OAK BROOK, Ill. – Just outside its wooded headquarters campus, McDonald's Corp. (MCD) is offering sneak previews of its fast-food future.
Now playing at its new flagship restaurant: Digital-media kiosks for burning CDs, downloading cell-phone ring tones and printing photos. Dozens of plasma-screen TVs. Wi-Fi Internet (search) access. New chicken sandwiches. Double-lane drivethrus. And an adjoining McCafe with gourmet coffees, fancy pastries and a fireplace.
Coming soon: Other menu items and concepts not yet released to a general audience.
Don't expect Starbucks (SBUX)-like makeovers like this one at the 13,600 U.S. McDonald's, or 30,000-plus worldwide; the Oak Brook restaurant, which opened late last month, doubles as public restaurant and test site. But the world's largest restaurant chain is tinkering with various possibilities in technology and design to try to ensure it is a hangout of choice in the future.
"It's unlikely you'll see this exact restaurant replicated," McDonald's spokesman Bill Whitman said. "But you will see elements of this restaurant in some of our new construction. It's all about keeping our restaurants more relevant for our customers."
McDonald's has undergone an image change in more ways than one since a time 2 1/2 years ago when its sales and reputation were sagging amid complaints about its service and food. Despite inconsistent results in some large European countries, that McSlump is no longer: Same-store sales have increased for 25 straight months in the key U.S. market.
The company reported first-quarter operating income was up 6 percent to $910 million and revenue rose 9 percent to $4.8 billion over the same time last year. Its stock price nearly tripled over a two-year period, hitting a four-year high of $34.56 per share in March, but has since settled around $29.
Snazzier new restaurants are part of the makeover; about 1,000, mostly older U.S. McDonald's have been either renovated or rebuilt since 2002. Contributing more to the sales resurgence, though, have been longer hours, accepting credit and debit cards, the high-powered "I'm lovin' it" marketing campaign and pricier new food items.
Some of the additions, such as salads, white-meat chicken nuggets and fruit options with Happy Meals, have served the dual purpose of enabling the company to state a commitment to a healthier, balanced menu while bringing in new customers who aren't there for the hamburgers.
McDonald's now hopes to attract more patrons with amenities that might entice them to come in and stay awhile.
Analyst Peter Jankovskis thinks the extra investments to try to make McDonald's restaurants hangouts are worthwhile, noting that they have worked not only at Starbucks but at Panera Bread and other chains.
"It used to be that a chance to eat burgers and fries with your friends was enough," said Jankovskis, director of research at Oakbrook Investments in nearby Lisle, which owns a million shares of McDonald's stock. "Now it takes a little bit more than that."
The sprawling new Oak Brook facility is now McDonald's main company-owned restaurant for test concepts, replacing one inside corporate headquarters itself.
Retro is absent here; there's no traditional red mansard roof or giant golden arches, and the two-story stone and brick building has a more understated look.
There's nothing subtle, though, about the double-lane drivethru attracting a steady flow of SUVs and mini-vans. McDonald's draws 60 percent of sales from drivethrus, so it's a good bet the number of restaurants with two lanes will be increased from its current U.S. total of fewer than 100.
Inside, repairs to the digital-media centers reduced geeks to gawkers as the restaurant filled at lunchtime on a recent day. When working, the BlazeNet machines allow customers to search a library of 40,000 songs and create a custom CD for 99 cents per song. Other kiosks let them surf the Web, print out photos in six seconds or get ring tones instantly.
The machines' high cost may preclude them becoming a regular sight at McDonald's. But with a trial in Germany having gone well, Whitman said there's a possibility the company will install some at other U.S. restaurants.
One popular item here that's set to be exported elsewhere is premium chicken sandwiches on wheat rolls, which the company says will be introduced across the United States later this summer.
Less certain is the fate of the McCafe (search), the gourmet-coffee lounge concept which Bell introduced in Australia in 1993. Currently there are more than 300 McCafes internationally but only five in the United States — four in Raleigh, N.C., and the one in Oak Brook.
McDonald's plans to introduce more premium coffees later this year, but at its traditional restaurants. Whitman said no big U.S. expansion of McCafes is planned.
Morningstar Inc. analyst Carl Sibilski said all the new concepts reflect McDonald's stepped-up effort to please young adults — particularly 18- to 24-year-old men, the demographic "gold mine" for fast-food purveyors.
"If you want to drive same-store sales you have to target your message to your most profitable customers," Sibilski said. "That explains the TV screens ... and the hipper advertising. They've made it OK (for young adults) to go to McDonald's again. It's not just someplace they went as a child."
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