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October 11, 2008 11:22:35 PM CDT

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Mickey D's Risks Big in Java War

Posted Feb 24, 08 5:58 AM CST in Business 

(Newser) – McDonald’s may have Egg McMuffin on its face if it can't out-grind Starbucks with a new line of premium coffees, the Chicago Tribune reports. The new coffee rollout, threatened by a shaky economy, marks one of the company’s riskiest launches ever, according to analysts. As food and labor costs rise, McDonald’s is asking franchises to invest up to $100,000 per store in java equipment.

The new “beverage cells” won’t offer Starbucks-level customization, but their coffees will cost 25% less—and tests show that required extra customer service time can be kept at 90 seconds or less. But one owner calls it a "crap shoot." With Starbucks stock already dropping nearly 50% over the last year, an analyst warned that "high-priced coffee might be seen as more of a luxury item and may be more of a difficult sell in an economic downturn."

Source Chicago Tribune

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Adding fancy coffees and other specialty drinks is a bold move intended to make McDonald's a beverage destination and a rival to Starbucks and other coffee chains. It's a key strategy aimed at luring...   (Getty Images)
A McDonald's Corp. restaurant near the Space Needle in Seattle advertises iced coffee. McDonald's plans to perk up its beverage and breakfast offerings with upscale coffee drinks, chicken biscuit sandwiches...   (Associated Press)
A cup of McDonald's specialty coffee is seen in front of a McDonald's restaurant in Kansas City, Mo.. Since it launched its so-called premium coffee about 18 months ago, followed by limited tests of...   (Associated Press)
Adding fancy coffees and other specialty drinks is a bold move intended to make McDonald's a beverage destination and a rival to Starbucks and other coffee chains. It's a key strategy aimed at luring...   (Getty Images)
Like McDonald's, many other restaurant companies are also feeling pain from a slowing economy. Starbucks has seen its stock sink by almost 50 percent over the past year, at least partly because of a slowdown...   (Associated Press)
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Chicago  • Starbucks  • coffee  • McDonald's  • franchise  • same-store sales  • Big Mac


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