Fast-Food Leader Ups the Ante

McDonald's opens first co-brand restaurant in a supermarket, tests McCafs

BURGETTSTOWN, Pa. -- Like any good business, the country's largest fast-food chain knows it must keep developing new ideas to remain ahead of the pack. And McDonald's Corp. is doing just that with its ongoing test of its McCaf a concept and a new co-branding deal in a supermarket.

Chicago-based IGA has joined forces with McDonald's and Laurel Grocery Co., London, Ky., to bring a co-branded supermarket/fast-food format to Petrucci's Market IGA in Burgettstown, Pa., according to a Progressive Grocer report.

As the first [image-nocss] co-branding endeavor of its kind for three company's, Petrucci's IGA is a full-service supermarket that includes within the building an independently owned, full-sized McDonald's restaurant, according to the report. The Petrucci family has owned and operated Burgettstown's sole supermarket since 1917.

When Jim and Tom Petrucci, grandsons of the original Petrucci's owner, lost their supermarket to flooding resulting from a tropical storm in 2004, they began to explore new concepts for rebuilding. The Petruccis began working with McDonald's to develop a co-branding effort that would bring Burgettstown its first fast-food restaurant in conjunction with a newly constructed Petrucci's Market. The Petruccis then sought and received license to join IGA with Laurel Grocery Co. distribution.

McDonald's Pittsburgh region development manager Patrick Hoffman said the fast-food giant has a history of co-branding with convenience store/gas station combinations, yet has not engaged in a co-branding effort with a full-service supermarket.

The Petruccis owned the only supermarket within 15 minutes of Burgettstown, Hoffman told Progressive Grocer. To make it work, we essentially morphed our oil- based co-branding initiative into one that would fit the Petruccis' Hometown Proud IGA supermarket model.

The perishables-driven Petruccis have tried to create an innovatively designed market that steered away from a traditional supermarket look. Their supermarket follows a Tuscan market style that features terracotta tile and hardwood in various areas throughout the store. To maximize linear feet, the Petruccis chose sleek black upright cases over traditional coffin cases and higher gondola shelving with 3-foot sections to enhance variety. The full-service McDonald's occupies the same building and is market accessible.

We know that we have a unique concept here, and we're glad that IGA, Laurel Grocery Co. and McDonald's agreed that it was one that could work, Jim Petrucci told the magazine. Knowing that you have that kind of support takes away the fear of being involved in a new concept

McDonald's owner/operator Ron Galiano agreed. This is just a win-win-win situation, he said. The town of Burgettstown really needed the convenience and service that both Petrucci's Market IGA and McDonald's provide. And Burgettstown is just the kind of warm, family-friendly community that makes it pleasant for McDonald's and the Petruccis to do business.

In the meantime, McDonald's is also continuing its test of a McCaf a format that puts coffee first.

The Oak Brook, Ill.-based company is testing the gourmet coffee format at its 46 restaurants in the Rochester, N.Y., region. Rochester is one of six national test markets for the gourmet coffee concept called McCaf a to be launched nationally if it proves successful, according to a report in the Rochester Democrat & Chronicle. Other test cities are Santa Barbara, Calif.; portions of Los Angeles; Grand Rapids and Kalamazoo, Mich.; and Greenville, N.C.

Coffee is one of the fastest-growing beverages in the industry, Rich Guon, owner of three area McDonald's franchises and president of a Rochester McDonald's cooperative, told the newspaper.

McCaf a offers coffee drinks in flavors such as vanilla latte or hazelnut latte for $2.29 for a small serving and iced mocha for $2.79. The coffees are fresh ground and harvested from Central and South America as well as Indonesia. McDonald's is seeking to compete with Starbucks and Dunkin Donuts, Guon told the newspaper.

They're trying to beat Starbucks at their game, said Warren Sackler, a restaurant consultant and associate professor at Rochester Institute of Technology.

McCaf as could attract busy families with children, with mom and dad drinking gourmet coffee while their children order Happy Meals, Sackler said. They will take a big hunk of the coffee market, he predicted.