Originally created 03/01/97

You deserve a break today, but the question is how much?



CHICAGO - deserve a break today, but the question facing McDonald's customers nowadays is how much?

McDonald's Corp. said Friday that franchise owners approved a "national value meal program that will begin in 55 days." The plan, which will make the steepest cuts ever in prices for McDonald's large sandwiches, has some questioning whether consumers will save money under the promotion since it requires the purchase of fries and a drink.

McDonald's executives have been meeting with franchisees for several weeks promoting "Campaign 55," a price-cutting effort aimed at stopping the flow of customers from McDonald's to its competitors.

The price of Big Macs would fall to 55 cents from $1.90, followed by other sandwiches such as the Quarter Pounder in a yearlong rotation.

Some analysts say the best thing McDonald's could do for its bottom line is to serve better-tasting food. The company is hoping price promotions do the job, but in some cases, adding fries and drinks could result in scant savings depending on the size of those items - and that could bother consumers.

The confusion over prices may have consumers asking "What the heck am I paying for?" said analyst Henry Kaczmarek at American Express Financial Corp. in Minneapolis. Others who normally refuse to buy the relatively high-priced drinks also may be turned off by the promotion, he said.

That could send customers to competitors such as Burger King, which offers a 99-cent Whopper that can be bought separately, Kaczmarek said.

McDonald's franchisees complain the length of the promotion will cut profits sharply.

"It's going to put a lot of people already in trouble in the red," said Gerardo Perez, who has owned a McDonald's franchise for 10 years. "We don't know whether this will even bring new customers in; the ones we already have could just trade off higher-priced sandwiches for the sale sandwich."

But Vice Chairman Jack Greenberg said after the plan was approved Friday that it would be "good for our customers, our franchisees and our business."

Franchisees reported the company hoped to begin the promotion on April 5 by lowering the price of four breakfast sandwiches, followed by lower Big Mac prices on April 25.

There also was confusion about whether the company would include a 55 second rule in which a customer must get their food or a coupon for a free sandwich on the next visit. A McDonald's spokesman earlier this week denied such a promotion was in the works, but some franchisees said the rule was mentioned Thursday.

"Hopefully they'll back off that, because you'd basically be shooting yourself in the foot," said one franchisee, who requested anonymity for fear of retribution.

Spokeswoman Anna Rozenich called the promotion "a normal process," but the importance McDonald's is placing on the effort is clear. Greenberg has shuttled across the country cajoling reluctant franchisees into accepting the plan.

McDonald's has seen sales at stores open at least a year flat or lower for more than a year, while competitors Burger King and Wendy's have enjoyed healthy increases.

That comes even in the face of McDonald's $100 million introduction of a Deluxe line of sandwiches last year, which was aimed at answering criticism its sandwiches do not taste as good as competitors.

Some analysts say McDonald's could be having an identity crisis as it tries to balance the changing tastes of American adults with its success in attracting children.

"In McDonald's case, they haven't been able to adjust to the aging of America," said analyst G. Michael Kennedy at American Express Financial Corp. "Their menu has remained static and bland while many consumers are looking for spicier food and value."

McDonald's stock has lost more than $2.5 billion of its market value since the plan was revealed Wednesday amid expectations the price cuts could lead to a fast-food war.