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McDonald's Takes On Starbucks

Today's Wall Street Journal reports on McDonald's plans to add coffee bars to its 14,000 US restaurants by the end of this year (WSJ is not yet free, but the link should work for a few days). They will be similar but not quite the same as the McCafés in several hundred German McDonald's, including our restaurant in Dibbersen. It sounds like they will be putting the espresso machines behind the front counter instead of a separate shop-in-shop, in part to be able to serve all coffee products in drive-thru (German McCafé sells only in-store). It sounds like the investment will be $100,000 per store (total for 14,000 stores: $1.4 billion), but with an expected sales increase of $1 billion per year, it should pay off in a hurry.

Despite the headline, I don't think Starbucks has to worry. Customers wanting the full corporate coffee lounge experience will go out of their way and pay the higher prices. I also think it's interesting that US McDonald's is taking an innovation developed outside the US. Over half of McDonald's are outside the US, and with the US market fairly saturated, the exciting markets are also overseas.

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