McDonald’s and Starbucks' results show it’s hard to sell Egg McMuffins and lattes when people work from home

July 29, 2020 12:14 am

McDonald’s and Starbucks reported the first full quarter of results that came during the coronavirus pandemic, confirming that when people don’t travel to work as often, they don’t stop at restaurants, either.

The breakfast rush has essentially been eliminated. Both chains noted that business during the morning when commuters used to stop by has diminished, and new dining patterns later in the day are cropping up. McDonald’s and Starbucks are seeing larger order sizes as families dine together at home. Starbucks executives pointed to two newly busy times, at around 9:30 a.m. and again at 2 p.m.

At Starbucks, U.S. same-store sales fell 40 percent, with the number of transactions down 52 percent and the average order size up 25 percent. The decline was not as severe at McDonald’s, where U.S. same-store sales fell 8.7 percent during the quarter and moved into positive territory in July.

McDonald’s CEO Chris Kempczinski admitted the Golden Arches saw competitive activity in breakfast, where it had lost some of its focus even prior to COVID-19 as the chain was paying more attention to initiatives such as its “hot off the grill” Quarter Pounder patties. Still, McDonald’s is gaining share during breakfast, he said. 

The disruption to the weekday morning routine is “a headwind we are focused on across the U.S.,” Starbucks CEO Kevin Johnson said on his company’s conference call.

Now, the two leading U.S. restaurant chains are figuring out what they need to do to boost sales at longstanding locations. McDonald’s will amp up its marketing spending, as it had announced back in May, adding $200 million to spend in the second half of 2020 in the U.S. and certain big international markets. The plan means that McDonald’s has a “sizable marketing war chest” to invest, and some of that will go toward breakfast, Kempczinski said.

The chains are relying on drive-thru and delivery for more of their business. McDonald’s announced last week that it would further delay the reopening of dining rooms. And Starbucks plans to have curbside pickup available at 1,000 of its U.S. locations in the coming months after seeing success with the concept at a smaller number of shops. And it is starting to use handheld devices to speed up the ordering process in those long drive-thru lines, a move already used at chains such as In-N-Out.

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