McDonald’s wants to rewrap restaurants

McDonald’s wants to rewrap restaurants
http://www.chicagotribune.com/business/ct-biz-0413-mcdonalds-makeover--20100412,0,2749029.story

Internal memo emphasizes cash incentives for updates; consultant says chain wants to be like Starbucks


As McDonald's Corp. moves more deeply into the cafe world of lattes, frappes and smoothies, the Oak Brook-based hamburger chain is attempting to speed up the remake of its U.S. restaurants into cozier places to linger and spend money, according to an outside expert.

Richard Adams, a franchise consultant, said a 2010 pilot program offers a higher level of corporate financial assistance to McDonald's franchisees willing to revamp their restaurants inside and out. Adams heads Franchise Equity Group, a San Diego-based consulting firm.

Normally, McDonald's prevails upon franchisees to remodel when their contracts are up for renewal. That occurs with 300 to 400 restaurants nationwide each year, Adams said.

But the company is sweetening its typical financial contribution in an effort to bring another 400 to 600 restaurants into the remodeling pipeline, said Adams, citing an internal McDonald's memo that spelled out terms of assistance.

The revamps could boost a restaurant's annual sales from $2.3 million to $3.1 million in four to five years, the memo stated. Adams said there's no guarantee remodeling will translate into more sales.

Nationwide, the company has 14,000 restaurants, of which 85 percent are franchises.

Adams estimates that a franchisee's cost might range from $600,000 for remodeling to $1.5 million for rebuilding. This comes shortly after franchisees retooled to handle coffee drinks, at a cost of up to $100,000 per restaurant.

McDonald's would not confirm or deny the contents of the memo. Spokeswoman Danya Proud said remodeling efforts are part of "an evolution of the restaurant redesign that started back in 2003."

Remodeled restaurants can feature plasma-screen televisions, lounge chairs and electric fireplaces. And separately, the chain is adding free Wi-Fi in most of its U.S. restaurants.

"The whole idea is they are trying to imitate Starbucks with coffee drinks," Adams said.

McDonald's declined to characterize it that way, with Proud saying, "It's an effort to contemporize existing restaurant locations."

In fact, not all the changes are aimed at encouraging customers to linger. With drive-through representing 65 percent of business, the revamped stores will include double lanes.

Tribune reporters Julie Wernau and Wailin Wong contributed to this report.