Oak Brook, Illinois--Fast-food giant McDonald's Corp. says it will test market a string of coffee bars, called McCafes, in the U.S. in an attempt to cut into the market share of retail coffee leaders Starbucks Corp. and Dunkin' Donuts, owned by Allied Domecq Plc.
McDonald's said the new U.S. outlets would be located inside existing restaurants, and industry watchers expect high-traffic locations in more affluent communities to be targeted.
There are already about 300 McCafes in 17 countries. McDonald's plans to open 10 McCafes in the United States in late fall. -Reuters
Oak Brook, Illinois--McDonald's Corp., determined to create a hipper brand image with last month's first-ever globally debuting ad campaign, could face bumps in the road from a related project: refurbishing older restaurants in its nearly 13,500-unit U.S. chain.
But the burger giant is facing operator opposition to renewal terms that may mandate reconstruction of aging facilities. With estimated rebuilding costs exceeding $1 million per store, franchisees say their return on investment is not high enough. Still, the company agreed to help its worried U.S. operators by giving them money to hire a law firm of their choosing for contract renewal advice. U.S. operators are trying to persuade the company to discontinue its practice of making some contract-renewal decisions contingent upon franchisees' rebuilding their stores.
McDonald's current U.S. franchise agreements expire after 20 years, and existing operators can get another franchise under the company's "rewrite" policy, whose new terms can require some operators to rebuild or relocate an older restaurant that is owned by the corporation and leased to the franchisee.
McDonald's said only 2 percent of "rewrites are contingent on rebuilds," which equals about eight of the chain's 250 to 300 total domestic rewrites each year, according to Michael Donahue, vice president of U.S. communications and customer satisfaction. -National Restaurant News