McDonald’s tests smaller fresh-beef burgerMcDonald’s tests smaller fresh-beef burger

As McDonald’s Corp. transitions from frozen to fresh beef for its Quarter Pounders, the burger giant is also testing fresh product for a smaller Archburger. 

“The size of the beef patty involved is (pre-cooked weight) six to a pound, marking the first time in recent memory that McDonald's U.S. is testing fresh beef for something other than quarter-pound burger patties,” reported Mark Kalinowski, an analyst with Instinet, on Tuesday. 

The so-called Archburger is in isolated tests, a McDonald’s spokesperson said Wednesday morning. The Oak Brook, Ill.-based quick-service chain in the mid-1990s offered a similarly named Arch Deluxe, but discontinued that.

“We are conducting a limited test in Oklahoma and look forward to gaining valuable feedback from our customers and crew,” said McDonald’s spokesperson Andrea Abate in an email. “We are continuing to raise the bar for our customers with new menu items and ways to experience our brand.”

Kalinowski, in choosing McDonald’s as Instinet’s top U.S. restaurant stock pick for 2018, cited four reasons including the fresh-beef initiative as well as the new value menu that is scheduled to debut Thursday.

The three-tiered value menu, announced in December, will offer a choice of three to four items at $1, $2 and $3 levels. The menu is the first time McDonald’s has included the popular Happy Meal at the $3 level. 

Competitors are also offering new value menus. The Wendy’s Co., for example, on Wednesday said it was expanding its “4 for $4” deal. The Dublin, Ohio-based chain said customers could choose from eight different items, including the Double Stack, Crispy Chicken Sandwich, Grilled Go-Wrap, Jr. Bacon Cheeseburger, Crispy Chicken BLT, Jr. Cheeseburger, Spicy Go-Wrap or a Jr. Cheeseburger Deluxe.

In his stock-pick note, Kalinowski also said McDonald’s is poised to gain market share and could offer a stock split, which the company has not done in nearly two decades, making it more attractive to retail investors.

The fresh-beef initiative will help McDonald’s same-store sales, especially in the second half of the year.

“McDonald's U.S. has indicated that it plans to complete its rollout of fresh (never frozen) beef for quarter-pound beef patties to essentially all of its U.S. restaurants by mid-year 2018,” Kalinowski wrote. That initiative will be supported by marketing for the Quarter Pounders and the Signature Crafted burgers. 

The fresh-beef initiative was announced last March and represented one of the biggest operational changes in the brand’s history. It took two years and a team of 40 people, including operators, supply-chain representatives and marketing and culinary executives, to tailor the initiative to the company’s more than 14,000 restaurants. 

McDonald’s remained the No. 1 chain in Nation’s Restaurants News’ 2017 Top 100 census, with more than $38.4 billion in U.S. systemwide sales for the 2016 fiscal year. 

Contact Ron Ruggless at [email protected]

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