In the past few years, McDonald’s has suffered from stagnant revenue streams, relatively low sales, and falling customer traffic in nearly all locations. In 2014, their comparable sales fell 2.1% and their comparable customer traffic fell 4.1%. This decline is partly due to its competitors’ focus on increasing their menus to attract the early morning demographic. McDonald’s, in response, is aggressively expanding their McCafe presence in as many stores as possible to try and bring back their morning customer base.
However, McDonald’s is playing at a disadvantage compared to Dunkin Donuts and other morning competitors; for years it has built its brand around fast food burgers, nuggets, fries, and sodas and is having an understandably rough time adjusting their image, especially in Asian markets. Their main response is to increase the number of McCafe coffee stations and establish McCafe standalone retail stores.
Though the exact figures have yet to be released, it is estimated that there is tremendous room for growth outside of North America. Japan and China will likely see the implementation of more McCafes as Japan is the third highest coffee consuming nation in the world (after the US and Germany).
Given that the average spend per visit to a McDonald’s corporate owned restaurant is roughly $3.84 and take the conservative estimate that beverages contribute roughly $0.90 on average to the total bill. Now, let’s assume that McDonald’s were to aggressively expand the quantity of McCafes globally and open a McCafe in 90% of all restaurants by the start of 2018. If roughly 80% of its customers order a coffee, the average check will reach $4.00 while the margins would increase since coffee is a relatively inexpensive item to produce.
Clearly, increasing the number of McCafe’s will not only help McDonald’s financially, but may also help it bring back some of its lost foot traffic.
-- Joshua Sakhai