Originally created 12/16/03

McDonald's sells Donatos Pizzeria

CHICAGO -- McDonald's Corp. plans to significantly narrow its outside brand activity, retaining Chipotle and Boston Market in the United States, but selling Donatos Pizzeria back to its founder and discontinuing development of all partner brands outside the country.

Jim Cantalupo, McDonald's chairman and chief executive officer, said Monday the move is consistent with the company's new priority to "do fewer things better" in an attempt to boost long-term growth in sales and profit.

The fast-food company said it expects to take mostly non-cash charges of 23 cents to 28 cents a share in the fourth quarter to accommodate the steps.

McDonald's has been deliberating for months on what to do with its partner brands amid speculation it might spin them off into a separate company. It reportedly tried to sell the brands but was unable to strike favorable deals.

Industry experts say the non-McDonald's brands, providing just 2 percent of revenue, have been a distraction as the Oak Brook, Ill.-based company seeks to continue a recent recovery while still facing challenges with service, food quality and new products in a crowded fast-food market.

The decision to discontinue its international non-hamburger food ventures affects Boston Market in Canada and Australia, and Donatos Pizzeria in Germany. The company said it reflects management's desire to remain sharply focused on revitalizing sales and service at the 17,000 McDonald's restaurants outside the United States.

In related moves involving two smaller partner brands, McDonald's said it will retain its minority investment in Pret A Manger, but McDonald's Japan will close its Pret units there as previously announced. Also, the company has entered into a letter of intent to exit its domestic joint venture with Fazoli's.

Cantalupo said the decisions will eliminate distracting and unprofitable operations, reallocate resources to McDonald's restaurants and provide a more focused growth platform for Chipotle and Boston Market.

"We will concentrate our efforts primarily on Chipotle and Boston Market in the United States, concepts that have potential for long-term growth and benefit to McDonald's," he said. "These two brands are sizable companies that can operate autonomously."

Mats Lederhausen will lead those efforts as managing director of McDonald's Ventures.

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