McDonald’s testing new CosMc’s chain amid unprecedented global expansion

by Ethan Kim
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global expansion

McDonald’s is venturing into new territory with the launch of its CosMc’s chain, a move aimed at boosting sales and competing with rivals like Starbucks and Dunkin’. The company revealed plans on Wednesday to inaugurate ten CosMc’s restaurants in the first half of the coming year. One will be strategically located near the company’s headquarters in Chicago, while the remaining nine will be situated in Texas. McDonald’s intends to carefully assess the performance of these establishments for at least a year before making any decisions regarding further expansion.

This announcement generated significant anticipation during McDonald’s day-long investor conference. In addition to this venture, the fast-food giant outlined its ambitious goal of opening nearly 10,000 new McDonald’s restaurants worldwide over the next four years, bringing the total count to a remarkable 50,000 establishments. This pace of growth is unparalleled even for the world’s largest burger chain.

The expansion strategy encompasses the addition of 900 new stores in the United States and 1,900 in international markets, including company-operated and franchised locations in countries such as Canada, Germany, the United Kingdom, and Australia. McDonald’s also plans to collaborate with licensees to open an additional 7,000 stores in international markets, with a significant portion of these establishments slated for China.

However, McDonald’s expansion is not solely physical; it is also an opportunity to diversify its menu and service hours to compete with rapidly growing chains like Starbucks. The introduction of CosMc’s, named after a space alien character introduced by McDonald’s in the 1980s, will offer a range of innovative drinks such as a churro frappe, pear-flavored slush, and turmeric latte, which are too complex to integrate into existing McDonald’s locations. CosMc’s will also feature snacks like pretzel bites and Egg McMuffins.

McDonald’s President and CEO, Chris Kempczinski, explained that CosMc’s aims to address a sales decline observed during the mid-afternoon hours. He emphasized the substantial growth potential in this $100 billion category, which is outpacing other casual dining segments and offers superior profit margins. Kempczinski expressed confidence in McDonald’s ability to succeed in this space.

Furthermore, McDonald’s is testing innovative systems at its smaller CosMc’s outlets, including drive-thru lanes designed to manage traffic based on the complexity of orders. The company recognizes the significance of bringing restaurants closer to customers to meet the explosive demand for delivery services, which have grown from $1 billion to over $16 billion in global sales since 2017.

To facilitate delivery, new restaurants may include dedicated pickup areas for delivery drivers, but McDonald’s remains committed to maintaining physical restaurants to accommodate customers who prefer dining in with their families.

Despite concerns about potentially cannibalizing sales from existing McDonald’s locations, Kempczinski pointed out that population shifts in the United States have left many areas underserved. The company aims to secure prime real estate and prevent competitors from capitalizing on these locations.

Additionally, McDonald’s announced a strategic partnership with Google Cloud to modernize its operations. By moving restaurant computations to the cloud, the company anticipates faster menu recommendations on ordering kiosks and in the drive-thru lane, as well as improved staffing optimization based on demand.

This bold expansion and technology investment are underpinned by McDonald’s strong performance, with same-store sales rising nearly 9% worldwide in the third quarter, even as U.S. foot traffic experienced a slight dip.

McDonald’s remains committed to its core menu items, such as Quarter Pounders and fries, which account for 65% of systemwide sales. The company is set to introduce enhanced burgers with softer, freshly toasted buns, meltier cheese, and more Big Mac sauce in U.S. restaurants by the end of 2024, expanding to most other markets by the end of 2025.

Notably, McDonald’s is experiencing significant growth in its chicken sales, reaching $25 billion annually, on par with beef. It plans to introduce its McCrispy sandwich to nearly all global markets by 2025. Furthermore, McDonald’s sees substantial potential for growth in coffee sales, aiming to promote a consistent global coffee brand, McCafe, and streamline its equipment suppliers for improved consistency across its coffee offerings.

Frequently Asked Questions (FAQs) about global expansion

What is CosMc’s and why is McDonald’s launching it?

CosMc’s is a new chain of restaurants introduced by McDonald’s. The company is launching it to expand its menu offerings and service hours, catering to a different segment of customers and competing with fast-growing chains like Starbucks.

How many CosMc’s restaurants are planned, and where will they be located?

McDonald’s plans to open ten CosMc’s restaurants, with one near its Chicago headquarters and the remaining nine in Texas.

What is the goal of McDonald’s global expansion plans?

McDonald’s aims to open nearly 10,000 new restaurants worldwide over the next four years, bringing the total to 50,000 establishments. This aggressive expansion strategy is unprecedented for the company.

How does McDonald’s plan to adapt to the growth in delivery demand?

To meet the surging demand for delivery, McDonald’s plans to get restaurant locations closer to customers, enhance drive-thru systems, and create dedicated pickup areas for delivery drivers.

What innovative menu items can we expect from CosMc’s?

CosMc’s will offer a range of unique drinks, including a churro frappe, pear-flavored slush, and turmeric latte, alongside snacks like pretzel bites and Egg McMuffins.

How does the partnership with Google Cloud benefit McDonald’s?

The collaboration with Google Cloud will enable McDonald’s to streamline its operations, provide faster menu recommendations, and optimize staffing based on demand, improving overall customer experience.

What are McDonald’s core menu items, and how does the company plan to enhance them?

McDonald’s core menu items, such as Quarter Pounders and fries, make up 65% of its sales. The company plans to enhance these items by introducing softer buns, meltier cheese, and more Big Mac sauce.

What are the growth prospects for McDonald’s in terms of chicken sales and coffee offerings?

McDonald’s chicken sales have reached $25 billion annually, and the company plans to introduce its McCrispy sandwich to nearly all global markets by 2025. Additionally, McDonald’s sees significant potential for growth in coffee sales, focusing on promoting the McCafe brand globally.

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