Late last year, McDonald’s CEO Chris Kempczinski hinted at a new brand called CosMc’s. Three months later, the company opened its doors and, thanks to intense social media curiosity, lines have been long at the suburban Chicago drive-thru beverage concept ever since.
Data from Placer.ai suggested that in the early days, the concept was drawing twice the traffic of a typical McDonald’s in December, even though it was open for just three weeks during the month.
To be sure, CosMc’s is a single-unit (for now) concept benefiting from all the attention that gets paid to the world’s largest restaurant chain. And new openings often get high traffic in their early days. It would have been a major problem if CosMc’s wasn’t outperforming the typical McDonald’s unit.
Yet franchisees see this effort and these lines and want a piece of the action. They just don’t necessarily want that action to be labeled a CosMc’s.
Last week, the National Owners Association, in a letter to its members, suggested that CosMc’s should be a testing ground for beverages that are sold at McDonald’s.
“McDonald’s has a foundational beverage platform,” the association, an independent group of McDonald’s operators, said in a letter to its membership, seen by Restaurant Business. “Let’s consider expanding frozen carbonated beverages, returning slushies, and adding more smoothies and frappes.”
“Restaurants already have the equipment and the capacity,” the group added. “CosMc’s can be used as a test site for growth of the McDonald’s beverage portfolio and McDonald’s can be considered the affordable beverage destination.”
At least one survey suggests most operators are skeptical. Only 10% of operators told restaurant analyst Mark Kalinowski in a survey last month that they would open a CosMc’s. Seventy-five percent of them said they would not, and the other 15% didn’t know.
“With all the new high-rent, low-profit stores McDonald’s wants to build, why would someone invest in a CosMc’s?” one operator wrote.
To be sure, a number of operators do want to jump on board. “There are some that want to be the first franchisee,” one owner told me. Another told Kalinowski, “Who do I call?”
Most operators understand, however, that such early results don’t necessarily translate into long-term success. And a couple of years of results could change a lot of operators’ minds. “Not until it has proven itself over three or four years,” another operator wrote, according to Kalinowski.
McDonald’s also understands that. It’s opening nine more CosMc’s in Texas and will decide what to do after that. “We’re only talking about a 10-store test,” Kempczinski said earlier this month.
But the question of beverages, profitability and whether they’d be best served on their own or in a separate format is fascinating.
Drive-thru beverages represent one of the fastest-growing segments of the industry, led by chains such as Dutch Bros, 7-Brew and Scooter’s Coffee. Beverages are highly profitable. Customers are loyal, as demonstrated by the continued loyalty of Starbucks’ top customers, and they’ll routinely pay substantial amounts for their favorite drink.
It’s hardly a surprise that McDonald’s would want a piece of this action.
Offering the beverages inside McDonald’s locations would theoretically complicate operations and slow service. Just ask Starbucks just how complex beverages in the modern era can be. And consumers have been shifting their business to specific concepts, rather than all-in-one destinations like McDonald’s.
By offering these beverages at a new brand like CosMc’s, McDonald’s could theoretically charge more for the drinks and build a restaurant around the idea.
Yet the comment from the owners’ association, and interviews with some operators, suggest the company could add the beverages to the menu right now with relatively little disruption. What’s more, some operators are concerned that CosMc’s will be a distraction. “Let’s focus on McDonald’s,” one operator said, according to Kalinowski.
And while McDonald’s wouldn’t be able to charge the same level as a CosMc’s, or even a Dutch Bros, it could theoretically portray itself as the “affordable beverage destination.”
Years ago, when new brands emerged with fancy new products, many of us would wonder if McDonald’s would simply add one of those new products to its menu, like frozen yogurt, and destroy that market.
If some franchisees had their way, the company would do that in this case.