Comparing McDonald’s and Starbucks’s Revenue Growth Prospects

For the next four quarters, analysts expect McDonald’s (MCD) to post revenue of $21.1 billion, which represents a rise of 1.3% from $20.8 billion in the corresponding four quarters of the previous year. The opening of new restaurants and positive SSSG (same-store sales growth) are likely to drive the company’s revenue during the period. However, the refranchising of company-owned restaurants could offset some of the increase in its revenue.

McDonald’s is focusing on expanding the implementation of its EOTF (Experience of the Future) initiative to enhance customer convenience through delivery and digital initiatives and menu innovations to drive its SSSG. By the end of the last quarter, McDonald’s had converted 8,000 restaurants in the US to EOTF locations with 400 of these restaurants in the previous quarter. The company’s management expects to upgrade 2,000 restaurants to EOTF this year.

McDonald’s had delivery service in over 20,000 restaurants across 75 countries at the end of the last quarter. McDonald’s delivery sales were more than $3 billion, which includes sales from both franchised and company-owned restaurants. The success has prompted the company’s management to expand its delivery service to other restaurants also. McDonald’s acquisition of Dynamic Yield in March is likely to aid the company in providing more personalized offerings for its customers.

Analysts expect Starbucks (SBUX) to post revenue of $27.2 billion in the next four quarters, which represents a rise of 6.4% from $25.6 billion in the corresponding four quarters of the previous year. The opening of new company-owned and franchised restaurants and positive SSSG (same-store sales growth) are likely to drive the company. However, its streamlining initiatives are expected to offset some of the increase in its revenue.

Starbucks has been enhancing its in-store experience, expanding its delivery service and beverage innovations, and growing its digital relationships to drive its SSSG. The company is planning to have nitro cold brew beverages in all its company-operated restaurants in the United States by the end of this year.

Starbucks has introduced delivery service in seven major markets across the United States, covering ~1,600 restaurants, by partnering with Uber Eats. The company also plans to expand delivery service to 3,000 restaurants in China by the end of this year compared to 2,100 restaurants at the end of last year. All these initiatives, along with the opening of new Starbucks Reserve Roasteries and growth in Starbucks Rewards membership are expected to drive the company’s sales.