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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (15435)	9/12/2002 12:59:09 PM
From: Allen Furlan	Read Replies (3) \| Respond to of 78740

Bob, just curious. I received unsolicited mailing from Rim of Fire Investments which had on the envelope "Why I'm buying 40,000 shares of a tiny hamburger chain that's trouncing McDonalds in Asia" Letter says they dominate in their home country. Is McD having major problems in asia?

To: Bob Rudd who wrote (15435)	9/12/2002 1:55:46 PM
From: Mark Marcellus	Read Replies (1) \| Respond to of 78740

Do you agree with the idea that they are sacrificing speed of service, a critical element in customer preference, IMO, for less important differentiated offerings? I agree absolutely. Not only that, they are instituting systems which marginally improve food quality but are much more prone to breakdowns. The new shake machines are a good example. They do make a better shake, but half the time they're not working. When they are working, the flavors from the last shake tend to bleed into the new one, meaning the shake has to be thrown out and a new one made. One common suggestion is that MCD should offer "breakfast all day", which sounds like a great idea. The response has supposedly been that breakfast requires a different grill which has to be broken down before they can do the rest of the day's offerings. That is probably true, but if they had spent all their time and money coming up with a solution to that problem instead of that Rube Goldberg inspired "Made for You" system, they would have actually improved the operation instead of throwing sand into the gears of a money machine. MCD has no problems that couldn't be solved if we could get Ray Kroc's ghost to return for about a week.

To: Bob Rudd who wrote (15435)	10/22/2002 9:41:40 PM
From: Mark Marcellus	Read Replies (2) \| Respond to of 78740

Bob, have you listened to the MCD CC? I have mixed feelings. What they're talking about doing sounds sensible, but it worries me that they're describing it as a "short term" strategy (i.e. set the core business right so they can afford once again to invest in idiotic non core ventures). The US guy sounds like he's competent, and we're being promised great things for the dollar menu program. Management is also implying that the MFY kinks have been worked out (though for the MCD's around me, the shake machines are still a major problem. I talked to one manager who said she had to have them come in at least once a week to fix the thing). The big news was their announcement that they were cutting back in many overseas areas, esp. Asia Pacific (excluding China), and Latin America, and redirecting capital to upgrading U.S stores, both company owned and franchised. In broad strokes it all made sense, but the details are murky, and I certainly do not trust management to get it right. Also, maybe I'm just prejudiced, but Greenberg's opening statement really bothered me. Referring to last month he said "To our people, [last month] feels like the longest month in our history. The stock market's reaction... has been painful and upsetting." He makes it sound like management errors had nothing to do with it, and that the real problem was the drop in stock price. He later goes on to say "[for the past two years] cyclical factors have negatively affected us". Give me a break. I guess Wendy's and Yum exist in an alternate universe. He also, rather wistfully, noted at the end of the call that no one had asked about the new "3 in 1" concept which they're testing in Lincoln, Nebraska. From the description, it sounds like they're trying to combine a Boston Market and McDonalds in a single store and adding a dessert section. Maybe it makes sense, maybe it doesn't, but I certainly wouldn't look for it to save the company. The fact that Greenburg felt compelled to mention it just shows me, once again, that he will never be happy just running a fast food hamburger chain - which means he is the wrong man for this job. Despite my distrust of management, I did like most of what they said they were going to do next year, though I think they're doing the right things for the wrong reasons. It still remains to be seen if they can walk the talk.