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Big Mac under attack
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May 22, 1997: 8:37 p.m. ET
McDonald's holds annual shareholder meeting amid questions and criticisms
From Correspondent Ceci Rodgers
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CHICAGO (CNNfn) - The top brass of McDonald's Corp. caught mild criticism at its annual shareholder meeting Thursday, raising questions about a possible management restructuring.
Investor sentiment has increasingly soured in recent weeks as franchisees have become more vocal in their criticism of the fast-food chain's much-touted 55-cent Big Mac marketing campaign -- one that has failed to boost sales.
But despite McDonald's own Mac attack, officials told shareholders the company stands by its "Campaign 55" -- even extending the promotion to the "Quarter Pounder with Cheese" sandwich just in time for the Memorial Day weekend.
"Campaign 55 is a long-term campaign designed to provide greater value for our customers and so far it's been in effect for about a month and a half now. It has absolutely met the objectives we thought it would," said Dick Starmann, senior vice president of McDonald's.
Yet McDonald's own numbers suggest sales have actually dropped since the start of the campaign, analysts said. This is especially evident since an 8- or 9-percent increase during April, when McDonald's offered "Teenie Beanie Babies" toys with its children's meals, analysts said.
"The biggest issues and challenges are that fewer people are going to each of their restaurants," said Anton Brenner, food analyst for UBS Securities. "Their per-store sales are declining and profit margins are being squeezed and they need to do something to turn them around."
Details of a possible management shake-up won't be known for a couple of months. To be sure, a small group of franchisees this week joined the chorus of critics, which is an unusual move by a group usually loathe to risk angering the home office.
"With stores being built all around you reducing your sales and reducing your profit, you've got very little chance of working for 15 or 20 years and walking away with anything," said Dick Adams, of McDonald's Franchise Consortium.
The deep-rooted problem facing the company is the need to grow in the mature U.S. market. Still, company officials had a relatively easy time with its shareholders, reassuring them of a back-to-basics strategy of sound marketing and quality. The company also pleased the crowd with a 10-percent increase to its cash dividend.
Despite the bleak sales outlook, shareholders also remained somewhat upbeat on shear hope, following an indirect vote of confidence from one high-profile investor. Berkshire Hathaway Chairman Warren Buffet recently disclosed he owns about 4 percent of McDonald's.
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