McDonald’s sees $100-billion delivery market as way to grow

After years of seeing fewer US customers come in its doors, McDonald’s Corp. is increasingly embracing a different philosophy: Take the food to them.

The fast-food chain will rely heavily on delivery to reignite sales, especially in the US, according to executives speaking at McDonald’s investor day in Chicago on Wednesday. The company also is turning more aggressively to digital technology, such as mobile ordering and payments, to meet its growth targets.

The overhaul is part of a bid to achieve long-term system-wide sales growth of 3 percent to 5 percent, starting in 2019. McDonald’s also aims to boost operating margins from the high-20 percent range to around mid-40 percent.

“Restaurant delivery is a $100 billion market and it’s exploded,” Senior Vice President Lucy Brady, who runs strategy for the chain, said at the event. “There’s significant opportunity that we haven’t even tapped into yet.”

The world’s biggest restaurant chain has faced slowing sales since excitement around the 2015 US launch of all-day breakfast has died down. That’s put pressure on Chief Executive Officer Steve Easterbrook to find new initiatives that can revive momentum. Though the company has been testing delivery for years, it now sees an opportunity to “scale quickly” with the concept.

Many of McDonald’s overseas restaurants already offer delivery, especially in Asia and the Middle East, and the company generated almost $1 billion in sales from the channel last year.

McDonald’s has been working with Postmates Inc., Uber Technologies Inc.’s UberEats and Foodpanda to test various approaches. The restaurant chain also named other delivery services, such as GrubHub, Inc., during its presentation. Though McDonald’s didn’t announce a specific GrubHub partnership, the remarks sent shares of that company up as much as 3.4 percent -- its biggest intraday gain in more than a month.

McDonald’s shares gained as much as 1.8 percent to $130 in New York. The stock was up 4.9 percent this year before Wednesday.

In the restaurant chain’s largest markets – the US, France, the UK, Germany and Canada – almost 75 percent of the population lives near a McDonald’s. That gives it an edge over rivals in adopting delivery, Brady said.

“We’re closer to more customers than any other restaurant company in the world,” she said.