LAGUNA NIGUEL, Calif. — The future of McDonald's fast food may be slowing it down.
Responding to declining same-store sales, falling stock prices and a shrinking base of younger customers, the world's largest fast-food chain will announce plans to vastly expand its "Create Your Taste" test platform.
Create Your Taste lets customers skip the counter and head to tablet-like kiosks where they can customize everything about their burger, from the type of bun to the variety of cheese to the many, gloppy toppings and sauces that can go on it.
"This is a big deal," says Greg Watson, senior vice president of U.S. menu innovation; the senior executive in charge of what is arguably McDonald's most significant menu change since the roll out of breakfast more than 40 years ago. "We are all under some pressure that is coming from the business picture not being where we want it to be."
What has until now been a tiny test in four Southern California stores is immediately expanding to 30 locations in five more states and in 2015 to 2,000 U.S. locations, or about one in seven of the 14,000 domestic McDonald's restaurants, says Watson. The five additional states: Illinois, Wisconsin, Georgia, Missouri and Pennsylvania.
USA TODAY was invited by McDonald's to go behind the scenes to tour one of its test stores and to report the upcoming expansion of the test to thousands of its restaurants nationally.
Not only is McDonald's preparing to widely spread the new menu platform, but it's also adding a second meat option to it: Chicken.
Customers will also be able to build their own chicken sandwiches — a serious competitive edge over designer burger chains that do not have that option.
But change comes at a price: Time. It's a price patrons in the test sites seem to be willing to pay.
For decades, fast food's central success has been built around serving customers their orders within a few minutes. That's impossible when customers — particularly those in the 14 to 24-year-old range — demand customized meals that are served fresh, appear healthy and don't cost too much. The wait-time for a burger from the new platform at McDonald's is about seven minutes — an eternity in fast-food land.
But the chain needs to take risks. It recently reported its worst same-store sales decline in more than a decade. McDonald's stock has lagged its peers. CEO Don Thompson knows that if results don't improve sooner rather than later, his job could be on the line. In the third quarter, when McDonald's earnings plunged 30%, Thompson conceded that the company had lost relevance for key young consumers like Slade.
"McDonald's single biggest problem is its current positioning with Millennials," says Darren Tristano, executive vice president at Technomic, a restaurant industry research firm.
Teens and young adults continue to abandon McDonald's for what they perceive as fresher, healthier and more customizable menu choices at favorites such as Chipotle, Panera and Five Guys.
"Not one student I have asked since the start of classes this September believes that McDonald's has any healthy items on its menu," says Christopher Muller, hospitality professor at Boston University. When he recently asked 75 students where they prefer to go for fast-food, not one picked McDonald's or Burger King. Two picked Wendy's. But roughly half said they preferred Chipotle, Panera and Starbucks.
"I think it is less that McDonald's has lost its way and more that a generation has simply left for a different destination," says Muller.
But McDonald's executives scoff at that. McDonald's attracts 27 million customers a day — a big chunk of them Millennials, says Watson. "Millennials are still coming to McDonald's."
So are even younger customers like 16-year-old Michael Slade, a junior at Dana Hills High School here. But on this particular day, the lure wasn't the menu, but a free coupon his folks had received in the mail to try out Create Your Taste.
Slade, who is very health-conscious, ordered a customized chicken sandwich on a ciabatta roll with lettuce, onions, jalapeños, pickles, guacamole and garlic sauce. He waited seven minutes for his food to arrive — open-faced in a polished wire basket, looking very much like a gourmet burger. It came delivered to his table by a crewmember.
Slade quickly polished-off the burger, and says he would even come back again. "It's a thumbs up," he says. "I like that I got to create it myself exactly the way I want it."
But he says the price is too high.
Create Your Taste a far cry from the $5 Value Meal. A customized burger with a medium drink and fries is $8.29 at this McDonald's.
Collin Philippi, a 14-year-old 9th grader from Laguna Niguel, says he loves the new offerings, but when he comes with his friends, he mostly sticks with the more affordable budget menu. "I only get the build-you-own when I come with my dad."
The higher price-tag isn't the new platform's only potential stumbling block to success. Time is an equally-big issue. Because it takes at least four to seven minutes to prepare orders from the custom platform, it can't even be sold at the drive-thru window — where many McDonald's do up to 70% of their business.
Also, many older consumers are uncomfortable with the new technology. That's why, during busy hours, this particular McDonald's places crewmembers right at the kiosks to show older folks how to use them.
Change is hard. Especially for a massive chain like McDonald's. That's why the new platform needs strong incentives like the free coupons, says Tristano. "We are all creatures of habit," he says. "The likelihood that McDonald's customers will continue to order Big Macs and Quarter Pounders with little or no customization will be high."
But this is the McDonald's of the present racing to become the McDonald's of the future.
Robert Nibeel, who owns this McDonald's restaurant along with 15 others in Southern California, is sold on "Create Your Taste." Two of his locations have the platform and a third will add it before the end of the year. He says it's bringing in incremental business and that on weekends, when folks typically have more time, up to half of the orders are from the new platform. Most importantly, he says, it's attracting younger customers.
"Millennials would much rather order from a machine than face-to-face," says Nibeel. He has two boys ages 16 and 18 "and they're upset we don't have an ordering app yet," he says. Watson says that's in the works and that McDonald's recently added the Apple Pay system where customers can pay with smartphones.
McDonald's is in the midst of reinventing itself, says Watson. The stores are being modernized. A new ad campaign is in the works. And even the way it sells and makes food is in flux.
"McDonald's is listening to the customer," says Watson. It's delving into a new frontier that's part fast-food and part fast-casual dining. Kind of like a restaurant within a restaurant. "Maybe we're creating a new space," he says.
There have been glitches. The software can be a real headache, says Nibeel. For example, on this particular day the sweet potato fries option somehow disappeared from the kiosk menu.
Also, "Create Your Taste" won't even fit in many smaller McDonald's locations, because it requires a separate assembly area.
And after promoting the program for months as "Build Your Own Burger," that name had to be scrapped when chicken was added as an option.
The school day has ended and a crowd of teenagers burst into this restaurant. Several boys gather around the kiosk with a screen that looks very much like an iPad. "Will it do my homework?" one of them asks, as his friends laugh.
But McDonald's isn't laughing. It's doing its homework.