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How McDonald's Hopes to Sustain Its All-Day Breakfast Success

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It’s rolling out all-day breakfast phase two, and focusing on higher-quality food

It’s been about a year since McDonald’s launched its turnaround plan in an attempt to salvage its suffering business. That plan — which included shuttering a number of stores and launching an all-day breakfast menu — seems to be working, but it’s a slow process.

In an earnings call call on Tuesday, executives said that all-day breakfast continues to drive sales at McDonald’s, though not as much as the company (and investors) would like. During the second quarter, same-store sales at the chain grew 1.8 percent. The growth was less than expected (analysts had hoped for 2.4 percent growth), but still positive, considering the chain’s history.

Below, a few ways the company hopes to sustain the success of its all-day breakfast menu:

1. Introduce all-day breakfast 2.0

CEO Steve Easterbrook noted that the company will expand the all-day breakfast menu this fall. He added that the more widespread additions of McGriddles, McMuffins, and biscuits — which he called “the next phase of all-day breakfast” — were overwhelmingly approved by franchisees, with more than 99 percent voting in favor of them.

Is extending the all-day breakfast menu enough to sustain growth, though? Probably not. “We plan to grow our business, but we’re not trying to do that on a quarter to quarter to quarter basis,” said Easterbrook. Long-term goals, he added, will likely include more than just the all-day breakfast menu.

2. Continue to focus on digital innovations

According to Easterbrook, the golden arches is banking on providing an “experience of the future” through digital innovations — like self-serve kiosks at restaurants in New York and Florida.

When asked whether a loyalty program could be in the works, Easterbrook wouldn’t provide a direct answer, but said the company was working on a number of “brand enhancements” for the long-term.

The company has also focused on digital innovations in Asia, and has worked to bolster sales in Japan in a rather unique way — through a partnership with the global phenomenon, Pokemon Go. According to Easterbrook, that partnership is “doing great things for the business.” As for whether the partnership would eventually make its way to the U.S, he said the company would “keep talking to any leadership partners,” but had no other speculation to add.

3. Invest in quality

It’s sort of ironic considering McDonald’s pioneered the fast-but-tasteless model of American dining, but the chain looks to be getting on board with things like fresh and local ingredients. In Canada, the company has been utilizing sustainable beef, which Easterbrook says it is tracking from the “farm to the fork.” And in America, the company has been cautiously testing fresh beef in select locations, which might be making its way company-wide eventually.

Noting that McDonald’s is beginning to “invest in ingredients and recipes,” he said the use of more quality ingredients “signals the direction of travel going forward.” The CEO wouldn’t disclose details, but added that there will be “more news to come, which will be powerful with customers.”

Ironically, the use of fresh beef doesn’t seem to be very popular with franchisees, who have expressed concerns that it could open the chain up to food safety issues.

So what’s holding McDonald’s back from greater success?

Pricing, for one thing, seems to be a point of concern. The company has struggled with balancing costs (of both ingredients and workers) with the prices of its food. So far, labor costs don’t seem to be affecting McDonald’s too negatively, though. “We are certainly mindful of wage increases,” said one executive, who added that the news isn’t all bad. In fact, the company has seen lower crew turnover recently. “Labor pressures will likely continue... but there aren’t any specific plans to significantly increase [prices.]”

McDonald's Reports Second Quarter 2016 Results [McDonald’s]

All McDonald’s Coverage [Eater]

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