- The Washington Times - Monday, November 4, 2002


CHICAGO —Golden arches have been proliferating around the globe ever since a traveling salesman named Ray Kroc had a vision about the limitless potential of fast food nearly a half-century ago.
Taking over the revolutionary Speedee Service System from brothers Richard and Maurice McDonald, Mr. Kroc built a burger-and-fries empire on the premise there can never be too many McDonald's.
Or can there?
After spreading to 30,000 restaurants in 121 countries and more than tripling in size since Mr. Kroc died in 1984, the empire is showing widening cracks in its home nation, of all places.
Facing a crowded restaurant market, complaints about poor service and a depressed stock price, McDonald's Corp. has ordered up slower expansion and other measures as it tries to break an unprecedented slump. A planned overhaul of U.S. restaurants, its first big price-discounting campaign since 1997 and menu additions are part of the "reinvention" of the U.S. business.
Restaurant specialists doubt whether those actions or any other can fully restore the golden glow cast by the McDonald's arches in the past.
"It's an ideal-type brand that's in trouble," said Kevin Clancy, who heads the Copernicus marketing and research consultancy in Auburndale, Mass. "They haven't had a really successful new product or many marketing successes in more than a decade. The brand has been moving ever so slowly and quietly toward oblivion for years."
But it's not like the world's biggest restaurant company has become just another burger joint on its home turf.
McDonald's and its more than 13,300 U.S. outlets hold a whopping lead over Burger King and Wendy's with 43 percent of the quick-service hamburger market, according to data compiled by Technomic Inc. of Chicago. That's bigger than the next four chains' portions combined.
The Oak Brook, Ill., company has experimented lately to maintain that advantage over its fast-food foes, inventing new products, test diners and other restaurant concepts, and installing a made-to-order computerized cooking system.
But the innovations have produced mixed results and haven't prevented the hamburger business from becoming a slowly shrinking piece of the restaurant industry pie.
Americans increasingly are forsaking burger places for pizza chains, more upscale eateries and "fast-casual" dining everything from bakery cafes to burrito shacks to sandwich shops. A baby boomer-led clamor for healthier and more sophisticated food presents a tall order for the purveyor of Big Macs.
"The fundamental core of their market has changed," said industry consultant Jerry McVety, president of McVety & Associates in Farmington Hills, Mich. "There's more competition. Kids today have more money, and many of them don't necessarily feel that going to McDonald's is a cool thing to do."
Sales at established U.S. McDonald's restaurants have been stagnant for several years and slid 2.8 percent in the third quarter compared with the previous year as new units continued to cannibalize business, angering franchisees.
The deepened U.S. slump, following mad-cow-disease scares overseas that weakened profits in 2000-01, has put the company on pace for a second straight year of lower earnings. Its stock has lost about 70 percent of its value since Jack Greenberg became chairman and CEO in 1998, prompting calls for a management shake-up.
Loyal customer Dick Chase, like analysts, says the company has strayed a bit from its credo of good food and quick service. The suburban Chicago resident considers himself an authority on the subject, as both a longtime friend of Mr. Kroc's and someone who eats at McDonald's about 350 times a year.
"The food isn't bad. But I think there's too much on the menu now," said Mr. Chase, 74, president of the Illinois Festival Association. "It's confusing. And the service could be better."
He chuckles at the irony of Mr. Kroc's telling him years ago, "We're never going to have a complicated menu."
McDonald's list of restaurant brands is getting longer, too, with the acquisitions of Chipotle Mexican Grill, Donatos Pizza and Boston Market since 1998. In a telling shift of strategy, the company plans to open 140 Chipotles in the United States next year but just 100 McDonald's restaurants less than one-third of this year's total.
But it also has begun a multipronged attack to revive sales at traditional U.S. McDonald's, which it still regards as its best opportunity for growth.
Worried about faltering service, McDonald's started a yearlong self-assessment in February with a restaurant-grading program, an army of mystery shoppers and a toll-free telephone number for customer feedback.
It has put its marketing muscle behind a new $1 menu and is preparing to roll out the next batch of products, including premium salads, flatbread sandwiches and McGriddles, a breakfast specialty with sausage and syrup between two pancakes.
It also has begun remodeling, relocating or rebuilding more than 2,000 restaurants. While the financial payoff from the renovation project could take years, chief restaurant officer Jeff Stratton said a hoped-for early dividend from all the changes is "creating excitement again at McDonald's for the customer," ultimately boosting business.
Skeptics suggest the company is focusing on too many things at once in a bid to return to strong growth.
"Their most serious problem is the belief they can grow the business forever," said Atlanta marketing strategist Al Ries, who says McDonald's should cut back.
"No brand lasts forever. McDonald's is a brand built on hamburgers, and 282 million people can eat only so many hamburgers."

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