Golden arches begin to lose sheen

THE famous statistic was that one McDonald’s opened somewhere in the world every day as the firm of the golden arches relentlessly pursued its ambition to become a global phenomenon.

However, these heady days of high growth are not likely to be revisited as McDonalds has announced its first quarterly loss ever in the US and is closing 175 stores this year on top of the 163 closures last year.

From now on, its strategy is to retrench from massive expansion and concentrate on growing sales in the outlets already up and running. This trend would appear to have taken hold at its Irish operation, which now runs 67 restaurants.

Although a new McDonald’s outlet opened last week in Shannon, the drive-through premises was only the second opening this year, down from three new stores in 2001 and seven in 2000.

However, McDonald’s Ireland director of operations Will Cooke said the slowing down by the group was mostly down to the difficulty in obtaining land and planning permission and wasn’t from a lack of trying.

He said: “We’ve opened an average of six or seven stores in the past five years. We would like to open more restaurants in Ireland and plan to open five next year.”

McDonald’s Ireland’s official accounts bear out the notion that people just aren’t flocking to the stores as much as they used to.

Topline growth for continuing stores in the year to December 2001 actually fell by 3% to €65.91 million. But financial controller Adrian Crean said the drop could be accounted for by the falloff in new stores rather than a decrease in sales. When a new franchise opens for the group, it pays a once-off fee along with the continuing rental, which boosts turnover. Because far fewer stores opened in 2001 than the previous year, its turnover fell.

He suggests another figure used by McDonald’s which tallies organic growth in sales and says this grew by 1.6% in 2001 to €128m, still a poor result for such a large company.

Mr Crean conceded it was less than they would have hoped for but this year’s performance will be significantly better and is forecasted to come in at €143m.

The real message with McDonald’s is change. It realises that hamburgers and fries are no longer viewed with delight and is attempting to turn itself around.

Earlier this year, it opened a cafe in its Grafton street store offering cappuccinos and paninis alongside the usual fare.

Mr Cooke said: “Part of that is reinventing who we are and what the brand is about. It’s a very different experience from the typical McDonald’s.

“Next year we will have different types of food for people who don’t necessarily want burgers and fries. We need to evolve.

“McDonald’s in its current format won’t return to that level of growth. McDonald’s at the moment is very much focussed on same store growth.”