Return
to Story Page
To print: Select File and then Print from your
browser's menu
Kathy Fieweger
Oak Brook, Oct 6: In the midst of global economic turmoil, the appetite for fast food remains robust, said McDonald's Corp chief executive Jack Greenberg. Greenberg, who was recently handed the reins at the world's largest fast food restaurant chain, told Reuters in an interview that both US and global business is better than expected for the company.
"Our US business is doing a whole lot better and is a lot more robust than people realise," Greenberg said. "Our US owner/operators have a significant increase in cash flow, year-to-date.
"Worldwide, I think things are better than people realise, because there's so much negative press. People are so worried about economies around the world and I think that's a legitimate concern, but I think we're doing a good deal better than one might expect given the economic turmoil."
Greenberg said Japan is a case in point.
Japan is one of McDonald's largest markets, with some 2,400 restaurants. "Our sales are up and we're doing quite well," he said, citingaggressive pricing, changes in strategy and the opening of many new restaurants as real estate prices dip.
"I don't mean to imply that the economic problems in southeast Asia don't have an impact -- they really do -- but it's a much smaller impact than people might realise."
Greenberg, who had been chief executive of McDonald's USA before taking his present post, is staying very involved with the 12,000-plus US McDonald's restaurants and disputes the idea that the US market is mature or stagnant.
Roughly half of the company's operating income comes from overseas. At June 30, there were more than 23,000 stores worldwide.
"Most people don't get it -- that the US business is going to continue to grow," Greenberg said. "A lot of people had written off the US business a year or two ago. The earnings report will speak for itself."
Analysts peg McDonald's third quarter earnings at 68 to 71 cents per share, according to First Call. Greenberg declined to be specific but reiterated that he was comfortablewith the range. Earnings will be reported in a few weeks.
Year-ago third quarter earnings were $448.9 million or 63 cents per share on systemwide sales of $8.80 billion.
Greenberg cited innovation as one of the key ways to keep McDonald's dominant in the fast food industry, despite the fact that some critics point to little change in recent years.
The company's current test market products include a Big Extra tomato and lettuce-based hamburger, the Big Bacon Cheeseburger and bagel breakfast sandwiches. While all show potential so far, none is yet ready for national roll-out.
One of the key strategies McDonald's has adopted is a new food production system called "Made for You."
Now operational in more than 1,000 restaurants in the US and over 500 in Canada, it is the centrepiece of a long-term innovation strategy that will allow restaurants to more easily offer different types of food. The system has met with some resistance among nervous franchisees over cost, although Greenberg maintains it hasbeen well received overall.
"Overall, I think there's acceptance. When you get to the reality of having to write a check and figure out what you need to do, I think it takes longer and it's a little bit more complicated than we would like to admit, but I think it's going very, very well," he said.
Greenberg also dismisses notions that some of its international markets are mature.
"We don't believe that at all," he said. Of the roughly 2,100 restaurants being opened this year, 85 per cent are outside the US and most of those are in the top 10 markets, Greenberg said. Europe will show almost the same level of profitability next year as the United States, he said.
"How deeply you can penetrate a marketplace is really a function of how low you can keep your prices," he said.
For the long term, McDonald's is setting its sights on changing the fast food experience overall and building on the brand name recognition it enjoys around the world.
"We keep talking about it," Greenberg said. "Long run, we'dlike to reinvent the category that we compete in. If somehow over the next several years we could change what you experience in a McDonald's to be much better and different than what your current expectation is, it would give us a tremendous leverage point. It does involve some menu variety."
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------