With the resurrection of McDonald's Corporation's (NYSE:MCD) same-store sales and Starbucks Corporation's (NASDAQ:SBUX) march to 40,000 stores, an ugly competition is shaping up. McDonald's has about 36,000 stores around the world, so some clash was probably inevitable between the world's largest fast food chain and the world's largest coffee shop operator.
As one expert in the food industry pointed out in the New York Times: "It's a good thing for Starbucks that coffee is a big part of the breakfast decision," said Tom Miner, a principal in Technomic, a food service industry research firm. "But most Americans spend no more than three minutes shopping for breakfast, which doesn't leave time for two stops."
The choice may come down to where you want to stop each AM. McDonald's has moved into high end coffee and Starbucks is selling McMuffin-like breakfast sandwiches.
McDonald's attributes much of its improvement is sales at stores open more than a year to premium coffee and breakfast food like its egg sandwiches. If it is going to fight to hold those gains, it cannot have those customers go around the corner to Starbucks.
What's it mean? In all probability, McDonald's will continue to improve its premium coffee selection. And Starbucks will offer more hot food for early eaters.
Then, it's two very large companies in a race to capture the same flag.
Douglas A. McIntyre is a partner at 24/7 Wall St.