McDonalds 2001 Annual Report Download - page 20

Growing the core McDonald’s business
is our number one priority.
At the same time, we know
customers want—and are spending
their eating-out dollars on—a variety
of foods and dining experiences. So,
we plan to supplement the growth of our core business
and add shareholder value with a portfolio of Partner
Brands—concepts that we believe will make a meaning-
ful contribution to earnings over the next five to 10 years.
We embarked on our Partner Brand strategy in
1998, with the purchase of a minority interest in Chipotle
Mexican Grill, which then
consisted of 14 restaurants in
Denver, Colorado. Today, we
have a portfolio of four Partner
Brand concepts—Boston
Market, Chipotle, Donatos
Pizzeria and Pret A Manger.
Collectively, they generate
approximately $1 billion in annual
sales. To put this in perspective,
there are only 12 quick-service
restaurant chains with more than
$1 billion in annual sales.
For our strategy to succeed,
we must ensure that we have
the right portfolio of Partner
Brands. Accordingly, we have
established very specific criteria
against which to measure each
brand’s potential. It must demon-
strate broad consumer appeal. It
must have a scalable, replicable
business model that produces
returns that exceed our cost of
capital. It also must have the
long-term potential to have thou-
sands of restaurants.
We think our Partner Brands
are best-in-class players in their
respective large and growing
market segments. Here’s a brief rundown on each brand.
Boston Market serves the needs of increasingly
time-pressed consumers who want a home-style meal
without the fuss. With more than 650 restaurants across
the country, Boston Market is targeting the $18 billion
U.S. home-meal replacement opportunity with selections
that include rotisserie chicken, grilled chicken, ham,
meatloaf and a wide array of salads, side dishes and
desserts. Customers can choose to take their meals
home or dine in the restaurant. They also can take
advantage of Boston Market’s catering service. In early
2002, we opened our first Boston Market in Australia,
and we have plans to open in Canada by year end.
Chipotle, which operates more than 175 restaurants,
offers fresh, gourmet burritos and tacos in an energetic,
contemporary atmosphere. Credited by some industry
analysts as pioneering a new category—“fast casual”—
Chipotle competes within and beyond the $13 billion U.S.
Mexican restaurant segment. This concept’s unique style
and flavorful food combinations have generated a loyal
customer following and strong positive comparable sales
growth.
Donatos Pizzeria competes in the $24 billion U.S.
pizza segment. With nearly 200 restaurants across the
U.S., Donatos is known for world-class, thin-crust pizza
with fresh Edge-to-Edge toppings. Donatos enjoys a loyal
following in its home market of Columbus, Ohio, and
plans to build brand awareness and further differentiate
itself from the competition with a new and inviting pizzeria
format. Building on a heritage of innovation, this new
format accommodates varied lifestyles with dine-in, take-
out and delivery service, as well as a call-ahead pick-up
window and catering options. The first Donatos in
Germany is scheduled to open later this year.
Pret A Manger, in which we have a minority interest,
sells upscale, ready-to-eat sandwiches that are prepared
daily on the premises. Pret is relatively new to the
$30 billion U.S. cold sandwich segment with seven shops
in New York City, and competes in the $5 billion U.K.
segment, with more than 115 shops there. The concept’s
popularity is evidenced by its strong comparable sales
increases in 2001. Pret opened its first shop in Hong
Kong early this year and has plans to open in Japan.
We believe these four brands have a lot of potential.
We will nurture and grow each carefully and will scale
a brand only after it demonstrates that it can meet our
stringent criteria. In the end, we will leverage our
resources and competencies to capture more meal
occasions around the world—both under and beyond
The Golden Arches.
we’re exploring new avenues of growth
COOKING UP
NEW POTENTIAL
The two-square mile trading area
in Dublin, Ohio, pictured above,
is home to three successful
McDonald’s restaurants with
combined annual sales of
$5.1 million. Frankly, there is
little room for an additional
McDonald’s in the neighborhood.
However, we also operate a
Chipotle, a Boston Market and a
Donatos Pizzeria in the area, each
generating about $1 million or
more in annual sales.
Together, these six restaurants–
representing four different brands,
serving four different meal occasions
–generate $8.2 million in annual
sales. That’s 60 percent more than
we would have generated with
McDonald’s restaurants alone.
Americans no longer consider
going out to eat a luxury.
It has become an integral part
of their lives.
Yankelovich Partners
18
$8.2 million salesDublin,Ohio, area
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