MCDONALD'S ON VERGE OF STARTING BURGER WAR.Byline: Deborah Adamson Daily News Staff Writer McDonald's plans to take a big bite Big Bite was an Australian sketch comedy broadcast on the Seven Network in an evening timeslot. The show starred Chris Lilley of We Can Be Heroes and Andrew O'Keefe, who would go on to fame as host of the Seven Network's Deal or No Deal, Dragons' Den, The Rich List out of the Big Mac's price. If the majority of the company's franchisees approve the new promotion today, prices of Big Macs and several other sandwiches could drop to 55 cents each for anyone who buys any size fries and a drink, too. That could spark a price war among fast-food chains, reminiscent of the feeding frenzy feed·ing frenzy n. 1. A period of intense or excited feeding, as by sharks. 2. Excited activity by a group, especially around a focal point: caused by Taco Bell's introduction of its low-pricing menu in the late 1980s. ``If this is the first shot in the burger war, it's going to be one heck of a war,'' said David Leibowitz, managing director and retail analyst for Burnham Securities in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Officials at McDonald's Corp. in Oakbrook, Ill., wouldn't comment Wednesday on reports of the price cut. But in a prepared statement, the fast-food giant said it ``is on the threshold of an unprecedented value offering that will be good news for our customers, our franchisees and our business . . . but bad news for the competition.'' Local McDonald's franchisees also won't talk about the new strategy, but one owner who did not want to be identified confirmed that the world's largest restaurant chain wants to cut prices to 55 cents. Dick Adams Dick Adams can refer to:
tr.v. dubbed, dub·bing, dubs 1. To tap lightly on the shoulder by way of conferring knighthood. 2. To honor with a new title or description. 3. ``Campaign 55.'' If OK'd, customers could get a featured sandwich for 55 cents if they buy any size fries and a drink. The featured sandwich will be rotated. Adams, a former franchisee and McDonald's executive, predicted that franchisees will ``grudgingly'' approve the promotion since it is the parent company's only proposal to increase sales. But they are likely to take a loss on the 55-cent sandwiches, he said. Every sandwich costs more than 55 cents in materials, packaging and franchise fees, Adams said, and that's before figuring in the cost of labor, utilities and other store expenses. Although fries and drinks have higher profit margins that will offset the loss leader, a high sales volume is critical. ``They're going to have to move a lot of product,'' Adams said. Locally, Big Macs cost about $2.09 plus tax. Fries start at 89 cents while a drink costs 99 cents and up. A Big Mac Value Meal of a Big Mac, large fries and medium drink costs about $3.74. If the promotion takes effect, it will cost around $2.50 for a Big Mac, small fries and small drink. Wall Street reacted to the news of McDonald's strategy by pushing the stock down 2-3/8 to 44-7/8. Other fast-food stocks suffered as well in anticipation of a coming price war: Wendy's International Wendy's International, Inc. NYSE: WEN is the parent company of Wendy's Old Fashioned Hamburgers. It also owns 70 percent of Cafe Express and 25 percent (fully diluted) of Pasta Pomodoro. The Tim Hortons chain was spun off by Wendy's into a separate company in September 2006. slipped 1-1/2 to 20-3/4; the stock of CKE CKE Clock Enable (memory signal) CKE Carl Karcher Enterprises, Inc. (restaurant chain) CKE Certified Kitchen Design Educator CKE Catia Knowledge Engineering CKE Content and Knowledge Engineering Restaurants Inc., parent of Carl's Jr., dropped 4-3/8 to 19-7/8; and Foodmaker Inc., parent of Jack-in-the-Box, dipped 1-7/8 to 9-3/4. McDonald's discounting strategy comes from a need to increase same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. , Leibowitz said. Same-store sales, considered a better gauge of company performance than overall sales, are revenues at stores open at least a year. New stores tend to have higher sales and thus skew (1) The misalignment of a document or punch card in the feed tray or hopper that prohibits it from being scanned or read properly. (2) In facsimile, the difference in rectangularity between the received and transmitted page. overall results. While many public restaurant and retail companies report same-store sales, McDonald's doesn't. Yet analysts believe that same-store sales have slipped for the fast-food giant in the past few quarters. That's due to the aggressive U.S. expansion effort McDonald's mounted last year, Adams said, adding 726 new locations in 1996. Adams said the new stores ended up cannibalizing other stores' sales. ``Campaign 55'' will be McDonald's second attempt to increase sales. The first, its Arch Deluxe The Arch Deluxe was a hamburger created and marketed by McDonald's with the intent of capturing the adult fast food consumer market, presented as a more sophisticated burger for an adult palate. It failed to catch on and is seen as one of the most expensive flops of all time. sandwiches, ``has not been as big a winner as many industry observers had hoped,'' Leibowitz said. CAPTION(S): chart CHART: MCDONALD`S PROMOTIONAL PRICING |
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