Drip Portfolio 10 Tips to Save McDonald's

The Golden Arches aren't even fit to be bronzed lately, with shares of the fast-food giant at a seven-year low. Rick Munarriz has some suggestions to help turn McDonald's around. Let's hope the company can handle these special orders.

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By Rick Aristotle Munarriz (TMF Edible)
September 19, 2002

Here we go again. That pesky Hamburglar is walking away with even more of that McDonald's (NYSE: MCD) market cap, and McDonaldland is up in arms.

We've come a long way since Ray Kroc spotted the two McDonald brothers selling burgers briskly in California. Right now, the world's largest restaurant chain still has a long way to go, too. We've got a lot of ground to cover, so let's get this beef started.

1. What's with this dollar menu you're rolling out later this year? I understand the value message -- no one's coming to see the wine list -- but what genius thought up the buck as some kind of price-point elixir? Wendy's (NYSE: WEN) has been pushing its $0.99 menu for ages, and now Burger King has rolled out an 11-item menu at that same $0.99 mark.

Why are you coming in at a dollar? You're like the last guy to bid on the Price Is Right, yet you still blow it and bid a dollar under the highest bid. To borrow a little from There's Something About Mary, no one's going to get rich selling "Nine Minute Abs" when there's an "Eight Minute Abs" series sitting on the same shelf. So, here's a penny for your thoughts. It's going to knock your socks off. Ninety-eight cents! And if you feel particularly daring, trim away the lowest margin items, and go for an $0.89 menu.

2. So, you teamed up with Disney (NYSE: DIS) on a broad licensing deal for your restaurants. My condolences. That's the equivalent of marrying the 2002 Anna Nicole Smith based on a 1992 photo shoot. Right now, you're pitching primetime shows for a network that finished a humiliating fourth in key demographic ratings, and your Happy Meal premiums are dated Beauty & the Beast toys. Remember when kids were tugging parental sleeves because you had Teenie Beanie Babies and flocking to Burger King for Pokemon playthings? Unless that Disney money is making up for the lost traffic, you really need to get out there as a free agent again. They won't be lining up for your Treasure Planet wind-ups later this year, just as they ignored last year's Journey to Atlantis collection.

3. If beauty's only skin deep, what do you hope to accomplish by remodeling your older stores? You'd have far better results if you took half of that $400 million investment and used it to subsidize aggressive incentive bonuses for all store employees. I realize it's hard to motivate teens. I realize the last time your stock traded this low, the average McDonald's crew member hadn't hit puberty. But show a little faith in your more ambitious front-line employees by putting your money where their mouths are. Or, here's a novel concept: Use that money to bring your burgers and sandwiches to a level worthy of your golden arches. Have the following words ever been spoken? "Hey, this cheeseburger's awful, but this place is so dang charming that I just know I'll be back soon!" Forget the paint job on the outside and color your insides right.

4. Sorry, Ronald, but clowns really do scare some children. And there's little logic and even less appeal to your assortment of characters. Why personify french fries and McNuggets to socialize with consumers, much less elect a cheeseburger as mayor? Why promote a burger thief, and why is he wearing pinstripes? What the heck is a Grimace? The only thing you've done right is to take this unsavory lot of critters and entrust the amazing Klasky-Csupo team of Rugrats and Wild Thornberrys fame to produce animated videos. The few produced have been genuinely enjoyable. Make more -- but do work up a new cast of characters.

5. A health-conscious conscience doesn't become you. Do you really think a junk-food restaurant would grow to become the world's largest chain if all folks really wanted was a bucket of reduced-fat fries? Why tweak the one signature item folks habitually crave? You have salads and grilled chicken sandwiches on the menu, so rest easy knowing that the clogged arteries are self-inflicted. Remember your McLean Deluxe fiasco? Or the ill-fated Border Lites campaign at Taco Bell? Give folks the option to graze on wheat germ if you must, but don't try to fix one of the few things that isn't broken.       

6. Vanilla is a flavor, not a marketing strategy. Why are your drink choices so unoriginal? Chains like Wendy's and Arby's offer eclectic carbonated fizz, and I can get my Slurpee fix satisfied at Burger King. Why not raise the ante and offer malted milk shakes? You know, all it takes is a packet of grenadine, and you'd be introducing do-it-yourself Shirley Temples. A dash of lime for virgin Lime Rickeys? You didn't have to wait for Coca-Cola (NYSE: KO) to roll out its own Vanilla Coke when you could've gone retro to win back a wider audience through the use of vanilla, cherry, and even chocolate syrups. You know what they say about carbonated soda -- leave it out for too long, and it's bound to go flat. Get creatively fresh before you become retroactively stale.

7. You want to milk that Disney relationship and introduce a new revenue stream? When Spy Kids 2 and Lilo & Stitch get released into the home-video market, enter into a revenue-sharing deal with Mickey Mouse and rent the videos and DVDs with drive-through convenience. You can sell them, sure, but that would be a price-point turn-off. You're better off charging $3.99 for a four-day rental. Instead of time-consuming credit card collateral, just match the rentals to driver's license numbers, and let the honor system take it from there. Why a driver's license? Well, you need one to be in a drive-through in the first place, right? Just one release at a time eases the inventory workload, and since a return has to be made, a repeat visit will likely be accompanied by a new food order.

8. You've mastered the art of dipping sauces to help kids wash down those lardy McNuggets, but what about enhancing the options for adults? Many casual dining establishments serve dipping sauces for their fries, as well. Ancho lime mayo? Honey chipotle ketchup? Spin the flavor wheel and see what you can come up with. Mango ginger? Sure. Raspberry garlic vinaigrette? Why not? Rotate the magic and keep folks coming back to try something new.

9. If you're going to stick with the dollar menu, make sure your regular menu is worth upselling. Daring yet ultimately rubbery McRibs aren't going to cut it. When you've gone regional -- like McLobsters up in Maine or Cuban sandwiches in Miami -- you've offended the locals. I know you can't complicate the menu. That's why it's important that every menu item is worthy of its signage. Do what the other big boys aren't doing. Take a page from the Krystal and White Castle handbook and roll out palm-sized onion burgers. Offer a high-quality steak sandwich. Onion straws, anyone? Integrate the breakfast and lunch menus by serving a burger on a bagel bun or adding the Egg McMuffin egg to a Quarter Pounder.

10. Ubiquity. Small box. Everywhere. You share these traits with places like RadioShack (NYSE: RSH) and 7-Eleven (NYSE: SE), only they have graduated beyond their core offerings. I'm not suggesting that you begin selling broadband Internet connections or satellite dish receivers, but what's wrong with selling prepaid wireless products like 7-Eleven is doing now? The drive-through crowd is the perfect on-the-go target, as long as the fulfillment process can be expedited.

In a more patient setting, you could have an attendant pumping gas and changing windshield wipers on the other side of the drive-through window, but even a more hurried mindset wouldn't object to pitching calling cards and gallons of milk. Will we ever see the day when an automated brushless car wash separates the order box from the ultimate delivery of food?

Will any of this work? Beats me. All I know is what you've got going now isn't working. As big as you are, always play nimble. Take creative chances. The road most traveled? Well, it just isn't as crowded as it used to be.

Rick Aristotle Munarriz thinks you deserve a break today. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.

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