McDonald’s is a trusted friend among kids . and grown-ups, too. TM Originally developed McTreat Spot kiosks Designed to capture This concept brings in Australia, McCafés sell indulgent sweet treats McDonald’s meal occasions two great restaurant generally are attached in high-traffic, in locations where experiences together under to existing McDonald’s high-volume locations. the sales potential would not one roof with classic, restaurants and have BOTTOM LEFT support a large, traditional cooked-to-order diner fare a cosmopolitan HOT FUDGE BROWNIE SUNDAE restaurant, McSnack Spot and traditional atmosphere with offers a limited selection McDonald’s favorites. distinct adult appeal. of McDonald’s BOTTOM RIGHT TOP LEFT menu items, as well as TRIPLE DECKER CAPPUCCINO AND snack favorites. TURKEY AND BACON CLUB BANANA CAKE TOP RIGHT STRAWBERRY BANANA FRUIT ‘N YOGURT PARFAIT WHAT DO YOU HAVE A TASTE FOR? we’re extending our reach here is more innovation than ever under sundaes, rich McFlurry desserts, refreshing Fruit ’N The Golden Arches, as we explore Yogurt Parfaits and delicious triple-thick shakes. Initial opportunities to extend the ways in results indicate that McTreat Spot kiosks are attracting which we serve our customers. customers who would have gone somewhere else to Take, for example, our McCafé satisfy their cravings. coffee concept. Originally developed We also have a small test of a concept called Tin Australia, McCafés generally are attached to existing McSnack Spot underway in Texas. It is designed to McDonald’s restaurants and have a cosmopolitan capture McDonald’s meal occasions in locations, such atmosphere with distinct adult appeal. Here, customers as within retail outlets and train stations, where the sales can enjoy premium coffees, cakes and pastries—all at potential would not support a a value price compared with typical coffeehouses. large, traditional restaurant. THINKING OUTSIDE Clearly, the coffee market varies significantly by McSnack Spots are highly effi- THE FRY BOX country, and the demographics need to be right. So, cient operating units that require McCafés may not be appropriate for all our restaurants. low investments and generate Yet, in the right locations, they can add to the bottom high profit margins. They offer a line. In Australia, where the coffee market is growing at limited selection of McDonald’s an annual rate of 10 percent, we have experienced sig- menu items, as well as snack nificant sales increases with McCafé additions. These favorites, such as popcorn and increases are being driven by the sale of McCafé offer- pretzels. Early results indicate ings, as well as incremental regular menu sales to our great consumer acceptance. coffee-loving customers. Today, we operate more than Another concept in early test 300 McCafés in over 15 countries, and we will continue that is resonating with consumers We are tapping into the growing trend for retro-nostalgia with to explore opportunities to add McCafés where they is McDonald’s with the Diner a concept that combines a make sense. Inside. It brings two great McDonald’s restaurant with a We also want to be top of mind when customers restaurant experiences together classic diner experience. The want an indulgent sweet treat or a snack when they are under one roof with classic, concept–McDonald’s with the Diner Inside–is designed to be on the go. So, we are using dessert kiosks and small cooked-to-order diner fare and best in class in the midscale dining restaurant units to earn such recognition and capture traditional McDonald’s favorites. arena, serving both traditional incremental sales. We opened our first diner in diner fare, such as Belgian waffles, For example, McDonald’s currently operates more Kokomo, Indiana, in 2001 and triple decker sandwiches and than 600 dessert kiosks in Latin America. Initially devel- have several under construction. chicken fried steak, as well as Big Mac sandwiches, Chicken oped about 10 years ago in Brazil, where they have been Current plans include converting McNuggets and Happy Meals. very successful, these kiosks typically sell bottled water a number of restaurants in a During its first year of opera- and a variety of soft serve products, including McFlurry television market to McDonald’s tion, the McDonald’s restaurant in desserts. Since they are situated in shopping malls near with the Diner Inside in order to Kokomo, Indiana, which had been full McDonald’s restaurants, they serve as billboards conduct an advertised sales test. converted to a McDonald’s with the Diner Inside, saw significant for those restaurants, as well as convenient places for Clearly, we are pursuing sales increases. customers to break to satisfy their sweet tooth. a number of opportunities to Now, we are adapting this profit generator for the extend the reach of Brand U.S. market with McTreat Spot kiosks and are testing McDonald’s and are monitoring results to determine a variety of dessert concepts in southeast Asia. whether a viable business case can be made for prof- In the U.S., our McTreat Spot kiosks are situated in itably expanding each of the concepts in test. high-traffic, high-volume locations, like the Minneapolis, We are committed to ongoing innovation and experi- Minnesota, airport, the Circus-Circus Casino in Las mentation. Our intent is to tap into our assets to give Vegas, Nevada, and the Woodfield Shopping Mall in customers what they want, to enhance their experience Schaumburg, Illinois. Offerings include satisfying and to build the business under The Golden Arches. More than 60% of Americans snack regularly. 2000 Roper Reports, Roper ASW 15 McDonald’s serves up great experiences all day long. WHAT DO YOU HAVE A TASTE FOR? we’re exploring new avenues of growth rowing the core McDonald’s business the country, Boston Market is targeting the $18 billion is our number one priority. U.S. home-meal replacement opportunity with selections At the same time, we know that include rotisserie chicken, grilled chicken, ham, customers want—and are spending meatloaf and a wide array of salads, side dishes and their eating-out dollars on—a variety desserts. Customers can choose to take their meals of foods and dining experiences. So, home or dine in the restaurant. They also can take Gwe plan to supplement the growth of our core business advantage of Boston Market’s catering service. In early and add shareholder value with a portfolio of Partner 2002, we opened our first Boston Market in Australia, Brands—concepts that we believe will make a meaning- and we have plans to open in Canada by year end. ful contribution to earnings over the next five to 10 years. Chipotle, which operates more than 175 restaurants, We embarked on our Partner Brand strategy in offers fresh, gourmet burritos and tacos in an energetic, 1998, with the purchase of a minority interest in Chipotle contemporary atmosphere. Credited by some industry Mexican Grill, which then analysts as pioneering a new category—“fast casual”— COOKING UP consisted of 14 restaurants in Chipotle competes within and beyond the $13 billion U.S. NEW POTENTIAL Denver, Colorado. Today, we Mexican restaurant segment. This concept’s unique style have a portfolio of four Partner and flavorful food combinations have generated a loyal Brand concepts—Boston customer following and strong positive comparable sales Market, Chipotle, Donatos growth. Pizzeria and Pret A Manger. Donatos Pizzeria competes in the $24 billion U.S. Collectively, they generate pizza segment. With nearly 200 restaurants across the approximately $1 billion in annual U.S., Donatos is known for world-class, thin-crust pizza sales. To put this in perspective, with fresh Edge-to-Edge toppings. Donatos enjoys a loyal Dublin,Ohio, area $8.2 million sales there are only 12 quick-service following in its home market of Columbus, Ohio, and restaurant chains with more than plans to build brand awareness and further differentiate The two-square mile trading area $1 billion in annual sales. itself from the competition with a new and inviting pizzeria in Dublin, Ohio, pictured above, is home to three successful For our strategy to succeed, format. Building on a heritage of innovation, this new McDonald’s restaurants with we must ensure that we have format accommodates varied lifestyles with dine-in, take- combined annual sales of the right portfolio of Partner out and delivery service, as well as a call-ahead pick-up $5.1 million. Frankly, there is Brands. Accordingly, we have window and catering options. The first Donatos in little room for an additional established very specific criteria Germany is scheduled to open later this year. McDonald’s in the neighborhood. However, we also operate a against which to measure each Pret A Manger, in which we have a minority interest, Chipotle, a Boston Market and a brand’s potential. It must demon- sells upscale, ready-to-eat sandwiches that are prepared Donatos Pizzeria in the area, each strate broad consumer appeal. It daily on the premises. Pret is relatively new to the generating about $1 million or must have a scalable, replicable $30 billion U.S. cold sandwich segment with seven shops more in annual sales. Together, these six restaurants– business model that produces in New York City, and competes in the $5 billion U.K. representing four different brands, returns that exceed our cost of segment, with more than 115 shops there. The concept’s serving four different meal occasions capital. It also must have the popularity is evidenced by its strong comparable sales –generate $8.2 million in annual long-term potential to have thou- increases in 2001. Pret opened its first shop in Hong sales. That’s 60 percent more than sands of restaurants. Kong early this year and has plans to open in Japan.