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05/09/02 . By Shirley Leung, Staff Reporter of The Wall Street Journal . Yahoo! News . U.S.A.
McDonald's U.S. Franchisees Mull Discount Menu, Extensive Store Remodeling
CHICAGO -- In the latest effort to revive U.S. sales, McDonald's U.S. franchisees are considering a national discount menu and an extensive remodeling of older stores.
McDonald's Corp. executives are asking franchisees to consider launching a menu in which 10 items would sell for under $1. Currently, parts of the U.S. market already offer such a program. Wendy's International Inc. (WEN) also offers a 99-cent menu that which Wall Street analysts have credited with helping to build sales.
McDonald's franchisees are also considering a proposal by executives at the fast-food giant to remodel every store that's more than 15 years old, according to people familiar with the matter.
McDonald's executives are asking that these older stores be either rebuilt or relocated. It's unclear how much financial support franchisees would get from the company.
McDonald's U.S. sales have been in a slump over the past two years, tallying flat to negative sales at stores open for more than a year. The Oak Brook, Ill., company has tried everything from improving kitchen operations to expanding its menu to launching a massive mystery-shopping program to improve service.
Meanwhile, Wendy's, the nation's No. 3 burger chain, is gaining momentum with brisk sales of a new salad line, and Burger King, the nation's No. 2 burger chain, is waking up with a new management team and owner.
McDonald's executives are looking at decor given the gains in France, where 50% of the stores have been extensively remodeled or upgraded. Same-store sales gains at these upgraded stores have ranged from 3% to 20%.
Some U.S. franchisees laud an upgrading of restaurants, while others are less confident it will be the solution to McDonald's problems. Franchisees are meeting with McDonald's executives this week in Las Vegas in what seems a desperate, last-ditch attempt to turn around U.S. sales, which make up half of global sales. The meeting continues Thursday, and franchisees still need to vote on any initiatives.
Walt Riker, a McDonald's spokesman, said the Las Vegas meeting is focused on customers and cautioned against jumping to any conclusions about the extent and cost of remodeling of U.S. stores.
"The comprehensive U.S. business plan with its key focus on value for the customer also includes a case-by-case restaurant review process that can best determine what reinvestments could be made to enhance the overall customer experience at a specific restaurant," he said. "Any potential corporate assistance, whether it is upgrading service, signage, technology, decor or anything else, will be made on this case-by-case basis."
Mr. Riker said it is too early to tell how much any of this would cost. " Therefore, it would be absolutely wrong to speculate about or invent a specific reinvestment number, particularly in light of some of the over-the-top guesswork we've seen."
Shares of McDonald's fell 27 cents to $21.97