McDonald's changes gears

By Timothy Sifert

McDonald's Polska is running lockstep with its U.S.-based parent company and reducing its focus on opening new stores, instead placing greater emphasis on refurbishing existing restaurants and planning to enlist an ad agency to renew the company's image.

As part of the game plan, McDonald's Polska will invest €15.1 million (zł. 66 million) into the refurbishment of existing locations and into opening about 20 new stores in the next two years - significantly less than the company has been opening in recent years.

"Over the last few months we prepared our global strategy," said Krzysztof Kłapa, a company spokesman. "We want to invest more money into existing restaurants."

When the parent company announced last month that it was downshifting its sometimes-criticized strategy of rapidly opening restaurants as a way to boost earnings, New York Stock Exchange investors rewarded the company with a 9-percent increase in share price.

The parent company's change of heart came as the company reported its seventh earnings decline in eight quarters and posted profits of €412.7 million ($487 million) for the third quarter, from €461.9 million ($545 million) a year earlier.

But Kłapa said that, the Polish economy notwithstanding, McDonald's Polska had not been hit as hard as its parent, recording zł. 19 million (€4.3 million) in profits last year, and the company plans to boost that figure by 2 percent this year. Kłapa noted the country's fast-food industry is not as competitive as that of the U.S.

Nonetheless, Kłapa said, to stay abreast of the evolving market in the country, McDonald's Polska is making adjustments.

"We're investing in the restaurants and facilities to change the decor and furniture slightly," he explained. "Not every restaurant will be the same; some we want to remodel. They should remodel because things in the market are changing."

McDonald's Polska has already completed some remodeling, for example at the newest restaurant to open its doors in Galeria Mokotów.

In addition, the ubiquitous parent company has asked 10 top advertising agencies to pitch a new image for McDonald's worldwide. Corporate Profiles DDB will handle McDonald's Polska's refreshed image soon after an ad strategy is chosen.

"McDonald's is looking to strengthen its brand," Kłapa said.

The goal of the strategy shift, he said, is to maintain the company's role as the largest fast food chain in the country, adding that details of the ad campaign have yet to be finalized.

Furthermore, the fast food chain will add more inexpensive items to the menu. "We want to be affordable for every possible (customer) in Poland."

Kłapa said that projected changes and investments would ensure the company's growth in the future, whatever the economic situation.

"We are just in grammar school," he said, noting that the company has room to expand and improve.

The company's steps in many ways parallel those of its closest competitors in the country, American Restaurants (AmRest), which operates restaurant brands KFC and Pizza Hut. AmRest is renovating its Pizza Hut chains to become more diner-friendly, and it is adding cheaper items to its KFC menu. Like McDonald's Polska, AmRest's strategy is a reaction to the country's anemic economy.