McDonald's Focuses on Expanded Menu and Convenience in China

From McDonald's (MCD) Q1 2007 earnings conference call last week:

Ralph Alvarez - President and Chief Operating Officer

We have compelling, locally relevant plans in each of the countries and we are doing a good job executing against those plans. For example, in China our management team is having success delivering on what we said we would do -- focusing on branded affordability, more choice on the menu, and expanded convenience. We are beginning to see traction.

In fact, in the first quarter, China revenues increased 15.9% in constant currencies, company-operated margins were up 380 basis points, and our operating income grew by 73.5%.

McDonald's China is actively promoting the variety of proteins we offer -- chicken, beef, and fish. This unique-to-McDonald's consumer proposition, when coupled with creative advertising, distinguishes us from the other quick service restaurants there.

With increased spending power and a 15% growth in automobiles comes a greater mobility and demand for convenience. The McDonald's drive-thru becomes an ideal choice.

Our development plans for 2007 include opening 100 new restaurants, half of which will be drive-thrus. New restaurant drive-thru restaurant sales are higher than those restaurants that open without drive-thrus.

In addition, we opened the first drive-thru as part of our Sinopec alliance this year and we expect to open 10 more by the end of the year. Sinopec is China’s largest petroleum retailer with 30,000 locations, providing us with an important pipeline of sites for the future. We are very optimistic about our prospects in China.

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