No sale of McDonald's partner brands for now

April 6, 2003

OAKBROOK, Ill. -- For at least the present, McDonald's Corp. isn't selling its partner brands, according to the company's CEO Jim Cantalupo.

Stock analysts have speculated for months (See "Despite rumors, Donatos Pizzeria isn't for sale, says official") that the world's largest foodservice company would sell its partner brands -- which include Columbus, Ohio-based Donatos Pizzeria, Chipotle, Boston Market and Pret a Manger -- to generate cash for righting its floundering hamburger flagship. But during an April 7 investor Web cast, Cantalupo said no changes are planned for now for the partner brands, which have not been profitable for the company.

"Everything is on the table, and we've been reviewing all our options (regarding our) partner brands, but no decision has been made," said Cantalupo. "We will do what makes sense. Will review that whole area."

Cantalupo blamed the company's fortunes on a lack of customer and product focus.

"We took our eyes off the prize and we paid the price," he said. "We focused on the next location instead of the next customer."

Cantalupo and other McDonald's officers who spoke stressed that the company's main goals are to reverse negative sales trends in its hamburger stores and make dramatic spending cuts.

"We are committed to lower levels of spending until we can achieve significant margin turnaround," Cantalupo said. "Our reduction in capital spending will free up cash."

Executive vice president and CFO Matthew Paul said the company will spend $800 million less than in 2002, and that the company will slow its store remodeling program.

About $90 million will be earmarked for partner brands expenditures, but details as to how that will be spend weren't provided.

McDonald's plans to open 620 traditional and 340 satellite stores this year, but it expects to close several hundred other units for a net of 360 new units.

Paul said the company has set a goal to increase store sales by 3 percent to 5 percent by 2005, and that the increase will yield operating income 6 percent to 7 percent within the same time period.

Topics: Public Companies

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