Quality Vs. Quick Service: The Difference Between Starbucks And McDonald’s
Starbucks‘ (NYSE:SBUX) recently acknowledged that it is facing operating issues in handling the huge volume of orders generated by the success of its Mobile Order & Pay app. The average number of daily customers at a Starbucks store is less than a third of what McDonald’s handles every day and, despite this significant difference, Starbucks’ annual revenues are higher than McDonald’s.
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The reason for Starbucks’ higher revenues despite a lower volume of customers is that the average spend per customer visit at a Starbucks store is almost three times that of a customer at a McDonald’s restaurant.
Starbucks’ business model is aimed at high spending customers and, hence, its stores are geared for a lower daily volume, compared to McDonald’s quick service format. McDonald’s is working on a transformation and introducing more “gourmet” menu items, which should increase the average customer spend per visit. That said, its model is not comparable with Starbucks. Both companies acknowledge that a significant change in the model impacts their revenues. For instance McDonald’s serving fresh patties is an operating issue because it increases the time spent to serve a customer order, impacting its volumes and revenues negatively. Similarly, Starbucks faced a decline in comparable sales in its latest reported quarter, primarily because it could not manage the huge volume caused by the success of mobile order and pay.
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