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23/10/02 . by David Teather in New York . Guardian . UK  
McDonald's loses its appetite  
McDonald's yesterday gave details of plans to sharply cut back on expansion next year and redirect cash into improving the restaurant chain's existing portfolio.  

The fast food group, which is struggling with falling profits, said it would open 600 new burger restaurants in 2003, a marked retrenchment for a group that peaked at 2,000 new openings in 1996.

The company indicated over the summer that it intends to slow expansion but gave no indication by how much. Investors who have argued that McDonald's focused too much on boosting earnings by opening new outlets applauded the move yesterday, marking shares in the company 9% higher. By the end of this year, McDonald's will have opened a further 1,300 restaurants.

The need for an overhaul at McDonald's was again underlined as the company reported its seventh earnings decline in eight quarters. It posted profits of $487m for the third quarter from $545m a year earlier.

"This year certainly has proven to be even more challenging than we had anticipated," said chief executive Jack Greenburg.

McDonald's is planning to spend as much as $400m on renovating existing restaurants. It is also near doubling its spend on other brands including Pret A Manger and Chipotle Mexican Grill, and will open a further 150-175 next year.

Amid intense competition, McDonald's launched its $1 menu in the US last month, following a move by the resurgent Wendy's. The company said sales in the US had responded well.

But investors have argued that more still needs to be done to address consumers' concerns about food quality and poor levels of customer service. Sales at McDonald's restaurants that have been open for at least a year in the US fell 2.8%. In Europe the decline was a more modest 1.3%.

The company has also made a series of missteps. A customised cooking system called "made for you" to improve the quality of food had the effect of lengthening queues and frustrating visitors.

McDonald's was forced to apologise to Asian customers for misleading statements that its fries are suitable for vegetarians and is being sued by one man who blames the chain for his obesity.  
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