Mcdonald's Plans Late Summer Rollout For Angus Burger

(Monday, April 20, 2009) - McDonald's Corp. is preparing to launch its first new hamburger in eight years, a one-third-pound patty set to debut late this summer.

The fast-food giant will begin rolling out the long-awaited Angus burger nationally by August, franchisees tell Crain's. A company memo indicates McDonald's also plans to feature the new sandwich in its Monopoly promotion in October.

The Angus — made from a better grade of beef than Big Macs and Quarter Pounders — is McDonald's answer to bigger burgers introduced by rivals in recent years. At $3.99, it also could boost profits of franchisees saddled with rising food costs and the expense of outfitting restaurants to serve premium coffee.

The question is whether consumers will bite. McDonald's hasn't had a hit new burger since the Quarter Pounder in 1973, and the economic downturn could dampen demand for pricier offerings like the Angus.

McDonald's tweaked the Angus for two years in test markets in California, New York and Columbus, Ohio. The challenge was making the large burger tasty enough using McDonald's existing cooking equipment.

Unlike Burger King and others that broil burgers over an open flame, McDonald's uses electric fryers. The two cooking techniques create different tastes, but McDonald's doesn't want to make franchisees buy new kitchen equipment at the same time they are spending up to $100,000 per restaurant on coffee machines.

EXPANSION PLANS

Many analysts didn't expect McDonald's to introduce the Angus this year because the company has been focusing on the specialty coffees, its largest menu expansion in 30 years. But the Angus provides another new product to promote nationally, and new products help drive growth in fast-food sales.

"It's always a good strategy to have one or two new products a year to help boost sales," says Larry Miller, an analyst in Atlanta at RBC Capital Markets. "But I wonder how successful it will be to launch two premium products in one year."

Southern California restaurants sold about 70 Angus burgers a day when the sandwich was introduced there in 2007, internal sales reports show. At that rate, it would generate annual sales of about $100,000 per restaurant, a 4% bump.

But as often happens with new products, Angus sales declined after an initial advertising barrage. Southern California stores sold about 25 per day during the last week of January, sales reports indicate. Angus sales there pale in comparison to the Big Mac but exceed sales of the McSkillet burrito and Southern Style Chicken Sandwich, both of which were introduced nationally last year.

Outsized burgers have become a fast-food staple since Carl's Jr. rolled one out in 2001 and Burger King followed suit in 2004. Recently, Burger King added the 7-ounce Steakhouse XT, and regional chains offering bigger burgers are expanding around the country.

"To stay competitive you need to have a big, premium burger," says Robert Sandelman, CEO of Sandelman & Associates Inc., a California-based market research firm. "These big burgers appeal to people who are trading down from a Chili's or a Friday's and want to get a good burger at a fast-food place."

Mr. Sandelman says large burgers appeal most to young men, a key fast-food customer. Burger King and Carl's Jr. have traditionally targeted young men, while McDonald's aims to attract families.

McDonald's has had better luck in recent years with salads, snack wraps and chicken sandwiches than with new hamburgers. The Arch Deluxe flopped in the 1990s after franchisees spent heavily on equipment to make it. Earlier, the chain abandoned both the McLean and the McDLT. The Big N' Tasty debuted nationally in 2001, but some stores in New York already have replaced it with the Angus.

Franchisees elsewhere, who have watched rivals rack up sales of bigger burgers, are just as eager to add the Angus to their menus, two restaurant owners say.

"Operators are happy about any new product that doesn't require a new capital investment and can increase sales," one franchisee says.

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