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More Golden Arches for Eastern Europe

March 7, 1990

CHICAGO (AP) _ The Berlin Wall is down, and the Golden Arches are going up.

McDonald’s Corp. plans to expand its fast-food empire into Eastern Europe, taking advantage of democratic and economic changes sweeping the region.

″We’ve been in Eastern Europe, so we’re not reacting to recent political developments there. We’ve been planning for this area for years,″ McDonald’s spokesman Chuck Ebeling said Wednesday.

″But political developments there open up promising aspects for us,″ he said.

The U.S. burger-and-fries giant opened restaurants in Hungary and Yugoslavia in 1988, began second outlets recently and hopes to have three more restaurants in each country soon, Ebeling said.

The suburban Oak Brook, Ill.-based company also is eyeing East Germany and Czechoslovakia, while Poland is in its ″long-term plans,″ he said.

″East Germany and Czechoslovakia are likely for the next step in development, but not necessarily this year,″ Ebeling said in a telephone interview from company headquarters.

The restaurants in Hungary and Yugoslavia, as well as the first Soviet McDonald’s, which opened Jan. 31 in Moscow, are been doing well.

″There’s lots of pent-up demand for consumer goods,″ said Ebeling. ″McDonald’s is a welcome addition, something not otherwise available.″

While McDonald’s may ″do it all for you,″ as its domestic jingle says, the company does less of it for Eastern Europeans.

″It’s pretty much the same menu - hamburgers, french fries, Coke and milkshakes. It’s simpler than the U.S. menu. Breakfast is not served in Eastern Europe and there’s not the same range of products,″ Ebeling said.

He strongly discounted a report published Feb. 17 in Trybuna, the newspaper of the now-dissolved Polish communist party, that said McDonald’s doesn’t want to invest in Poland because of economic problems there.

″It’s not true,″ said Ebeling.

″I’ve spoken to the president of McDonald’s International about Eastern Europe, and Poland is in our long-term plans, but I can’t be more specific. We don’t discuss negotiations,″ he said.

Back home, some investors have been leery of the risk involved in such expansion.

″Wall Street wants overnight success. They want to know, ’Why does it take three or four years for a profit?‴ said Michael Kennedy, an IDS Financial Services analyst specializing in the restaurant business.

″McDonald’s invested $50 million in Russia and only has one store, but five years from now, they will have a major position, and others will be left out in the cold,″ said Kennedy.

″There are 350 million people in Eastern Europe, and your eyes get big when you look at the consumer market over there, but these people don’t have any middle-class spending power and it will be a long, long time until anything of significant comes out of it,″ Kennedy said.

He said he believes McDonald’s has tremendous advantages over other western companies venturing into Eastern Europe.

″McDonald’s started in Hungary and Yugoslavia, so they are ahead of the game when it comes to dealing with a closed society,″ he said.

And, Kennedy said, McDonald’s officials are an innovative bunch.

For example, to be assured of french-fry supplies for their Moscow restaurant, McDonald’s took seedlings for a new strain of potatoes from Holland and planted them in Russia.

″I’m always in awe of McDonald’s management. They are able to do things other people say you can’t do,″ he said. ″They are awfully bright and they see opportunities others don’t.″

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