Camelia Mafteam of Oak Lawn enjoys taking her 5-year-old son to McDonald’s because she gets to spend some uninterrupted time with him. She doesn’t want to be distracted by any other retail pitches from the fast-food giant.
“I think it would be crazy for the parents if McDonald’s sold retail items in their restaurants,” Mafteam said Wednesday while having lunch with her son. “Maybe parents don’t want to spend more money at lunch and dinner time.”
Still, the world’s largest restaurant chain, struggling to get its domestic business back on track, is looking at selling items beyond food, taking advantage of its household name and its vast network of 13,000 locations around the country.
“Maybe someday we’ll be selling things beyond what we sell today,” said Matthew Paull, McDonald’s Corp.’s chief financial officer.
What kind of retail items might spring up besides Big Macs and fries is not yet known, and McDonald’s isn’t divulging details of its strategy, which it calls “extension.” This much is clear: Clothing apparently is out, rejected by the notion that most folks wouldn’t enjoy buying apparel with that deep-fried smell.
A McDonald’s spokesman cautioned that any venture into retailing would not happen for at least two years.
“People should not start jumping to conclusions as to what we’re doing,” said spokesman Walt Riker. “We’re going to experiment and see what might work.”
McDonald’s has been trying a lot of things lately to boost growth, but, until now, all of them have revolved around food. The Oak Brook-based company has acquired non-burger restaurant chains that are a little more formal than fast food, such as Boston Market and Chipotle grills. It is testing McDonald’s with diners inside, and kiosks at malls and airports that sell desserts and other treats.
The implication of these moves, analysts say, is that the long-term prospects for the company’s U.S. business, which accounts for more than half of the company’s profits, are slowing. The fact that McDonald’s is even considering the possibility of selling other products at its restaurants–even if it turns out to be an experiment–is further proof of that.
Not all agree with the wisdom of the experiment.
“The company would be better off using these resources to figure out how to improve food quality, encourage friendliness and speed of service, and obtain more consistent marketing,” said Mark Kalinowski, a restaurant analyst at Salomon Smith Barney.
McDonald’s denies that growth opportunities in its core business are not as strong as the company would like. Moreover, restaurant execution remains its top priority, Riker said. But he added that it is management’s responsibility to look for ways to maximize the company’s real estate assets.
Retail experts can’t find fault with that. With restaurants serving 46 million customers a day through its 30,000 units around the world, the revenue potential is enormous–if McDonald’s can find the right product or service, said Neil Stern, partner in McMillan/Doolittle, a Chicago retail consulting firm.
“I heard somebody say that retailers of the future will be value-added real estate plays,” Stern said. “I blame it on the dot-coms. The model started getting people to think differently about bricks and mortar.”
In fact, McDonald’s is behind the times. Starbucks Corp. has for some time sold coffeemakers, mugs and games at some of its cafes. These products made up 4 percent of its $2.2 billion in retail sales in fiscal 2001.
But Starbucks, like any retailer, has found that finding the right merchandise mix is tricky.
“We’ve tried things from time to time, like picture frames and scrapbook sets, and our customers didn’t respond to that stuff,” said company spokesman Chris Gimbl.
To some degree, McDonald’s is already more than a restaurant. Through its Happy Meal promotions, such as Teenie Beanie Babies and Disney figures, the company has proven it can move vast amounts of merchandise.
More Top Picks Best Push Lawn Sweepers
McDonald’s now appears ready to give other companies access to its millions of customers. In a hint of what may come later, McDonald’s is working with mortgage-finance agency Freddie Mac on a project, in which computers were installed in two restaurants in Atlanta to provide information about homeownership by linking users to Freddie Mac’s own Web site.
Customers have some other advice: “I’d like to see a Ticketmaster in McDonald’s,” said Daryl Marsh, 25, of Chicago.
Others were sour on the whole idea of McDonald’s selling other merchandise because it might slow down service. Indeed retail experts warn that whatever McDonald’s tries, it has to be careful not to annoy its core audience, families like the Mafteams.
“The challenge for them is whether they can pull it off without messing around with the core business,” Stern said. “If they slow service by one second, it may be a losing proposition.”