McDonald’s Franchisees ‘Underwhelmed’ by the McPlant Made With Beyond Meat

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Beyond Meat’s

emblematic restaurant partnerships may not be as robust as expected, some analysts say.

Beyond Meat (ticker:

BYND

) has forged several headline-grabbing partnerships over the last few years in a bid to expand its restaurant presence, including with fast-food giants

McDonald’s

(

MCD

) and KFC parent company

Yum! Brands

(

YUM

).

These partnerships have been gaining traction over the past few months. McDonald’s announced it was expanding a pilot of the McPlant, its plant-based burger, to 600 stores in the U.S. in January. The same month, KFC said its plant-based fried chicken product, the Beyond Fried Chicken, would be available across several U.S. locations.

The initial response to the launches was generally positive. In January, Piper Sandler analyst Michael Lavery said he was expecting strong demand for the McPlant, given the product’s enthusiastic reception throughout a small-scale trial in eight restaurants in Texas, Iowa, Louisiana, and California.

But weeks after the product’s launch, that tune may be changing, analysts warned. A team of BTIG analysts, led by Peter Saleh, conducted channel checks at different franchises participating in the McPlant rollout, and found that “franchisee sentiment on the sales performance was underwhelming.”

According to BTIG’s analysis, the restaurants in San Francisco and the Dallas/Forth Worth area were selling about 20 McPlant sandwiches per day, while rural locations in East Texas were selling about three to five sandwiches per day. These figures were below the roughly 70 daily sandwiches locations in the small-scale trial were selling, and below the 40 to 60 sandwiches franchisees were expecting, Saleh said.

“Their assessment was that they don’t see enough evidence to support a national rollout in the near future and that lower sales volumes were slowing down service times, as the product was being cooked to order,” he wrote.

Even if the McPlant doesn’t roll out nationally this year, Saleh doesn’t think it’ll affect Beyond Meat’s stock all that much.

“I don’t think there was the expectation that McDonald’s was going to roll out McPlant this year,” he said, adding that the rollout wasn’t factored into the current price. Moreover, U.S. restaurant sales comprise less than 20% of Beyond Meat’s revenue, with nearly 70% coming in from international and domestic retail sales last year.

Saleh believes McDonald’s may continue to test and offer McPlant in higher-income, urban markets that may be more receptive to plant-based meat offerings. Both companies may continue to tweak the product and marketing messaging behind it, he added. Some of the biggest complaints from franchisees include that the price point was too high or that the McPlant patty looked “perfectly round,” and manufactured, Saleh said.

The analyst conducted similar tests for the KFC Beyond Chicken a few weeks after its launch and found mixed results, with the product comprising about 3.2% of sales in its second week. Some markets, like Atlanta, were performing 2 times higher than the national average, he added.

Representatives for Beyond Meat, McDonald’s, and Yum! Brands didn’t immediately respond to requests for comment.

Shares of Beyond Meat were down about 2% on Thursday. The stock rose Wednesday after the company announced it was launching Beyond Meat Jerky, the first product from its joint venture with PepsiCo. The stock has lost 25% this year.

Write to Sabrina Escobar at sabrina.escobar@barrons.com