McDonald's New Menu Item Boost Earnings

McDonald's is on a roll, er, you know what I mean. The fast-food chain has managed to expand its menus just the right amount and with the right premium items. Increase the menu to too many premium salads and chicken items, it confuses the customer, muddles the brand and slows down order time. Too little and there will be no growth in business and a more confused customer.

The world's largest franchiser has managed to increase its restaurant's average check total with three years of growth. Its restaurants have seen a 5% check increase for the past two years, a quantum leap in the quick service restaurant business.

Franchisees must be happy with average purchases higher, especially after the slowdown of 2002 and the fear of downward sales with the release of the movie Super Size Me, critical of eating fast-food as a lifestyle. However, The Wall Street Journal ($$) reports the pace of change has been too strong for some franchisees.

Richard Adams, a retired McDonald's executive and franchisee who now works as a franchisee consultant, says that broadening the menu too far risks confusion. "They've gone as far as they can go in complicating the menu," he says. "I don't know if they can add any more products without further confusing the customer and the restaurant staff. That's the biggest complaint I get from franchisees...You try to push people through the drive-thru, but you give them a menu that takes a half-hour to read."

Adams has a point. Drive-thru through-put time last year dropped because of more menu items and more complexity.

What Adams does not take into consideration are ongoing changes to more streamlined operation efficiencies and technology that allows orders to be fulfilled more quickly. And the marketing teams can provide better menu layout. Such changes will allow McDonald's to gradually add more items -- but no faster than the pace that it can roll out successful technology that its restaurants can absorb. And that comes back to the effectiveness of its management and its leadership.

And what might McD's add to its menu in the future? The Journal writes that McD's is testing a salad containing Edamame, a soybean used in East-Asian dishes.

Americans like to see comeback stories and this is a great one in the fast-food world - a story of good timing, stretching a brand and change done right.

Photo by mcchronicles