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The launch of a new restaurant concept by McDonald’s (NYSE:MCD) is not anticipated to shake up the sector even though the Chicago-based company was one of the first major investors of the Chipotle Mexican Grill (CMG) chain back in 1998.
The new McDonald’s (MCD) CosMc’s opened last week in Bolingbrook, Illinois last week was the start of a national test that will include locations in the Dallas-Fort Worth and San Antonio regions next year. The name is a reference to the iconic McDonaldland mascot named CosMc, an alien character who appeared in ads for the fast-food giant in the late 1980s and early 1990s. The CosMc’s menu is highly focused on specialty beverage and snacks, although items also include a spicy queso sandwich, creamy avocado tomatillo sandwich, and the classic sausage McMuffin with egg. “This is a $100 billion category growing faster than the rest of the [informal eating-out segment] and with superior margins,” previewed McDonald’s CEO Chris Kempczinski on the test launch.
The apparent focus by CosMc’s on light snacking and taking the extra time to make specialty beverages could eventually pit it in competition with Starbucks (SBUX), Tim Hortons (QSR), Peet’s Coffee, Dutch Bros. (BROS), Krispy Kreme (DNUT), Panera, and Dunkin’ Donuts if the concept becomes a large chain. However, William Blair analyst Sharon Zakcfia noted there is only a relatively muted threat to those big players at the moment. What CosMc’s does give McDonald’s (MCD) is another growth wildcard in the mix as investors eye the world’s largest restaurant company. While the company was only an investor in Chipotle (CMG) from 1998-2006, the CosMc’s launch could be an organic sales driver if it blows up.
Shares of McDonald’s (MCD) rose 0.55% in afternoon trading on Tuesday and are up almost 9% over the last six weeks. Seeking Alpha analysts are mixed on McDonald’s (MCD), with a Buy rating, Hold rating, and Sell ratings all being doled out in the last week.