MCD'S PUTS NEW PRIORITY ON SPEED HIGH-TECH TEST RESTAURANT OFFERS CUSTOM ORDERS, MORE EFFICIENCY

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The future of McDonald's Corp. may be in Colorado Springs, Colo., a lush and hilly city of 350,000 that prospers in the shadow of Pike's Peak.

On the town's booming east side sits a high-tech McDonald's with five drive-through windows. Employees use computer touch-screens to zap orders to the kitchen. Beverage dispensers drop a cup, fill it with ice and soda, and whisk the drink down a conveyor to a checkout counter. And the custom-assembled food-extra mayo, please, and hold the onions-is guaranteed to arrive within 3.5 minutes, or the meal is free.

The whole process typically takes 2.1 minutes-at least 30% speedier than the typical McDonald's, sources say-and waste is almost eliminated.

TEST STARTED IN AUGUST

Franchisee Steve Bigari, who refuses to be interviewed, quietly opened the test restaurant in August. It's now a franchisee destination, attracting curious McDonald's owners from around the country.

Even McDonald's USA President-CEO Edward Rensi reportedly is impressed. On his first visit, Mr. Rensi pitted the system against the clock by special-ordering 12 hamburgers. The system won.

Good test results are embraced these days at McDonald's headquarters, where the corporate catchphrase has become: Fix it fast.

Scrambling to reverse eight quarters of declining domestic sales and regain lost market share from Burger King Corp. and Wendy's International, McDonald's is pushing its most trusted franchisees and largest suppliers to remake the burger, improve the service and cut the costs of labor, ingredients and waste.

The stakes are high. Never before has the world's largest fast-food chain been forced to rattle procedures and operations from top to bottom. The price tag on revamping McDonald's 12,000 U.S. kitchens to work like Mr. Bigari's alone would be a staggering $1.2 billion, estimated Dick Adams, a former franchisee and executive director of a group of dissident McDonald's owners.

But the long-term payoff could be just as weighty. Saving precious seconds could be worth hundreds of millions of dollars annually in both sales and bottom-line growth. And offering U.S. consumers fresher, tastier food could finally give the chain an edge over competitors that many observers believe sell a better product.

LOOKING FOR NEW CUSTOMERS

As McDonald's U.S. Chairman Jack Greenberg recently noted in a conference call with analysts: If each day, one new customer comes in every other hour, that's $15,000 in annual sales per restaurant-or roughly $150 million in new domestic sales.

Now, Mr. Bigari and franchisees throughout the country are testing technologies and management tools that could make the old McDonald's fast-food factory more closely resemble rival Wendy's, where custom orders are de rigueur. Only McDonald's wants to do it faster.

Among the technological innovations that could help the chain pull it off are computer systems that alert kitchen staff to imminent peak periods and robotic french-fry systems that fill fry baskets and even shake and dump the cooked fries.

NEWEST TACTICS

The latest strategy from headquarters-they change frequently, report those close to the workings of McDonald's-calls for installing new equipment, systems and procedures in the next 18 months at an undetermined number of restaurants.

It's an ambitious necessity. The domestic division accounts for more than 50% of McDonald's total systemwide sales, which last year hit $31.81 billion, but corporate earnings from the U.S. division fell 9.5% to $1.14 billion on revenues of $16.37 billion.

So far this year, the company claims, sales numbers look promising. Analysts, however, don't expect a huge recovery.

"They've got to do something major now to affect the speed and quality of food," said Joseph Buckley, a Bear Stearns & Co. analyst.

Indeed, consumers rank McDonald's last in taste preference, according to a national survey recently conducted by market researcher Leo J. Shapiro & Associates.

McDonald's appears to be listening. The company declines comment, but at a manufacturers symposium in February, a dozen McDonald's executives outlined goals of a program dubbed JIT, for "just in time."

At McDonald's, that means made-to-order sandwiches and devising a process that ultimately would get the goods to the diner in less than a minute.

MORE EFFICIENCY

The best way to achieve that, most suppliers and franchisees believe, is through a combination of cranking up cooking temperatures, reworking how a sandwich is "built" and installing new cooking and computer software.

McDonald's existing systems are hardly technological marvels. Restaurant managers predict the ebb and flow of customers and the volume-oriented procedures tend to shine only at peak periods.

Computerization is crucial to the new procedures. Upgraded software transmits order information immediately and accurately. Plus, computers predict ebb and flow more precisely than people can.

Analysts applaud the moves, but are wary.

"It's certainly a step in the right direction," said Janice Meyer of Donaldson Lufkin & Jenrette Securities Corp. "Whether it can close the gap on quality remains to be seen."

Ms. Waters is an associate editor for Crain's Chicago Business. Darlene Bucher in Colorado Springs contributed to this story.

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