McDonald's goes upscale with Starbucks flair
Goodbye, fiberglass tables and bright colors. Hello, faux leather and WiFi.
Right now, the only reason most adults stop and sit awhile at their localMcDonald's (MCD) is to watch their kids hang out at the indoor playground. That or because they have no place to take the take-out, since they work out of their car or truck.
Well, the king of fast food hopes to change that with a massive makeover of its 14,000 U.S. restaurants. McDonalds plans to do away with its fiberglass tables and steel chairs to make the restaurant an inviting destination with padded recliners and warm painted interiors that help customers linger -- and maybe spend a few extra bucks.
McDonald's inspiration? None other than coffee king Starbucks (SBUX).
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The plan includes wooden tables, Wi-Fi access, comfortable faux leather chairs and other cafe-style decor that Starbucks has long used to make its stores as much of a selling point as its trademark coffee.
It will be no small undertaking, considering McDonald's has long been known for its bright colors, fluorescent lights and cartoon mascots. Reports put the price for the move at more than $1 billion.
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In addition to stylish interiors, there will be a push to overhaul the iconic exterior of McDonald's restaurants -- replacing ketchup-red roofs and bright yellow accents with more earth tones and grassy landscapes.
McDonald's tried several designs before it decided on one used in Tampa, Fla., as the model. It hopes to have that design in about 800 restaurants by year's end. The chain and franchise owners hope the vast majority of restaurants will be completed by 2015.
So what gives? Surely such an expensive effort isn't just artistic.
Well, the renovations are the latest and largest effort to date by McDonald's to attract more high-end customers. The company already has revamped its menu, adding premium sandwiches, cappuccinos and smoothies. It also has added Free Wi-Fi service for laptop and iPad users.
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Now the chain, which built its early success on serving customers quickly and getting them out the door with cheap food in hand, obviously believes the $1 billion-plus in renovations can take its operations to a new level.
That's where the Starbucks model comes in. McDonald's has already proved it can compete with the coffee crowd, with its highly successful McCafe business fueling a lot of the stock's success in the past few years. MCD shares are up a stunning 125% in the past five years, compared with just 10% gains for the Dow since May 2006.
Now McDonald's needs to maintain its dominance -- not just in casual dining but also on the coffee front. Restaurant chainsPanera Bread (PNRA) and Chipotle Mexican Grill (CMG) have seen explosive growth even across the financial crisis. And after a dip in 2009 revenue, Starbucks is making a comeback and 2011 sales are on track to top pre-recession revenue by 20% to 25%. The Seattle coffee giant is clearly looking to make up ground lost to McDonald's and others in the past few years.
Of course, McDonald's is risking a lot with the renovations, with the $1 billion capital outlay only the tip of the iceberg. There are very few restaurants parents can take their kids to for a meal they know they will eat. And there are even fewer restaurants that allow youngsters to run around and burn off penned-up energy. If the newly remodeled stores become too popular with leisurely adults seeking a relaxing atmosphere, McDonald's could alienate a customer base that has been the cornerstone of its growth for decades. A January Ad Age report estimated Happy Meals account for about 10% of total McDonald's sales.
The Golden Arches had better be sure the push toward laptop-toting professionals doesn't alienate this important customer base, or else it will find its renovations not just costly but counterproductive.
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Really? I would like to see how Mcdonalds will keep clean "comfy" chairs all while having millions of kids running around and jumping on furniture. I can just see myself trying to enjoy a cup of coffee and reading a book around all the screaming kids. Give me a break McDonald's. Stick to what you do best.
A lot of our local MCD's have flat screens and free wi-fi. We have some with play places and some without. The play places are professionally cleaned in-btween the regular cleanings. The inside of the playplaces are for parents to supervise their children while relaxing and eating or joining their kids. MOST kids don't run around and jump all over the furniture in the restaurant area while others are sitting and eating. McDonald's food is not all bad for you, they have a lot of good items on their menu. You need to take some time and look up their food info. Their salads are fabulous! At any rate they are good in a pinch and I would sorely miss Mcdonald's if they weren't around and no...I'm not fat and unhealthy. I just choose not to eat there every meal.
Why not change, their menu is always adding something new and fresh and their decor has changed a few times over the years....why not? and so what if they want to spend money and put some people to work to make that happen?
5 years ago, a share of McDonalds stock cost about 33 bucks. Today its almost 80. I have no idea whether their idea will work or not, but no matter how much you hate McDonalds, you can't argue with their earnings over the long haul, which, of course, chaps the **** of corporate haters to no end.
I love people who will buy a computer....made by a corporation, pay a monthly fee to an ISP....set up by a corporation, and use a free blog like this.....provided by a corporation, so they can bitch about corporations.
Mcdonalds lives on high customer turnover rates. Their fast food is consistently the "fastest'.
If someone wants to linger for an hour while only buying one coffee, let them go to St*rbucks.
This move will turn out to be a big mistake. What part of "Fast" food does Mcd Corp. management not get?
A more sensible approach would be to start small and with test sites. Even better would be having completely separate stores, but instead with the McDonald restaurants built for the adult crowd, while still not disturbing the 'what works, don’t change it' phraseology. Again, beginning a little slower and in smaller steps to test the model first.
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