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Would You Like A Latte With Your Fries?

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By ASHLEY M. HEHER, The Associated Press

Published: November 19, 2007

CHICAGO - McDonald's Corp. executives came out swinging when they announced their assault on the comfy world of coffee shops.

After the success of its upgraded drip coffee - which even managed to snag a thumbs-up from testers at Consumer Reports earlier this year - the fast-food chain known for super-size meals is gearing up for a massive expansion into the world of lattes.

"We want to move from beverages as an accompaniment to being a beverage destination," Don Thompson, president of McDonald's USA, said in a meeting with analysts Tuesday. "Our speed, our convenience, the value that we can afford to customers without quality comprise will make us a formidable player."

Restaurants will offer lattes, mochas, cappuccinos and espressos with a choice of different flavorings and milk. Industry watchers say the drinks cost about 50 cents less than at Starbucks.

As it tries to cash in on the fast-growing specialty coffee market, however, the world's largest restaurant chain is already finding itself at odds with the unlikeliest of groups: its own franchise owners.

"There's a real groundswell of resistance among the franchisees about this," said Richard Adams, a consultant for McDonald's franchise owners. He estimated the effort has a 50-50 chance of getting off the ground because of franchise opposition.

Store owners are balking at the plan's estimated $100,000 price tag to cover renovations and initial new equipment.

Many also are concerned that little customer interest in McMochas means it could take years to recoup their investment, even on the famously high-margin coffee drinks.

McDonald's said it's confident the new coffee will win over new customers and help individual stores boost annual revenue by about $125,000 once the coffee products, along with new bottled drinks, smoothies and other beverages are added to stores.

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