe than Starbucks, "since their franchisee model introduces increased complexity due to technology platform differences (and) more complex food prep."
"There will be stress on the system and it will take time for consumers to use the mobile app, then it will only be a small portion that will use it," veteran restaurant analyst Howard Penney over at Hedgeye Risk Management tells TheStreet.
McDonald's reported a 1.3% same-store sales slip in the U.S. in the fourth quarter, likely due to its lack of a mobile presence (as TheStreet's Brian Sozzi suggests in the below video).