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American Morning
Interview with Andy Serwer, 'Fortune' Magazine
Aired May 03, 2002 - 09:35 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: Andy Serwer, "Fortune" magazine's editor-at-large back with us this morning after an undisclosed absence of several days.
ANDY SERWER, EDITOR AT LARGE, "FORTUNE": I was out there working, Jack.
CAFFERTY: You were out in the heartland, out there in America.
SERWER: I was out -- I was in Denver, I was in Omaha, all over the place.
CAFFERTY: Sat down to dinner with the oracle at Omaha.
SERWER: With Warren Buffett, chatted with him a little bit about the economy and the state of things, and he thinks things are...
CAFFERTY: Is he buying McDonald's stock these days?
SERWER: No. Well, I don't know. You always have to say that about Warren Buffett. He will not tell you if you ask him if he is buying a stock or not.
CAFFERTY: McDonald's, though, is struggling, aren't they?
SERWER: They are. They are really having some problems, Jack. And, of course, it used to be the great American success story. Rolled them out all across the country.
CAFFERTY: Sure.
SERWER: They saturated the United States, they moved abroad. Now 18,000 of their 30,000 stores are overseas, 50 percent of their profits are overseas, but what has happened in Europe, of course, is you have got mad cow disease, and then in the third world -- the developing world, people are throwing rocks through the windows because nothing represents America more than McDonald's...
CAFFERTY: Oh, of course.
SERWER: ... so they have had troubles all over the place with that. Meanwhile, in the United States, the business is stagnant, and if you look at the market share numbers of McDonald's compared to some of its competitors -- let's take a look there. Still a commanding lead, Jack, about 41 percent, but the big point there it that it is held flat and gone down over the past two years. These numbers are just out this week.
CAFFERTY: And the other guys are gaining on them.
SERWER: They are. Burger King is down also, a little bit. But they are on the block. The big winner here is Wendy's. Tremendous gain in market share, you can see that is up a full percentage point, which is huge in that business, over the past couple of years. Jack in the Box and Sonic also gaining ground, and McDonald's stock has gone absolutely nowhere for the past five years. Six quarters in a row, their profits are down.
CAFFERTY: What are they doing wrong? I mean, Wendy's makes hamburgers too. They all sell hamburgers. I mean, that is an oversimplification. Why is McDonald's all of a sudden not doing the way they used to do?
SERWER: Well, they are just so big, and they keep experimenting, they are trying to tweak. Wendy's has kind of got a real good niche, where they have kind of got the macho burger, you know. They have kind of got a real...
CAFFERTY: Right. A couple of those big old square, greasy patties of meat and some cheese...
SERWER: Yes, with that cheese and mushroom sauce on it.
CAFFERTY: Yes, I love those things.
SERWER: That will do it to you.
CAFFERTY: That will get you.
SERWER: But what McDonald's is trying to do now is they are opening up -- just this week, they have announced a new town center mega-McDonald's, 11,000 square feet.
CAFFERTY: Holy cow.
SERWER: I mean, that is -- that's huge. This is in Columbus, Ohio. It has got different themes for different parts of the family. It has got an espresso bar, living room concept for grownups, a karaoke bar for teens, and a drive through, a mini drive through for tots.
CAFFERTY: You know, they might be on to something. If you can go there, and off load the small children in one part of the place, dump the teenagers in another part of the place, and then you can go sit down in the living room, sit and enjoy your lunch without a lot of interruptions, they might have concept, an idea.
SERWER: Yes, if you leave them all there...
CAFFERTY: Yes, and then if you finish quickly, you just get up and go home, and leave them there. SERWER: Yes, baby-sitting service involved.
CAFFERTY: We'll be back tonight when they close.
SERWER: You know, and it is never too early -- my kids have taught me this -- it is never too early in the day, Jack, for a McFlurry, and that is where I am going.
CAFFERTY: What's a McFlurry?
SERWER: You don't know what a McFlurry is? Your kids are too old.
CAFFERTY: I don't know. That is new to me.
SERWER: This is new. It is an ice cream, milk shake goo thing.
CAFFERTY: I would like that.
SERWER: Yes, all right, I will get you one.
CAFFERTY: I stop -- I get those quarter pounders, I go to the drive-up window. I love those things.
SERWER: All right. Well, get you a McFlurry this time.
CAFFERTY: A McFlurry. OK. Good to have you back.
SERWER: See you later.
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