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April 2, 2001

By Kate MacArthur

CHICAGO ( -- After investing more than $1 billion in its "Made For You" program to bring more variety to its menu,

McDonald's Corp. is now doing an about-face.

Simplicity is the new mantra for the world's largest fast-feeder, according to a five-year plan, "Blueprint to Double the U.S. Business," presented to the company's National Leadership Team on Jan. 19 and obtained by The company posted U.S. systemwide sales of $19.6 billion in 2000.

McDonald's three-phase plan organizes myriad initiatives to refocus and simplify its core business, expand restaurant concepts and create retail opportunities, all while improving customer service and satisfaction.

'Not a lot has stuck so far'
"They're trying to float a lot of things out there to see what sticks and then simplify it," said an agency executive familiar with the company. "Not a lot has stuck so far."

A spokeswoman declined to comment on the internal document, beyond saying, "We've obviously said there is a plan to double the business."

According to the plan, McDonald's will trim its 36-item core menu within the next 24 months, jettisoning items, sizes and packaging; the chain has a more complex array of meals than rivals Burger King Corp. and Wendy's International. Out will go such items as the 16-ounce McFlurry, a move that has already begun in some places on the West Coast. Menu variety will be channeled via the New Tastes Menu, a menu rotation program, and through specific food promotions.

New concept: McCafe
Other programs to increase sales over all "day parts" and "eating occasions" will likely come from new concepts such as test units "McDonald's with the Diner Inside" and "McCafe," according to executives familiar with the plan. Those executives said McDonald's may rule out testing a deli concept because of its high labor and food costs.

Much of the plan relies on technological improvements to increase top-line sales growth and profit with a less-is-more food-focused, marketing. Responsibility for menu and food marketing has recently been combined under Tom Ryan, senior vice president of U.S. marketing.

'Vision stores'
To help cut service times, which have increased despite the new kitchens, the blueprint team recommended testing three "vision stores" in three phases. In the next 24 months, the chain will split counter service so that one person handles orders and cash while another assembles the order.

Over the next five years, McDonald's will add coin changers and double drive-throughs, self-order kiosks, electronic menu boards and cashless drive-throughs. One constant appears to be value and promotional pricing.

Technology is driving the most dramatic marketing changes, too. The "customer opportunities" team led by Marlena Peleo-Lazar, McDonald's vice president for marketing in charge of advertising, appears to be finally checking into rehab from its promotion addiction. While the chain in 2000 relied on six self-liquidating promotions and five games to drive traffic into stores, this year it will use two promotions and two games. Next year it plans to use only one promotion.

"They're cutting back the layers of the programs," said another agency executive.

In their place, McDonald's is ramping up on a national consumer rewards program, predictably called McRewards, driven by a customer relationship management database. While it is unclear which of the company's agencies will manage the program, all will be expected to integrate the system in their efforts, said the agency executive.

Aimed at tracking customer behavior to improve customer frequency, the plan predicts McRewards will lift incremental sales from 10% to 30% over seven years.

With each visit, customers will gain points toward prizes from partners such as Walt Disney Co. and Mattel. McDonald's is considering using the program for boosting sales for after school and on weekends, front-loading new product promotions and for using the cards for crew incentives.

McDonald's is also looking to reduce promotional clutter in its stores. Store audits showed on-site promotional displays increased by 50% to 33 per store between 1997-1999.

Copyright April 2001, Crain Communications Inc.

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