Dive Brief:

• McDonald’s will introduce a Digital Marketing Fund on Jan. 1, 2025 to accelerate digital investments and widen its competitive advantage, the company said in a memo viewed by Restaurant Dive.
• The chain will shift its digital marketing tools — MyMcDonald’s App, customer relationship management platforms and consumer web tools — into the new fund in Australia, Canada, Germany, U.K. and the U.S.
• The fund will be 1.2% of projected identified digital sales, which the company defines as sales made when a customer “identifies themselves at the time of transaction, allowing us to market directly to them.” 

Dive Insight:

The shift in funding is expected to result in a cash flow benefit to every U.S. McDonald’s of about $2,600 starting in 2025 following the movement of the costs from P&L to the Digital Marketing Fund. The fund will cover ongoing costs as McDonald’s grows its digital business, per the memo. The global mobile app is currently paid for by an annual fee, according to the company’s 2024 Franchise Disclosure Document. The company recommended that the fund be paid for within existing OPNAD, which is McDonald’s co-op marketing fund, and local marketing contributions. 

“This will not change the 2025 required system marketing contribution rate but will require us to think differently about how we deliver the most impactful approach for the System,” the company said. “This change aligns with feedback we’ve heard from Owner/Operators that [the Global Mobile App] and CRM are marketing tools and should be funded that way.” 

The company said this marketing strategy will help it better understand customer behavior and optimize “customer lifetime value, all while maintaining systems for data management, network security, and data storage.” 

“When we shift marketing investment from traditional mass media like television, print and billboard ads, to collective investment in modern and digital capabilities to personalize the experience, we drive profitability,” McDonald’s CEO Chris Kempczinski said during the company’s Q1 earnings call. “And successfully delivering personalized experiences depends on transforming our restaurants to deliver what customers want, hot fresh orders delivered with convenience and accuracy.”

This shift comes as McDonald’s continues to see rapid growth in its digital channels and loyalty program. Systemwide sales from its loyalty members across 50 markets made up nearly $25 billion for the trailing 12-month period and $6 billion in Q1 2024, according to an earnings release.

The company said in the memo that it will also invest hundreds of millions of dollars into innovation and other digital products such as new ordering channels like web ordering as well as personalization and more ways to use loyalty points. McDonald’s is also planning to shift toward a national value platform instead of local value messaging. 

“With pressured QSR traffic, we have an opportunity to get the customers who already visit to visit more often. As more customers make purchase decisions based on personalized recommendations on their phones, driving frequency means using our digital capabilities like loyalty to know when to serve our customers better than anyone else,” Kempczinski said. “With the insights powered by our loyalty members, we will work to deliver the right message at the right time to the right consumer.”

Changes will not be made to other international operated markets or international developmental licensed markets in 2025. The new model will be adopted once these markets have the tools and capabilities, the company said in a memo.