Tarnished arches

CHICAGO (AP) -- Golden arches have been proliferating around the globe ever since a traveling salesman named Ray Kroc had a vision about the limitless potential of fast food nearly a half-century ago.
Taking over the revolutionary Speedee Service System from brothers Richard and Maurice McDonald, Kroc built a burger-and-fries empire.
But after spreading to 30,000 restaurants in 121 countries and more than tripling in size since Kroc died in 1984, the McDonald's Corp. empire is showing widening cracks.
"It's an ideal-type brand that's in trouble," said Kevin Clancy, who heads the Copernicus marketing and research consultancy in Auburndale, Mass. "They haven't had a really successful new product or many marketing successes in more than a decade. The brand has been moving ever so slowly and quietly toward oblivion for years."
Trying to break slump
Facing a crowded restaurant market, complaints about poor service and a depressed stock price, the Oak Brook, Ill.-based company has ordered up slower expansion and other measures as it tries to break an unprecedented slump. A planned overhaul of U.S. restaurants, its first big price-discounting campaign since 1997 and menu additions are part of its reinvention.
Some restaurant experts doubt, however, whether any actions can fully restore the golden glow.
McDonald's and its more than 13,300 U.S. stores hold a whopping lead over Burger King and Wendy's with 43 percent of the quick-service hamburger market, according to data compiled by Chicago-based Technomic Inc. That's bigger than the next four chains' portions combined.
But Americans increasingly are forsaking burger places for more upscale eateries, as well as everything from pizza chains to bakery cafes to sandwich shops. And a baby boomer-led clamor for healthier food presents a tall order for the purveyor of Big Macs.
"The fundamental core of their market has changed," said industry consultant Jerry McVety, president of McVety & amp; Associates in Farmington Hills, Mich. "There's more competition. Kids today have more money, and many of them don't necessarily feel that going to McDonald's is a cool thing to do."
Stagnant, slipping
Sales at established U.S. McDonald's restaurants have been stagnant for several years and slid 2.8 percent in the third quarter compared with the previous year.
The deepened U.S. slump, following mad-cow disease scares overseas that weakened profits in 2000-01, has put the company on pace for a second straight year of lower earnings. Its stock has lost about 70 percent of its value since 1998.
McDonald's list of restaurant brands is getting longer, too, with the acquisitions of Chipotle Mexican Grill, Donatos Pizza and Boston Market since 1998. In a telling shift of strategy, the company plans to open 140 Chipotles in the United States next year but just 100 McDonald's restaurants -- less than a third of this year's total.
Worried about faltering service, McDonald's started a yearlong self-assessment in February with a restaurant-grading program, an army of mystery shoppers and a toll-free telephone number for customer feedback.
Marketing muscle
This fall, it has put its marketing muscle behind a new $1 menu and is preparing to roll out the next batch of products, including premium salads and flatbread sandwiches.
It also has begun remodeling, relocating or rebuilding more than 2,000 restaurants. The $300 million to $400 million face-lift includes double-lane drive-throughs, easier-to-read menu boards and updated bathrooms.