Updated 18:32ET
McDonald’s (NYSE:MCD) is requiring franchisees to help offset the huge cost the fast-food giant is investing in digital marketing.
Beginning in 2025, McDonald’s (MCD) is requiring franchisees to contribute 1.2% of their current marketing contribution to go towards digital marketing costs based on projected digital sales, and changing annually as projections are adjusted.
The company projects a cashflow benefit of $2,600 from this change.
McDonald’s (MCD) hopes that by investing hundreds of millions in digital marketing, the company can widen its competitive advantage and narrow the gap with rivals who have a superior number of digital customers. The company plans to add ordering channels, and enable customers to place orders on the web without the need to download an app.
“The new model is about reallocating our collective marketing investment toward higher-ROI tactics digital platforms we know are working/driving the business,” a McDonald’s spokesperson told Seeking Alpha.
The most recent industry data shows that McDonald’s (MCD) spends roughly 80% of its ad dollars on TV ads, with digital and radio both at approximately 10% each.
(Updated to clarify franchisee contribution to the digital marketing fund, and to include comments from a McDonald’s spokesperson).
