More than 100 items crowd the menus at Dee and Christine Crawford's five McDonald's restaurants, ranging from familiar Egg McMuffins to newfangled fruit smoothies. The family franchisees recently added oatmeal and caramel-mocha [image-nocss] beverages. Next up for consideration: frozen strawberry lemonade.
In certain restaurants around the country, McDonald's Corp. is testing flatbread sandwiches and "garden" snack wraps--chicken and vegetables wrapped in a tortilla.
"Change is a part of our business, to keep up with customer demands, and there have been a lot of changes," Dee Crawford told the newspaper.
Though McDonald's is practically synonymous with burgers, the chain's appetite for change has helped make it the nation's best-performing restaurant company during the economic downturn. Since early 2003, the company has posted 30 straight quarters of same-store sales increases. During the worst trenches of recession, in mid-2008, global same-store sales at McDonald's rose by 6.1%.
An increasingly diverse menu, with some items priced at a dollar and others as high as almost $5, has lured more cost-conscious customers while preserving profit margins. That's a departure from the days when McDonald's largely catered to so-called heavy users--customers who queue up to eat fast-food several times in a week, according to the report. Today, many of those 18-34-year-olds, hit by the economic slump, can no longer afford to binge on Big Macs.
To help boost traffic, the company is keeping more restaurants open 24 hours, has spiffed up thousands of stores, created double-lane drive-thru and now offers free Wi-Fi in most locations. The new menu choices are so plentiful that the Oak Brook, Ill., company has been running ads to remind customers that it still sells Big Macs and Quarter Pounders.
But as the changes mount, some franchisees and analysts are cautious about the chain's ability to sustain growth.
The chain's peak lunch-hour business has been flat for five years, according to a company e-mail reviewed by The Wall Street Journal. A McDonald's spokeswoman declined to comment on the content of the memo, but said in an email response, "it's important to note that our entire business has continued to grow."
One reason for all the menu tweaks: the shifting landscape of fast-food and food purchased by consumers on the go. Just a decade ago, chains like McDonald's and Burger King were a natural choice for people wanting a quick bite. Today, with more types of chains serving more types of fare, the big franchises are chasing market share from competitors such as 7-Eleven, coffee shops like Starbucks, smoothie outlets like Jamba Juice, and even gas stations that carry prepared food.
As business evolves, the franchisees who operate about 90% of the company's 14,000 U.S. stores bear the brunt of upgrade and expansion costs. With multiplying new demands in the kitchen, operations are more complex than ever, threatening slower service and mistakes in orders.
Several franchisees interviewed for the Wall Street Journal story declined to comment. Some worry that their investments will never pay off, according to an October franchisee survey by Janney Montgomery Scott analyst Mark Kalinowski. One franchisee polled said new McCaf a coffee drinks are selling so poorly that, "we are not even paying for the electricity to run the machine."
"Our business is driven by keeping things simple and being able to deliver in a fast and efficient manner," said a McDonald's franchisee in the Southwest interviewed by the Journal. "So the more complexity you bring into the system, the more challenges you'll have."
The introduction of snack wraps, for example, represented such a change in food assembly that one Augusta franchisee sponsored a snack-wrap-making contest to give crew members extra practice. The winners received gift cards to retail stores.
With musts like a new $13,000 frozen-drinks machine, "the question always is, Is the next dollar worth the next amount of investment and hassle?' " said the Southwest franchisee. "In most cases, so far, yes it has been, but not in every single store."
Click here to read the complete Wall Street Journal story.
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