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McD’s details $2B cap-ex budget, plans for new chicken items

NEW YORK McDonald’s expects to spend $2 billion this year to “reimage” about 1,500 restaurants and open approximately 1,000 stores, Pete Bensen, chief financial officer, told financial analysts Wednesday at a conference in New York. The plan is to increase the number of restaurants by 1 to 2 percent, he said.

Bensen also divulged plans for the spring introduction of a breakfast biscuit sandwich and a conventional sandwich made with southern-style chicken. In a picture shown during the presentation, the chicken appeared to be a fried fillet. Bensen said the promotion of chicken products is a key strategy of the burger chain.

In his first presentation since he replaced Matthew Paull, who retired, Bensen also reiterated McDonald’s plans to refranchise 1,000 to 1,500 domestic restaurants in major markets within the next three years. The sales to franchisees would reduce the chain’s portion of company units to below 20 percent, from the current level of 22 percent.

McDonald’s also forecast increasing its beverage sales 4 percent annually for the next five years, with the addition of new espresso-based coffees, fruit smoothies, frappes, sweet iced tea, more fountain choices and bottled soft drinks. By the time the entire new beverage program is rolled out in mid-2009, individual restaurants should average $125,000 in additional sales, Bensen said. As previously reported, McDonald’s will pay about up to 40 percent of the franchisees’ costs of rolling out the new beverage platform. Bensen confirmed that the contribution from the franchisor could run as high as $75,000 per store, with operators paying an additional $25,000 per unit for equipment.

The quality of the espresso specialty coffees, now in at least 800 test stores, “will rival the best in class,” Bensen said. He noted that the chain would stress convenience and price as additional advantages. Various portion sizes, syrups and types of milks are being tested, he said.

Internationally, Bensen said, McDonald’s will open 125 units this year in China and 35 to 40 in Russia. The combined revenue from stores in China, Russia and India currently accounts for 7 percent of total worldwide sales, and Bensen said the percentage would increase significantly in the future.

Bensen also said McDonald’s plans to return $15 billion to $17 billion to shareholders from 2007 through 2009. That amount is roughly double the return paid from 2004 through 2006.

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