It’s early, but Grimace already may be grimacing.
The early results of McDonald’s Corp.’s new value strategy have more than a few franchisees grumbling and some McDonald’s marketing executives less than happy. While more customers are coming into the restaurants, so far the numbers aren’t offsetting the discounts.
More worrisome: The company’s 15-month “Dollar Menu” began to roll out nationally only last week.
According to the minutes of a meeting last week of franchisees and McDonald’s executives obtained by the Tribune, average same-store sales during the first 28 days of the value program were flat or down slightly despite heavy amounts of advertising that pair up celebrities such as Donald Trump with McDonaldland characters to promote $1 Big `N Tasty and McChicken sandwiches.
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According to the document, same-store sales in roughly 6,500 restaurants were down on average 0.1 percent in the first three weeks of the program, even though more customers were being drawn in by the promotion.
Some executives may tout that as a victory, considering same-store sales were down 2.8 percent last quarter.
But the average check was down 3 cents.
A McDonald’s spokesman couldn’t be reached for comment Wednesday.
The concern among marketing executives is that the focus on the Dollar Menu, which matches Burger King’s 99-cent menu launched earlier this fall and Wendy’s 99-cent menu, may be taking the company’s eye off of trying to sell more profitable combination meals, such as the more expensive extra-value meals.
Discounting is often a slippery slope for retailers. Once customers are trained to buy a heavily discounted product, it’s often hard to get them to trade up to more-profitable products.
The company doing it the best? Wendy’s, which has found the right balance of keeping customers coming back with its 99-cent menu while drawing in more infrequent customers with higher-profit sandwiches that rotate on the menu.
Look for McDonald’s to try and emphasize its more profitable extra-value meals going forward. And there’s always the chicken flatbread product that was a hit for McDonald’s this year. That sandwich is expected to return to restaurants in January.
Until then, it will have to keep relying on its celebrities to bring them in. Last week, the company announced that it was using tennis stars Serena and Venus Williams in the next round of advertising from Burrell Communications here.
The fast food giant can only hope that the famous sisters deliver not only more customers … but customers who open up their wallets.
Boyko steps down: Former Chicago creative Rick Boyko, co-president of Ogilvy & Mather New York and chief creative officer of Ogilvy & Mather North America, is retiring. Boyko, 54, will become the managing director of The Adcenter at Virginia Commonwealth University in July, a department focused on training future creative directors. Boyko got his advertising start in Chicago at Leo Burnett, where he worked on United Airlines. Bill Gray, 50, Boyko’s co-president, will assume sole management of the New York office, while David Apicella, 47, and Chris Wall, 46, both executive creative directors, will become co-creative heads of Ogilvy New York.
Rank back to Chicago: In a surprise move, media-buying maven Dan Rank, managing partner of OMD based in New York, is moving here to take a key post on the other side of the bargaining table at Universal Television Group. Rank, who spent several years in Chicago at DDB, becomes executive vice president, advertising sales, central region and outside offices.
He will oversee the Chicago office as well as Los Angeles and Detroit. Rank, who helped negotiate one of the biggest media deals in TV history–a groundbreaking $1 billion upfront deal with Walt Disney–controlled billions of dollars of client advertising money.
“He’s a natural salesman,” said Jeff Lucas, president of advertising sales for Universal. “Transferring over to the other side makes us smarter.”
On the move: Julie Colbrese, executive vice president at 141 Worldwide, joined Chicago-based litigation and business communication consulting firm Zagnoli McEvoy Foley Ltd. as director of business development.