McDonald’s Stores Trying Loyalty Program

McDonald’s Corp. (MCD) franchisees are rolling out an electronic loyalty program in about 570 U.S. locations as stores seek to attract younger customers.

Mobile solutions marketer Front Flip LLC has introduced a loyalty application in about 420 McDonald’s stores that rewards customers with free food and other offerings. It is adding another 150 locations in coming weeks, Front Flip founder and Chief Executive Officer Sean Beckner said in an e-mailed statement.

The world’s largest restaurant chain has been testing a mobile payment program and introducing new items, such as pumpkin lattes and chicken wings, to lure teens and young adults as business in its home market stumbles. Sales at U.S. restaurants open at least 13 months rose 0.2 percent in August, trailing the 0.8 percent gain projected by analysts surveyed by Consensus Metrix.

“It’s targeting toward that younger population,” said Terry Smith, who owns three McDonald’s restaurants in the Burlington County, New Jersey, area that started using the Front Flip loyalty app about seven months ago. Customers can win prizes such as free cheeseburgers and buy-one, get-one-free Big Macs after scanning a QR code, a pixelated square that can be read by a smartphone, he said.

Lisa McComb, a McDonald’s spokeswoman, didn’t immediately respond to a phone call and e-mail seeking comment.

McDonald’s fell 0.9 percent to $96.21 at the close in New York. The Oak Brook, Illinois-based company has advanced 9.1 percent this year, trailing the 18 percent gain for the Standard & Poor’s 500 Restaurants Index.

Curbside Pickup

Earlier this month, the Quarter Pounder seller said it’s testing a mobile payment app in Salt Lake City and Austin, Texas. After ordering via a mobile phone, customers can pick up food in stores, curbside or at the drive-thru, according to notes from a June meeting of McDonald’s franchisees and company executives obtained by Bloomberg News. The system will also include special promotions, offers and a loyalty program, according to the notes.

“Younger people are certainly more inclined to use mobile payments and ordering and also probably more inclined to be members of loyalty groups,” said Sara Senatore, a New York-based analyst at Sanford C. Bernstein & Co. “Young people seem to have less of an issue with giving over personal information.”

While Starbucks Corp. (SBUX) and Panera Bread Co. (PNRA) have loyalty programs, there hasn’t been a fast-food company that’s been able to introduce one yet chainwide, she said.

Front Flip is working with other dining chains including Ponderosa and Bonanza Steakhouse on loyalty programs.

McDonald’s has about 34,700 locations worldwide, including more than 14,100 in the U.S. The company is scheduled to report third-quarter results on Oct. 21.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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