McDonald's reviews local US media business to give franchisees more flexibility, AdAge reports

Dive Brief:

McDonald's announced that it is performing a review for its local U.S. media business to allow local co-ops to choose from several agencies to work with, AdAge reported. Omnicom's OMD currently handles local media buying.
Several McDonald's franchisees created and joined a National Owners Association last year, which gives the restaurant operators more of a voice in McDonald's business decisions. It's unclear how many agencies will participate in the review, but OMD and Publicis Groupe’s Starcom are reportedly taking part.
Before OMD won the local media buying business, regional co-ops hired their own media agencies, with the same shop often handling creative and media. OMD will retain McDonald's national media buying. Omnicom's We Are Unlimited, which handles McDonald's national creative, was created as a dedicated agency in 2016, but will be seeking other clients. In March 2018, McDonald's hired Omnicom's The Content Collective as its agency of record for entertainment and content marketing.

Dive Insight:

The local media review solidifies McDonald's commitment to support its franchisees and offer them more flexibility in how they connect with their customers. It also reflects the importance of local advertising for national chains if they want to develop relationships with consumers in different regions of the country. The move comes as the fast food chain admitted that it has focused too heavily on national campaigns. In one example cited in the AdAge report, the company recognized that its breakfast campaigns should be localized to allow specific regions to promote menu items based on sales and what will connect best with local consumers.

Franchise owners have been pushing back on some of McDonald's demands, which led to the formation of the National Owners Association. Many had complained about working with OMD and reported being unsatisfied with cash flow and the low returns on McDonald's "Experience of the Future" remodel, which the company is requiring of franchisees, according to a report at Restaurant Business. The association recently told franchise operators to put remodels on hold until it could renegotiate certain elements. McDonald's has eased up on the timeline for remodels, expanding it from 2020 to 2022 with a reduced company contribution to the project.

In August, McDonald's opened a new 19,000-square-foot flagship restaurant in Chicago that was designed with modern, environmentally friendly features and tech-focused consumer experiences. The restaurant, part of the "Experience of the Future" initiative focusing on convenience and technology, features self-order kiosks, table services, mobile ordering and payment and delivery.

McDonald's is the latest brand to shift its relationships with agencies. Nearly 75% of multinational companies report reviewing their agency arrangements, according to the World Federation of Advertisers and The Observatory International. Many brands are wanting to reduce the number of agencies that they work with or work with more specialized shops.

McDonald's was ranked the 29th largest advertiser in 2017, when ad spending increased 3.4% to nearly $1.51 billion, according to Ad Age Datacenter. Nearly 80% of that year's budget went to TV ads, both national and local spots.