MCDONALD'S WALL STREET SPIN CONTROL

Following Bad News, Analysts Told of New Menus, Restaurant Concepts

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CHICAGO (AdAge.com) -- A day after lowering Wall Street's financial expectations, McDonald's Corp. on Tuesday presented to analysts a wide array of initiatives to convince investors that it was still a growth company.

To that end, in the second day of its biennial meeting with Wall Street representatives, the fast-food giant trotted out a strategy that highlighted menu choices at its Golden Arches eateries and new restaurant concepts to try to show a silver lining in an otherwise gloomy outlook.

Among the menu initiatives executives touted were McPick Value Meals, which allow customers to build their meals from a set of entrees and side dishes. Mickey D's also will add beef and chicken sandwiches to its New Tastes Menu rotation, as it continues to look for ways to keep pace with trendy deli and gourmet sandwich chains.

Diner-style concept
Executives then

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trumpeted the success of its "McDonald's with a Diner Inside" test, telling analysts the company is expanding on the Kokomo, Ind.-based concept with a dozen retrofitted McDonald's units in the Midwest.

McDonald's U.S. Chief Marketing Officer Tom Ryan said the 1950's-style dual-concept unit is "on track" to grow annual sales to $2.3 million, nearly double its current $1.4 million. Average sales for a McDonald's unit is $1.6 million -- and sales have been flat so far this year. More important to company executives, Mr. Ryan said, the unit hasn't cannibalized sales of nearby McDonald's, a fear among franchisees.

Other Mcconcepts the company has been testing have showed mixed results. Its much ballyhooed McCafe, which features gourmet espresso drinks and European-style pastries, has been a disappointment.

"They can't compete with Starbucks," said one insider about the Chicago test.

Success with snacks and sweets
The company has had more success with its McTreat Spot dessert kiosks in the South and McSnack Spot test in Houston that feature popcorn, pretzels and other finger foods. McDonald's plans to open 25 dessert and snack units next year.

Of the restaurants in its "partner brands" portfolio, McDonald's said it will aggressively expand the Chipotle gourmet burrito chain in 2002, with 70 new units; will continue to tweak its Donato's pizzerias and Pret a Manger sandwich restaurants; and stay with its Boston Market turnaround effort with a new sandwich test. McDonald's also said it plans to jettison its stake in U.K.-based Aroma Cafe following a lukewarm response similar to that for its McCafe's.

No games planned
One area McDonald's won't gamble on is the games business. The company is now embroiled in no less than two dozen lawsuits after a massive scandal surrounding its promotional games.

Both McDonald's and its former games partner, Simon Marketing, have each filed lawsuits against each other to recoup their losses and put liability on the other for damages.

As McDonald's tries to recover from the scandal, it's trying to determine what, if any, game architectures it will pursue. Executives knowledgable about McDonald's 2002 calendar say no future games are slated so far.

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