McDonald's Table Service: Another Smart Move in the Company's Efforts to Rebound

Earlier this week, McDonald's (MCD)  intrigued us with revelations that it is testing spicy, Sriracha sauce-laced burgers in Ohio, with the potential for these hipster-drawing delicacies to be rolled out nationwide at a later date.

On Thursday, the fast-food chain made the surprise announcement that it will be bringing table service to all its restaurants. It seems an unlikely move, but it should appeal to customers and investors.

The initiative is part of a larger effort to improve its products and services. The company's shares were roughly flat in Thursday trading. 

McDonald's has long been the market leader when it comes to fast food. But changing tastes and preferences among consumers have forced the company to alter several aspects of its business.

First, the fast-casual restaurant model, led by chains such as the now-beleaguered Chipotle Mexican Grill and Panera Bread, began to gain favor among American diners over traditional fast food. Fast casual offers the convenience of fast food, but with ingredients that are deemed healthier or more gourmet than what you'd get at McDonald's or Restaurant Brands' Burger King. The prices are steeper, as well, but fast casual chains have found that consumers are willing to pay for better quality.

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But then the landscape for the restaurant industry began to change. People started eating out less, preferring to cook their own foods with produce and groceries bought at increasingly low supermarket prices. Meanwhile, some analysts blamed a decline in fast food sales on the fact that many Americans still feel cash-strapped. A few analysts have even gone as far as to declare the U.S. at the beginning of a "restaurant recession."

Against such a backdrop, McDonald's has had to retool both its products and its image to keep profits rolling in. Under new CEO Steve Easterbrook, the company has implemented big changes, such as the introduction of the all-day breakfast menu.

To appeal to the more health-conscious consumer whom the company was in danger of losing to fast casual, the company started to experiment with local specialties, cut artificial ingredients and preservatives and eliminated high-fructose corn syrup from some of its baked goods.

Separately, McDonald's moved its headquarters from its campus in the suburbs to one of Chicago's most up-and-coming neighborhoods.

To be sure, table service might seem like a stretch. But it could be a smart move for the company and its investors.

This is a model that has been successful at many international McDonald's locations, as well as at restaurants in New York City and Los Angeles. It's surprisingly efficient, and there's no tipping necessary.

Customers have a choice: Order at a kiosk and receive your food at your table, or go the traditional route and order at the register.

With kiosk ordering, there's no wait at the register for food to be prepared and packaged. And it's convenient for families with small children. Everyone can be seated and ready to eat.

This food-delivery model will launch in the Washington, Boston, Chicago, San Francisco and Seattle markets early next year, and the company will be looking to add the service to all 14,000 of its locations.

"For the best part of our 16 years, we've asked customers to work around our business model," CEO Easterbrook said on Thursday. "But now, customers are more demanding, and we're looking to evolve our business."

McDonald's is a true legacy stock, one of the great American companies that should stand for several lifetimes more. Grab shares on any dips, and hold for the long term.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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