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McDonald's Thinks 'Retail'

NEW YORK - McDonald's Corp. is exploring how to use its restaurant locations to sell items other than food, Wednesday's Wall Street Journal reported.

"We need to think of ourselves as a retailer," says Matthew Paull, McDonald's chief financial officer. "What else can we do on that real estate and that can make us a whole lot of money?"

McDonald's executives in Oak Brook, Ill., are calling the strategic project an "extension" and have refused to divulge what "extension" means. Paull said the company is about two years away from any kind of launch "beyond food," but that it is "going to try a bunch of experiments."

The burger giant needs to find more sources of revenue to make it in the long term, The Wall Street Journal reports, noting that its sales have slowed in the saturated U.S. fast-food market, where the chain has 13,100 stores. The company has gone on an acquisition binge, going beyond fast food to buy up more formal restaurant concepts such as Boston Market, Chipotle Mexican Grill and Donatos Pizza.

McDonald's is unique in the fast-food industry in that it owns much of its real estate or has it tied up in long-term leases, giving the company more control over what it can do on the land.

Retail experts say McDonald's would probably stick close to its core audience, families, by building on its partnership with Walt Disney Co. However, there are constraints on what McDonald's can sell, the retail experts add. There is little space to display merchandise or to store inventory. And clothes are probably out because of greasy odors from the food.

McDonald's also won't have the luxury of browsing shoppers, says Peter Brown, chairman of Kurt Salmon Associates, a New York retail consultancy, since clients zip in and out. McDonald's operations at its counter and drive-in window are timed to within seconds.

Mr. Brown says he could see McDonald's selling such things as stamps, videos or even watches. "Little things that aren't bulky and that aren't so pricey," he says.
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