Mcdonalds Sticks To Asia Investment Plan

McDonalds Corp., grappling with sluggish results in the United States, said Thursday it would stick to plans to open 2,000 restaurants in Asia despite economic problems in the region.

The worlds largest restaurant chain said it will not change its plans to invest $1.5 billion in the region over the next three years. Fierce competition has hurt the companys results in the United States, and it sees international expansion driving its growth.

I think were well positioned to weather the storm and come out ahead, Jim Cantalupo, president and chief executive of McDonalds International, said in an interview.

Cantalupo said McDonalds invests to ride out tough economic conditions but many competitors cannot afford to do so and abandon the market. This, he said, leaves McDonalds with a stronger market position.

 

McDonalds closed 13 restaurants in Indonesia last month, Cantalupo said, but some of them may be reopened once the economic pressure there subsides.

Overall, he said McDonalds will open more restaurants - a planned 850 to 880 in the Asia/Pacific region in 1998, compared with last years 823.

Some of this presents opportunities for you, Cantalupo said of the economic turmoil. You get deals you couldnt have gotten six months ago, and were evaluating that on a daily basis.

Analysts praised the companys plans for Asia.

Its a great idea to invest now when real estate is cheap, and take advantage of the positive macroeconomic aspects underlying the region, said Mitchell Speiser, an analyst for investment bankers Lehman Brothers.

Thats the power of a company with deep resources and a long-term focus, he said.

The announcment comes amid a campaign to boost sales and deal with disgruntled franchisees in the United States. The company has been expanding rapidly overseas.

At a franchisee meeting just last month, McDonalds Chairman Michael Quinlan took responsibility for bad management decisions, bureaucracy and other problems that have hurt results at the companys domestic restaurants. U.S. franchisees have complained that adding too many new restaurants in the past has taken away from existing stores profits.

At the meeting, the company promised menu changes, unveiled a made-to-order food production system and laid out a plan to help franchisees pay for it.

The meeting was the first since McDonalds shook up its executive ranks and decentralized U.S. operations in a bid to give more power to regional managers and franchisees.

A week after the meeting, McDonalds said it was streamlining its Oak Brook, Ill., home office and will probably cut jobs.

By focusing on adding restaurants, we took our eye off the basics that made us famous quality, service, cleanliness and value. To top it off, at the same time our competition improved and lowered prices, Quinlan wrote in a letter to shareholders in McDonalds annual report, released this week.

Citing disappointment with its financial performance, the company did not give base salary merit increases to any of its officers for last year.

But Quinlan still received a 1997 base salary of $1.1 million and a bonus of $1 million, compared with salary of $1.1 million and a bonus of $932,000 the year before, McDonalds said Tuesday in documents filed with regulators.

Quinlan, 53, and a director since 1979, was also granted options to buy 315,000 shares of McDonalds at an exercise price of $47 a share. The option expires in March 2007.