McDonald’s expects to open nearly 10,000 CosMc’s restaurants over the next four years, a pace of growth that would be unprecedented even for the world's largest burger chain. Photo / McDonald's
McDonald’s expects to open nearly 10,000 CosMc’s restaurants over the next four years, a pace of growth that would be unprecedented even for the world's largest burger chain. Photo / McDonald's
McDonald’s is testing a new restaurant format with customisable drinks and treats designed to appeal to afternoon snackers — and grab sales from competitors like Starbucks and Dunkin’ Donuts.
The company said it will open 10 CosMc’s restaurants through the first half of next year. One will benear the company’s headquarters in Chicago and the rest will be in Texas. The company will study the results for at least a year before determining whether to expand.
The announcement was one of the most anticipated at McDonald’s day-long investor conference. The company also said it expects to open nearly 10,000 McDonald’s restaurants worldwide over the next four years — to reach a total of 50,000 restaurants — a pace of growth that would be unprecedented even for the world’s largest burger chain.
McDonald’s expects to open nearly 10,000 restaurants over the next four years, a pace of growth that would be unprecedented even for the world's largest burger chain. Photo / McDonald's
It plans to open 900 new stores in the US and 1900 in international markets with company-operated and franchised restaurants like Canada, Germany, the United Kingdom and Australia. McDonald’s plans another 7000 stores in international markets that are operated by licensees. More than half of those stores would be in China.
But beyond that physical expansion, McDonald’s is also looking to CosMc’s to expand its menu and service times and keep up with other fast-growing chains like Starbucks. Starbucks said last month it plans to open 55,000 stores globally by 2030, up from 38,000 today.
McDonald’s President and CEO Chris Kempczinski said CosMc’s is designed to fill in a slump in sales that the company sees in the mid-afternoon. But the complexity of the drinks it will offer — like a churro frappe, a pear-flavoured slush or a turmeric latte — make it impossible to fit into its existing restaurants. CosMc’s — named after a space alien character that McDonald’s introduced in the 1980s — will also serve snacks like pretzel bites and Egg McMuffins.
CosMC's coffee drink options will include a churro frappe, s'mores cold brew and tumeric-spiced latte. Non-coffee beverages include a sour cherry energy burst, blackberry mint green tea and popping pear slush. Photo / McDonald's
“This is a $100 billion ($163 billion) category that’s growing faster than the rest of (casual dining) and with superior margins. And it’s a space that we believe we have the right to win,” Kempczinski said.
McDonald’s is also testing new systems at the small-format CosMc’s restaurants, including drive-thru lanes that manage traffic based on the complexity of orders.
McDonald’s said the explosive growth of delivery demand makes it critical to get restaurant locations even closer to customers so food can arrive faster and hotter. McDonald’s delivery made up $1 billion in global sales in 2017; that has grown to more than $16 billion ($26 billion).
Kempczinski said new restaurants will likely have dedicated pickup areas for delivery drivers to ease restaurant congestion. But he said it’s important to open actual restaurants and not just delivery-only kitchens.
“Not everybody wants delivery every single meal. Sometimes they want to go to the restaurant with their family,” Kempczinski told The Associated Press in an interview.
CosMc's will offer a couple of McDonald's items as well as several new menu items like a spicy queso sandwich and pretzel bites. Photo / McDonald's
Kempczinski said he’s not concerned about cannibalising sales from existing McDonald’s locations. In the US, he said, population shifts have left many parts of the country underserved. McDonald’s also wants to prevent competitors from snatching up good real estate, he said.
Manu Steijaert, McDonald’s chief customer officer, said it took 33 years for the company to open its first 10,000 restaurants; by comparison, it took 18 years to grow from 30,000 to 40,000.
McDonald’s also announced a multi-year partnership with Google Cloud. Financial terms of the deal weren’t disclosed.
Kempczinski said moving restaurant computations into the cloud — versus relying on slower servers — will speed up things like menu recommendations on ordering kiosks or in the drive-thru lane. The new system will also help managers optimise staffing by, say, recommending an additional staffer at a drink machine if demand warrants it.
McDonald’s chief financial officer Ian Borden said the company has the confidence to invest in new stores and new technology because of its strong performance. McDonald’s same-store sales rose nearly 9 per cent worldwide in the third quarter, even as US traffic fell slightly.
McDonald’s shares closed little changed on Monday.
The company is focused on core menu items like Quarter Pounders and fries which, according to McDonald’s, make up 65 per cent of sales system-wide.
Burgers with softer, freshly toasted buns, meltier cheese and more Big Mac sauce are coming to US restaurants by the end of 2024 and most other markets by the end of 2025.
McDonald’s said its chicken sales have now reached $25 billion ($40 billion) annually, on par with beef, and are growing fast. It plans to bring its McCrispy sandwich to nearly all global markets by 2025.
Jo Sempels, president of McDonald’s international licensed markets, said the company also sees a significant opportunity to grow coffee sales. The company already sells 8 million cups of coffee each day, he said, but growth has been hampered by a fragmented approach. McDonald’s plans to promote one brand — McCafe — and whittle down the list of equipment suppliers so its coffee is more consistent globally, Sempels said.
