ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, September 20, 1996 TAG: 9609200040
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
DATELINE: CHICAGO
SOURCE: Associated Press
McDonald's Corp. is gearing up for a new line of fish and chicken sandwiches amid continuing concern about the performance of its recently introduced Arch Deluxe cheeseburger.
The three new sandwiches to be introduced next Thursday are Crispy Chicken Deluxe, a fried chicken-breast sandwich; Grilled Chicken Deluxe, a marinated chicken-breast offering; and Fish Filet Deluxe.
The new deluxe items will be larger and more expensive than versions of chicken and fish sandwiches they will replace from the fast-food giant's current menu.
Some Wall Street analysts question the wisdom of introducing a series of new sandwiches when the success of McDonald's Arch Deluxe cheeseburger is in doubt. But Merrill Lynch analyst Peter Oakes said Thursday the company is on the right track.
``They either need to get more sales from existing customers or grow their customer base, and these sandwiches are aimed at doing that,'' Oakes said.
McDonald's executives have been tight-lipped about the success of the Arch Deluxe introduced in May with the promise of $1 billion in sales in its first year.
But Edward Rensi, president and chief executive of McDonald's USA, told the company's 2,700 U.S. franchisees in a recent memo that the sandwich, a beef patty with bacon, lettuce, tomato and cheese on a sourdough bun, has done well.
Rensi said the sandwich was ``never intended to be a silver bullet.''
Spokesman Chuck Ebeling said the memo was aimed at reporting the success to date of the sandwich in advance of the new product introductions.
``I don't think I'd characterize [the memo] as a defense of the Arch Deluxe,'' Ebeling said.
Ebeling declined to reveal numbers but said the Arch Deluxe cheeseburger is doing its job - bringing in old McDonald's customers who had migrated to other food outlets.
McDonald's stock has lagged amid investor skepticism about the company's ability to improve domestic sales in what is considered a saturated, mature market. Indeed, sales at stores open at least a year have been lower for five consecutive quarters, while some McDonald's competitors have seen sizzling increases with new menu introductions.
In the memo, Rensi told the franchisees there has been ``some menu trade-off,'' meaning that Arch Deluxe cut into the sales of existing items. But he wrote that the check price of the average Arch Deluxe sale was 32 cents more than that for a Big Mac.
Depending on the variety, Arch Deluxe sells for $2.09 to $2.49.
Rensi said in the letter that sales of Arch Deluxe were 38 percent better than the company's projections during the product's early introduction and 10 percent better than expected during a recent testing period.
``Only those who expected a miracle were disappointed,'' Rensi said.
LENGTH: Medium: 60 linesby CNB