McDonald’s has provided us with a nice lesson in why you should always take early success of a new restaurant with a great, big grain of salt.
The fast-food giant opened the first location of CosMc’s in suburban Illinois in late 2023. It generated ridiculous lines, thanks to a heavy dose of publicity surrounding the drive-thru beverage concept.
Those lines persisted for a few weeks. But when we visited the location a couple of months later, we had no problem with lines, with only a couple of other cars coming through during the 20 minutes we spent in line and hanging out around the location, taking pictures. The Texas locations apparently had a similar result, as three of them were closed within a few months of opening.
Now they’re all closing, and McDonald’s plans to bring “CosMc’s-inspired” beverages into its regular restaurants as part of a test.
But it was never likely at all that CosMc’s would grow into a secondary concept. The decision to effectively take its beverage test in-house was not remotely surprising and is a bow to competitive and financial reality.
For one thing, McDonald’s is not a concept creator and has not been one for decades. It operates a massive, global operation, the largest restaurant company in the world. And it is generally good at being the largest restaurant company on the planet.
That is a very different skillset from starting a concept from the ground up, which requires speed and resourcefulness and a fair bit of luck. It would have been quite a feat had McDonald’s been able to create a long-term winning concept.
Yet doing so would have taken a decade, at least, to move the needle for McDonald’s. The fastest-growing concept of recent vintage, Crumbl, started in 2017 and last year generated $1 billion in system sales, which is some exceptional growth. And yet it is just 2.5% the size of McDonald’s in the U.S. alone.
Or, in other words, it’s the equivalent of a solid new product offering for the global fast-food giant.
McDonald’s might be able to muscle into the market with its own new concept, but doing so would take years and a lot of money. Yet it has an amazing resource of real estate and labor and operations already in the form of its 13,500 existing restaurants.
McDonald’s could, after this next round of tests, come up with a line of beverages that build sales within that market without the intense investment in time and resources necessary to create a restaurant chain. And it could add that $1 billion in new sales almost immediately, rather than wait nearly a decade.
There are risks involved in adding a new product line to existing restaurants, of course. Customizable drinks can be complicated and might drag down service times. It’s also possible that the U.S. consumer simply doesn’t consider McDonald’s enough of a drink destination for the chain to move the needle.
But it could also drive traffic and sales to existing restaurants with a relatively light investment in marketing, equipment and resources.
In its announcement, McDonald’s said that the stand-alone CosMc’s created a “learning lab” that enabled the company to test drinks, flavors and technologies in “real customer-facing environments” without impacting existing McDonald’s experiences. Ultimately, the company got some benefit from that test.
Ultimately, there isn’t much wrong in throwing a few dollars at an idea that may work, particularly if there is a clear fallback option like the one McDonald’s has had all along.