McDonald’s has launched a new restaurant format with drinks and snacks that can be customized to attract afternoon snackers and to compete against Starbucks and Dunkin’.
The company announced Wednesday that it would open 10 CosMc’s restaurants in the first half of next year. One of the restaurants will be located near the company headquarters in Chicago, and the others will be located in Texas. The company will wait at least one year to decide whether or not it wants to expand.
This announcement was the highlight of McDonald’s investor conference on Wednesday. The company said that it also expects to add nearly 10,000 McDonald’s worldwide in the next four-year period, bringing the total to 50,000. This would be a growth rate unprecedented for even the world’s biggest burger chain.
McDonald’s plans to open 1,900 stores overseas, including in Canada, Germany, the United Kingdom, and Australia. McDonald’s will open 7,000 more stores in foreign markets, where licensed operators will operate. Over half of these stores would be located in China.
McDonald’s also looks to CosMc’s for help in expanding its menu and service hours and keeping up with other fast-growing chains like Starbucks. Starbucks announced last month that it would open 55,000 new stores worldwide by 2030. This is an increase from the current 38,000.
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McDonald’s CEO Chris Kempczinski stated that CosMc’s was designed to help the company fill in the sales slump it sees mid-afternoon. The drinks will be too complex to fit in the existing restaurants. For example, churro-flavored frappes, pear-flavored smoothies, or turmeric lattes. CosMc’s, named after an alien character introduced by McDonald’s in the 1980s, will serve snacks such as pretzel bites or Egg McMuffins.
“This is an $100 billion category with margins that are superior to the rest (casual dining).” Kempczinski added, “We believe that this is a market we can win.”
McDonald’s also tests new systems in the CosMc’s small format restaurants, such as a drive-thru lane that regulates traffic based upon the complexity of the orders.
McDonald’s stated that the rapid growth in delivery demand is a reason to bring restaurants closer to their customers so they can receive food faster and more quickly. McDonald’s delivered $1 billion worth of global sales in 2017. That number has now grown to over $16 billion.
Kempczinski stated that new restaurants are likely to have designated pickup areas for drivers in order to reduce restaurant congestion. He said that it is important to have actual restaurants and not only kitchens for delivery.
Not everyone wants to order delivery for every meal. In an interview with The Associated Press, Kempczinski said that sometimes people want to eat at a restaurant with their families.
Kempczinski says he is not worried about the cannibalization of sales at existing McDonald’s. He noted that population shifts in the U.S. have left many areas of the country unserved. McDonald’s wants to stop competitors from taking over prime real estate.
Manu Steijaert said that it took McDonald’s 33 years to open the first 10,000 restaurants. Comparatively, it took them 18 years to go from 30,000 to 40,000.
McDonald’s announced a multi-year agreement with Google Cloud on Wednesday. The financial terms of the deal were not disclosed.
Kempczinski says that moving restaurant computations to the cloud, rather than relying upon slower servers, will speed things up, like menu recommendations at ordering kiosks and in the drive-thru lanes. The new system can also be used to optimize staffing, for example, by recommending that an extra staffer be added at a beverage machine when demand warrants.
McDonald’s Chief Executive Officer Ian Borden stated that the company is confident about investing in new technology and stores because of its strong performance. McDonald’s global same-store sales grew nearly 9% during the third quarter despite a slight drop in U.S. traffic.
McDonald’s shares closed Monday with little change.
McDonald’s focuses on its core menu items, such as Quarter Pounders or fries, which account for 65% of system-wide sales.
By the end of 2024, the U.S. and other markets will have burgers with freshly toasted buns mel, ted cheese, and more Big Mac Sauce.
McDonald’s chicken sales are on pace to surpass beef and reach $25 billion annually. By 2025, it plans to introduce its McCrispy sandwiches to almost all global markets.
Jo Sempels is the president of McDonald’s International Licensed Markets. She said that her company sees a significant opportunity to increase coffee sales. He said that the company sells eight million cups of coffee every day. However, growth is hampered because of a fragmented strategy. McDonald’s will promote McCafe and reduce the number of equipment suppliers to ensure that its coffee is consistent around the world, Sempels explained.