ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, February 27, 1997 TAG: 9702270045
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: CHICAGO
SOURCE: Associated Press
IT COULD HAPPEN, if most franchisees agree. And it could be just the beginning.
Bellying up to the competition, McDonald's Corp. is sizing up a 55-cent Big Mac.
The prospect of a Big Burger Battle that could cut into corporate profits drove down the stock of McDonald's by 5 percent and undercut shares of competitors Wednesday. Wall Street got indigestion despite statements from Burger King and Wendy's that they don't plan to enlist in a price war.
``Sounds like they're using their trump card, which is extremely low prices, to lure people into their restaurants,'' said Michael Jacobson, executive director of a nutrition watchdog group, the Center for Science in the Public Interest. ``But it's disappointing that McDonald's has given up on encouraging people to eat healthier.''
McDonald's began quietly cutting prices of some products, including Chicken McNuggets, and offering two Big Macs for $2 earlier this year.
It will outline its ``Campaign 55'' plan to some of its 2,700 franchisees in a closed-circuit videocast today and will ask for a vote directly thereafter, said Dick Adams, a former company director of franchising for the Western United States. He now represents hundreds of disenchanted franchisees across the nation.
McDonald's won't give further details on the marketing plan unless three-fourths of its franchisees approve it. Franchise operators of McDonald's stores in Western Virginia either did not return calls for reaction or declined to comment.
McDonald's has ``been showing declining same-store sales in the U.S. for six quarters in a row, and this is a move to reverse that trend,'' Adams said. ``It's the only option being presented to franchisees, so it'll probably pass.''
To stay competitive, Burger King, Wendy's and others may be forced to follow with their own lower-priced offerings, said analyst Allan Hickok at Piper Jaffray in Minneapolis.
Spokesmen for Wendy's and Burger King said there currently are no plans for lower prices.
Burger King, the nation's second-largest fast-food chain, has offered a 99-cent Whopper for nearly three years, but recently boosted its advertising to highlight that fact as it goes head-to-head with McDonald's.
McDonald's counter, Campaign 55, refers to the year the company was founded. The 55-cent package will rotate from the Big Mac to Quarter Pounder to the McRib, all of which currently cost about $2, to the $2.19 Arch Deluxe hamburger over the next 12 months, according to franchisees. The prices could become permanent.
The sandwiches must be bought with fries and a drink, according to reports Wednesday by The Wall Street Journal.
McDonald's spokesman Jack Daly said the first price cuts could come ``within months,'' although they likely will be sooner since franchisee approval is expected by Friday.
The fast-food giant likely would be selling the Big Mac for a loss, hoping additional consumer traffic and the add-on fries and drinks would make up some of the difference, analysts said.
Sales at McDonald's restaurants open at least a year fell an estimated 1 percent to 2 percent in 1996, and would have dropped further without the Deluxe sandwiches, analysts said. Meanwhile, Burger King's same-store sales rose more than 2 percent.
Bloomberg News contributed to this story.
LENGTH: Medium: 70 linesby CNB