McDonald’s (MCD): Being Open 24/7 Key To Sucess

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Try to get a Starbucks (NASDAQ: SBUX) at 3 AM. No such luck. But, according to data given to us by McDonald’s (NYSE: MCD), more than 30% of its 13,700 US stores are up 24 hours, seven days a week. Over 50% are open 24 hours at least one day a week.

The practice is not limited to the US. Last year, the number of McDonald’s open around the clock more than doubled in China and rose 27% in Australia.

The world’s largest fast-food chain attributes a great deal of its recent same-store sales growth to morning menus and premium coffee. For many customers, breakfast is not at 8 AM. A lot of people have to be up and out closer to 5 AM due to having jobs which start early or long commutes.

McDonald’s has learned something which would benefit many retail businesses. Being open 24 hours is not all that expensive, in most cases.

At a company like McDonald’s, the largest fixed costs are already in place. Those include real estate, the cost of food, kitchen equipment, and marketing. At a store which would close at 10 PM and open at 6 AM, it takes one more shift of three or four people to operate overnight. Assuming four people at $12 an hour, the total personnel cost is less than $400. Add some cost for the price of utilities and the cost of the food sold and the total expense is probably about $1,000.

Fifty people coming by for $20 meals and the cost of the extra eight hours is paid. McDonald’s in undoubtedly careful about only keeping high traffic stores working overnight, so the profits could be really substantial.

Aside from the money made during the overnight shift, the longer hours bring something that money can’t buy. Customers who get to pick-up something to eat at a McDonald’s in the middle of the night when nothing else is open are probably much more likely to come back during "regular" hours. Convenience can build brand loyalty and McDonald’s can’t put a price on that.

Douglas A. McIntyre