OAK BROOK, Ill. -- McDonald's Corp., pursuing what it believes could be a billion-dollar annual sales builder, is nearing a decision on significantly expanding its U.S. beverage offerings, from specialty coffee and bottled sodas to smoothies and sweet tea, according to a Dow Jones report.
Enhanced beverage options are a big piece of McDonald's strategy to boost average annual domestic restaurant sales to $2.5 million. The average now is about $1.9 million.
But while incremental profits also are projected to be significantperhaps $ 50,000 [image-nocss] or more a yearthe venture is generating controversy, and some opposition, among McDonald's franchisee community, according to the report.
Its cost and payback are said to be contentious issues. Some operators say they believe a full-blown installation could cost perhaps $100,000 per restaurant, although the figure would vary according to equipment already on the premises. The additional beverage selections would be available both within the store and at its drive-thru windows.
Upgrading its coffee to a premium blend gave the fast-food giant's sales a nice jolt last year. Since then, McDonald's has been slowly augmenting its beverage offerings. Iced coffee is being served in more than 7,000 U.S. locations.
But what the company is calling its Combined Beverage Initiative goes beyond that. An internal document addressing frequently asked questions says the initiative would "help McDonald's become a credible destination for beverages by developing and implementing new profitable ... offerings that our customers want," the report states.
The document projects incremental sales of $100,000 per restaurant, which if all 13,700 U.S. restaurants were on board could add more than $1.3 billion.
McDonald's considers the opportunity so important it has a designated officer overseeing it. But it won't comment on how close it might be to a go/no-go verdict, saying that "no final decisions have been made."
As a business-preserving as well as business-building effort, the initiative "makes tremendous sense," John Sicher, editor and publisher of Beverage Digest, told Dow Jones.
Sicher cited a McDonald's franchisee who told him he was "getting tired of watching people buy a hamburger at his store and a Coke at a local convenience store because they might have wanted a resealable bottle."
McDonald's is being mum on the array of beverages it may stock but has hinted that it may include drinks from manufacturers other than Coca-Cola Co., its primary source of sodas.
Tests of the initiative are under way in Michigan and Texas. Results aren't expected to be reported to franchisees for several weeks.
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