CosMc's may not be expanded by McDonald's, but the spinoff could still yield profits.

• McDonald's has opened four CosMc's locations since announcing the restaurant spinoff.
• The company unveiled a mobile app and loyalty program for CosMc's, aimed at streamlining service and enhancing customer insights.
• To compete with Starbucks and Dutch Bros, McDonald's launched a new brand aimed at attracting younger customers.

Six months have passed since the opening of the first CosMc's location, and while the hours-long drive-thru lines have decreased, the chain is still in its early stages.

McDonald's CEO Chris Kempczinski announced at an investor event in December that the company created a spinoff brand using CosMc, an alien who loves McDonald's cheeseburgers. The aim was to attract younger consumers by offering customizable drinks and coffee popular in the afternoon segment.

Beverages are now viewed as part of the snack area, making them more affordable, indulgent, and potentially healthier treats, according to Katie Belflower, an editor at restaurant research firm Technomic. This presents a good profit margin for restaurants, as they can be creative with beverage offerings without having to invest heavily in product lines like food.

McDonald's has opened three CosMc's restaurants in Texas, with plans to open 10 locations by the end of this year, all but one of which will be in Texas.

On Tuesday, the new brand will launch its mobile app and loyalty program, CosMc's Club. Customers can place orders through the app and pick them up either inside the restaurant or in the drive-thru lane. Loyalty program members earn 10 points for every dollar spent, and once they accumulate 400 points, they can redeem them for $2 rewards.

Even if CosMc's fails to make it past the 10-location test phase, McDonald's could still benefit from the app and loyalty program, which will provide additional consumer insight.

According to Mark Kalinowski, restaurant industry analyst and CEO of Kalinowski Equity Research, the cost of shutting down McDonald's for six months would still result in valuable learnings for the company, even though it would be a rounding error.

CosMc's buzz dies down

During the December investor presentation at McDonald's, Kempczinski minimized the immediate impact of CosMc's.

"He reiterated at the event, "We're discussing 10 stores." He clarified, "The main focus isn't on CosMc's specifically. It's about what it reveals about McDonald's and our prospects.""

For many consumers, CosMc's was the headline. When the first location opened days later in Illinois, eager customers waited for hours in drive-thru lines that dragged around the shopping center for the chance to buy McPops and Churro Frappes.

The average wait time at CosMc's drive-thru line was 11 minutes and 13 seconds, based on visits from mystery shoppers in January and February. However, the average service time after ordering was just four minutes and one second, falling six seconds short of the industry benchmark.

On a Monday afternoon in May, there was no line for this CNBC reporter to reach one of the four drive-thru intercoms to place an order.

As other parts of McDonald's business gain more attention, investor interest in the company has decreased.

Kalinowski stated that six months ago, there was a lot of curiosity, but now that McDonald's same-store sales have decelerated, his clients' focus is on this matter.

In the first quarter, McDonald's reported a 2.5% increase in U.S. same-store sales, which was slower than expected due to rising prices and decreasing restaurant spending by diners.

The CosMc's experience

The CosMc in Bolingbrook has an unassuming exterior, with four drive-thru lines for customers to place their orders. The indigo building does not display any signs of its namesake mascot.

Although CosMc is a significant character in the brand's mythical background as portrayed on the CosMc website, he is barely noticeable in the branding or restaurant.

"Belflower stated that he believes it is to CosMc's advantage that they are not as well-known as a character, as it allows people to understand their uniqueness compared to McDonald's. However, he also noted that their retro font, coloring, and other elements contribute to their nostalgic appeal."

McDonald's advertisements featuring CosMc aired in the '80's and '90's, which could explain why CosMc's absence is due to the fact that the chain's target customer likely wasn't born yet during that time.

Kalinowski, with over two decades of industry experience, remarked that the menu appears to be aimed at a younger audience.

McDonald's offers a variety of drinks and a limited snack selection, including Sour Cherry Energy Burst, Island Pick-Me-Up Punch, and Popping Pear Slush.

Tropical Spiceade drinks can be personalized with various "boosts," such as a vitamin C shot or an energy shot, tapioca pearls (boba), or a selection of eight different syrups. Additionally, the chain provides coffee drinks, including its Churro Cold Brew Frappe, which contains nearly five times the caffeine of an average cup of brewed coffee in its largest size.

CosMc's, Swig, and Refreshers are all beverage-focused restaurants that generate a significant portion of their sales from energy drinks and other beverages.

Consumers searching for an afternoon energy boost may prefer non-coffee drinks, such as CosMc's Blueberry Ginger Boost, over another cup of coffee.

At a traditional McDonald's, CosMc's level of customization would be challenging due to the potential slowdown of drive-thru lanes. Similarly, Starbucks has attributed its recent sales growth to the popularity of cold drinks and intricate customizations, such as cold foam, but both customers and baristas have expressed frustration over the slow service caused by complex orders.

One way to improve CosMc's service is to utilize its digital menu boards more effectively. Currently, the menu board displays ads until a car approaches the intercom, limiting customers' time to review the extensive menu of over 70 drinks and food items. Introducing mobile and online ordering options may also help reduce wait times.

Customers can pay for their orders at the speaker or wait to pay with a cashier at the pick-up window after finishing their order. CosMc's also has customers wait by the intercom where they ordered until their order is ready to pick up. The menu board indicates which pick-up window to drive up to grab the order.

The Bolingbrook CosMc's, a former Boston Market location, is a much larger version of McDonald's than the company intends for its other locations. Despite not offering any in-restaurant seating, customers can choose to sit in the 10-spot parking lot or keep driving. The location, which is a 45-minute drive from McDonald's Chicago headquarters and has a traditional McDonald's right next door, was chosen as the first spot for the spinoff due to the availability of empty real estate.

The acquisition of Boston Market by McDonald's in 2000 was intended for its real estate, but the company ended up keeping the brand operational.

McDonald's divested in the brand seven years ago, along with other secondary brands such as Chipotle Mexican Grill, as its sales were struggling and executives attributed some of its problems to a lack of focus.