3 days ago
McDonald's To Close All Spinoff Branches It Launched Across US
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McDonald's will be closing the remaining branches of its beverage-focused spinoff, CosMc's next month.
The company announced the decision last Friday, less than two years after CosMc's was launched. As a result, McDonald's will be closing CosMc's locations on a "rolling basis" and discontinuing the loyalty reward app.
Why It Matters
While the five stand-alone locations will begin closing next month, McDonald's said that it will incorporate the insights gained from the 18-month CosMc's experiment—described as a "launchpad for learning" for the entire Golden Arches brand. As a result, it said certain flavors inspired by CosMc's will be making their way onto the main menu at "hundreds" of U.S. restaurants.
What To Know
McDonald's launched the first CosMc's in December 2023, before rolling out further locations in a "10-store test." The initiative was viewed as a way for McDonald's to capture some market share from competitors such as Starbucks and Dunkin'.
On Friday, McDonalds said that CosMc's began with the belief that the company "had the right to win in the fast-growing beverage space" and would allow it to "test new, bold flavors and different technologies and processes—without impacting the existing McDonald's experience for customers and crew."
It added that "CosMc's-inspired beverages" will be arriving at McDonald's locations in the U.S. as art of the company's upcoming "beverage test."
Customers place their orders at CosMc's on December 11, 2023 in Bolingbrook, Illinois.
Customers place their orders at CosMc's on December 11, 2023 in Bolingbrook, its first-quarter earnings call in early May, CEO Chris Kempczinski said that the company would be incorporating "new menu items inspired by CosMc's" at existing McDonald's locations.
Kempczinski did not specify which items would make their way onto the McDonald's menu, but Fortune identified the most popular CosMc's drinks as the Sour Cherry Energy Burst, Churro Cold Brew Frappe, and Island Pick Me Up Punch.
During the call, Kempczinski noted that the CosMc's "test" provided valuable insights for the company, including the discovery that McDonald's customers prefer ordering food alongside their beverages, rather than having the latter as a stand-alone order.
"Food is still going to always be an important part of whatever our beverage offering is because that's consumers' expectation for the McDonald's brand," he said.
The decision to shutter the alien-themed spinoff also follows a weak quarter for the company. In early May, McDonald's announced that same-store sales had fallen by 3.6 percent in the U.S., the largest decline since 2020.
What People Are Saying
McDonald's in a statement on Friday, said: "By creating a Learning Lab—in a way that only McDonald's can—the CosMc's team was able to test-and-learn in real customer-facing environments, which allowed for greater agility and speed. Quick adds and edits to the menu based on feedback led to more focused choices for our fans as the test continued.
"We've learned so much, so quickly from the CosMc's test. As part of this next testing phase, starting in late June, we will be closing all stand-alone pilot CosMc's locations on a rolling basis and discontinuing the CosMc's app."
McDonald's CEO Chris Kempczinski, during the company's Q1 earnings call, said: "Increasingly, we're competing against specialists, and so we're bringing a specialist focused into McDonald's. In beverages, for example, we've discovered some interesting learnings through our CosMc's test, which has better informed our understanding of consumers' customization preferences and interests in new emerging beverage categories.
"Later this year, in partnership with our franchisees, we'll be launching a beverage test in the U.S. in some of our existing McDonald's restaurants that will incorporate new menu items inspired by CosMc's."
What Happens Next?
The company announced that the remaining five CosMc's locations—one in Illinois and four in Texas—will shut down by the end of June, along with the discontinuation of their stand-alone app and loyalty program.
