Starbucks-style McCafés revive burger giant’s slumping sales
At the National Air and Space Museum near Washington’s Dulles airport, a barista is serving cappuccino with a double shot of espresso.
A display nearby stocks blueberry muffins, “luscious lemon squares” and bags of Guatemalan Antigua whole bean coffee. So far, so ordinary – for a coffee bar. Except this is a McCafé, one of only five experimental coffee outlets in the United States owned by McDonald’s, the fast food chain.
“ Yeah, people are surprised,” the barista says. “ They’re like, this is a McDonald’s?”
As strange as the idea of a Starbucksstyle coffee shop may seem for a company known for selling hamburgers and fries, the McCafé concept has being going since 1993, when it was introduced in Australia by Charlie Bell, former McDonald’s chief executive.
It has grown steadily across Asia and the Middle East, where there are 300 outlets; Latin America (more than 110) and Europe ( nearly 140); and has recently reached North America. The formula is simple: to serve “great speciality coffee in a relaxing setting at an affordable price,” according to McDonald’s.
McCafé interiors are starkly different from the often dowdy décor of a standard McDonald’s. At the outlet in the Air and Space Museum, spotlights shine from the ceiling on to designer tables with vases containing fresh carnations.
In Australia, McDonald’s has found that a restaurant with a McCafé attached — the typical formula — generates 15% more revenue than a standard outlet.
More broadly, however, the McCafé concept is part of a campaign to reposition McDonald’s to appeal to a broader set of consumers — including higherspending restaurant-goers than those traditionally associated with the chain’s cheap, core burger menu.
It is a key part of McDonald’s plan, launched two years ago, to reverse a decline in same-store sales. The chain had over-reached itself with relentless store openings. At the same time, sales suffered amid a consumer backlash over obesity and food safety.
Since 2003, McDonald’s has focused on promoting its core menu, introducing new items — often at a premium to the core menu — and sprucing up its existing restaurants.
The effort has paid off so far. In August, sales in stores open more than 13 months rose by 3.2% in the United States and 3.6% in Europe, with global operating income in the first half up 5% to about $ 1- billion.
Next year, the company will make $ 1.8billion in capital investments — $ 100- million more than this year — to open about 850 restaurants and “broaden our reimaging efforts internationally,” says Matthew Paull, chief financial officer.
Many restaurants, not necessarily ones with a McCafé attached, now feature soft overhead lights, designer sofas, WiFizones and flat- screen TVs.
By the end of this year, McDonald’s will have revamped about 4,500 of its restaurants since 2003 — or about 15% of the total. Next year, a further 2,000 around the world will receive the same treatment.
Ralph Alvarez, president of McDonald’s North America, says: “We also have to think like a retailer. We are broadening the definition of the space that we operate in. You don’t want to be in a commodity business. It’s about brand definition.”