OAK BROOK Ill. McDonald’s Corp. would neither confirm nor deny on Tuesday the reported national introduction this summer of its long-tested Angus Third Pounder, a product rollout that sources say could spark some franchisee tension.
First reported this week by Crain’s Chicago Business, citing franchisee contacts and an internal corporate memo, the Angus burger would be McDonald’s first new burger introduction in eight years. The third-pound, 100-percent Angus beef burger had been tested since May 2007 in Southern California, New York City and Columbus, Ohio. The franchisor suggested price was $3.99.
Published reports and other sources have indicated the premium product would help McDonald’s compete against chains like Carl’s Jr. and In-N-Out Burger, which have long focused on larger, premium burgers. Proponents also say the McDonald’s Angus burger would compete head to head with Burger King’s newest Steakhouse XT burger, which features a larger patty made possible by the chain’s new larger broiler equipment.
Reports are surfacing, however, that some franchisees are not fully behind the pending introduction, saying that the economy is too precarious for the systemwide debut of a higher-priced, premium product. Even more, with the continued introduction of McCafe premium coffees, some franchisees fear McDonald’s is trending too far away from its value focus and placing too much strain on franchisee operations.
One franchisee in New York City, who asked not to be identified, said he was not convinced that now is a good time for the franchisor to focus marketing and menu efforts on higher-priced offerings, as most consumer research shows restaurant guests picking value-based, lower-priced items.
In an April McDonald’s franchisee survey by former stock analyst and independent researcher Mark Kalinowski, one unidentified McDonald’s franchisee called the Angus burger “another poor margin item.”
In the same study, Kalinowski asked franchisees how they viewed the McCafe rollout and whether it would hurt or help same-store sales in 2009. Of the respondents — 31 domestic franchisees that represent about 213 restaurants — 16 percent said McCafe and the premium coffees would boost sales, while 32 percent said it would weaken sales, and 52 percent said the rollout would have no impact.
One unidentified franchisee was quoted by Kalinowski as saying: “We are about to take our focus off the McDonald’s brand to sell coffee drinks at a very bad time. We should be focused on food and value.”
Other franchisees did say the coffees will provide consumers with an alternative to Starbucks, especially at a time when the Seattle-based coffeehouse chain is struggling.
McDonald’s system includes about 31,000 locations worldwide.
Contact Sarah E. Lockyer at [email protected].
