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McDonald's "Super Size Me" Burger Empire Crumbling in UK

From: The Independent (UK)
Leading article: McDonald's loss is the healthy consumer's gain
Health fears eat into profits at McDonald's

By Jonathan Brown

29 September 2004

The fast-food giant McDonald's is used to serving up super- size profits
for its shareholders as well as bulging cartons of burgers and fries to a
hungry public. But yesterday it was explaining away a significant decline in
reported profits as it revealed its restaurants had been hit by a big drop
in turnover last year.

The UK arm of the global chain, which owns two thirds of the 1,235
McDonald's restaurants across Britain, reported operating profits were down
£61m on the previous year. However, the company insisted that across the UK
group as a whole, which includes its lucrative property holdings, the figure
was closer to a £5m fall. Profitability, it said, had been steadily falling
since 2000.

The company blamed the decline in operating profits on financial
restructuring and claimed that results were in line with expectations.

Turnover at the company's restaurants, excluding its 470 franchises for
which details are not provided, was down £42m - 3.6 per cent - to £1.09bn in

Never before has the lustre of the Golden Arches appeared so dim. The
company has enjoyed three decades of phenomenal growth since launching its
first restaurant in Britain 30 years ago. But this latest bad news comes at
a critical time for the burger empire as it is involved in a rearguard
action to defend its menu against a barrage of criticism from health and
nutrition campaigners as well as a raft of litigation in the courts.

Chief among its tormentors is Morgan Spurlock, a film director, whose
attempt to exist on a pure diet of McDonald's for a month in the hit
documentary Super Size Me saw him pile on 30lbs and suffer a falling sex
drive. Meanwhile, the so-called McLibel Two have reopened the scars left by
the longest trial in English legal history by taking their case to the
European Court of Human Rights. The company is also braced for compensation
claims from obese former customers who claim their health suffered by eating
too many burgers.

McDonald's yesterday conceded it had faced two challenging years in Britain
but insisted the future was bright. Last March, it announced the most
significant change to its menu ever by introducing salads in all its
restaurants and providing more nutritional information to an increasingly
health conscious public.

The Salad Plus initiative has seen outlets offer fruit, yoghurts and mineral
water alongside the more traditional menu of Big Macs and french fries.

McDonald's also recently signed a lucrative deal with the vegetarian brand
Quorn, and will offer a vegetarian option to its three million customers a
day. The company hopes this will boost sales by £40m a year. A new recipe
for Chicken McNuggets has also been launched which reduces the salt content.

Amanda Pierce of McDonald's said this changing pattern was a similar to that
seen in the United States and Australia, where efforts to lure people back
into their outlets were proving successful.

The company is confident of continuing success and plans to open a further
22 restaurants in Britain this year and a 24 in 2005, she said. Industry
analysts believe McDonald's' current problems are compounded by an explosion
in choice in the proliferating fast food outlets in Britain's towns and
cities. According to Sue Baic of the British Dietetic Association, we can
now choose lunch from a range of specialised sushi, bagel and soup bars, all
of which offer a healthier alternative to McDonald's. She welcomed the
burger giant's attempts to change its menu but said there was still room for
improvement. "The healthy options must be equally as attractive, available
and affordable as the less healthy one," she said.

Ian Tokelove of the Food Commission said consumers had woken up to the
choices available. "McDonald's have tried to convince us that they are
making their food more healthy but their salads have been shown to have more
fat than a burger when you take into account the dressing," he said.