McDonald's Eyes Lattes
McDonald's Eyes Ballooning Coffee Market, but Franchisees Not Happy
McDonald's Corp. wants its franchisees to expand coffee capabilities in offering lattes, mochas, cappucinos and espressos at about 50 cents less than Starbucks. It sees itself as becoming a formidable player who can eat into Starbucks coffee drinking market. But its franchisees may put a kibosh on its new latte initiative.
"There's a real groundswell of resistance among the franchisees about this," said Richard Adams, a consultant for McDonald's franchise owners. He estimated the effort has a 50-50 chance of getting off the ground because of franchise opposition.
Store owners are balking at the plan's estimated $100,000 price tag to cover renovations and initial new equipment. And many are concerned that little customer interest in McMochas means it will could take years to recoup their investment, even on the famously high-margin coffee drinks. (Excerpt from McDonald's Eyes Coffee Market, AP)
But McDonald's Corp insists individual store revenues will be lifted by $125,000 per year once the coffee, water and smoothies - yes, smoothies - are added.
- Franchise topic:
McDonald's coffee sales
Update:
According to June 2, 2008 Nation's Restaurant News, unannounced test markets conducted in Kansas City and in Michigan ran "far below" the $125,000 annual rate expected by McD's.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Richard Adams
Wasn't Rirchard Adams a Mc Franchisee - I though he had a website a couple of years ago, in which he made complaints about Mc. Who is he a consultant to?
Michael Webster PhD LLB
Franchise News
Smoothies
For over a year I have been extremely negative on any Smoothie franchise opportunity because of precisely this. It is just too easy for any big organization to plug in smoothies. They don't have to do a build out of a whole store and sign a one trick pony franchise agreement to sell smoothies.
If I am correctly reading the news, McD and Dunkin Doughnuts, with their new coffee emphasis, are already putting a dent into Starbucks. If they can do that to Starbucks, think of their impact on smoothie franchises. Others are also adding smoothies as regular menu options.
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
McDonalds Has Operated In The Gourmet Coffee Market For 20 Years
Don’t know what all the commotion is with the McDonalds franchise owners, or should I say their “consultant?” And how competent is the McDonalds franchisee consultant when he says there's only a 50-50 chance the owners will go along with the system improvement. Doesn't he know system improvements, especially in the McDonalds network, are not voluntary? You do it or lose your franchise. Sound's like the franchise owners need a new consultant.
Truth is, McDonalds has not only eyed, but operated in the gourmet coffee market segment for 20 years under its McCafe brand, something the article didn’t bother to mention. It kicked Starbucks' ass in Germany where McDonalds is the number one market leader in coffee shops. For all the details, go to the Franchise Foundations website, under Articles I . Scroll down the franchise history article until you get to McDonalds – McCafe. Not surprisingly, Mr. Franchise predicted McDonalds would bring its McCafe coffee concept to the U.S.
Smoothies and other plug ins
I think the difference is marketing and true specialization. Any chain can plug any menu item or category into their system but will not necessarily become a destination for those items. McDonalds will not necessarily become a destination due to coffee - there will be a lot of cannibalization - existing customers moving around the menu. Of course if the new item gives a higher per ticket average or has a higher margin this is still a very good thing but is not automatically at the expense of any competitor. There are pros and cons to a customer moving from a fountain drink to a coffee - it's a lot more hassle to serve. It's also possible to make a crappy cup of coffee, certainly more easily than screwing up a fountain drink. The latte styles need $100k equipment investment from Mc zees and the beverage is going to sell about 10% cheaper than S-Bux - hardly a guarantee of the latter's downfall.
Witness Subway's so called personal pizzas - not great at all - they could have rather done a pizzaiola sub - it's what they are good at. They would probably be equally bad at smoothies.
Almost every QSR chain could plug Chipotles items into their menu - this potential threat doesn't seem to be weighing on them.
I wouldn't necessarily be against a concept because someone else could do it, moreso if the category segment wasn't big enough to generate enough customer visits at a viable per ticket average.
Still Space for Specialists
Smoothies at Dunkin'
Dunkin' Donuts already does sell smoothies, and does well at it in the summer months.
Still a dedicated smoothies franchise will sell all year round. Dunkin isn't necessarilygetting the smoothie-driven trip, just up selling smoothies to people who might have bought something cheaper and were going to Dunkin already.
Po Kitty!
Every night a group of alley cats would sit on a fence in this alley and howl. One night a resident of an adjacent building, in a fit of peek, threw something at the cats on the fence and hit this particular tom cat, kocking him off the fence. On his way down from the top of the fence to the ground, he encountered a nail sticking out of a post and got snagged, emasculating himself.
Some kind soul took him to the SPCA where he waas fixed up and released. He eventually made his way back to his customary alley and was warmly greeted by his pals for his good fortune in getting treated and healed up and being able to return to the sceme.
One old pal said, "Well, Tom, whatcha gonna do now?" To which Tom responded, "I guess I'll just have to be a consultant from here on out."--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Tom Cat Consultant
You are killing me!!! Priceless.
Solomon
Wouldn't he be better career as an attorney and arrogant blogger for a hatchet-job website?