News

McDinner and a movie? McDonald's tests DVD rental kiosks

January 5, 2003

WASHINGTON, D. C. -- McDonald'shas put its own stamp on dinner and a movie, installing DVD-rental kiosks outside some of its restaurants, according to a report in the Washington Post.

The Oak Brook, Ill.-based fast-food chain, in its latest bid to attract more customers, has placed machines in the Washington, D.C., and San Francisco areas.

In December, the burger giant predicted it would have its first loss ever this quarter. The company -- which has battled with other chains in a price war that packed its menu with lower prices -- hopes the DVDs will give it an edge over the competition.

The kiosks, called TikTok DVD Shops, accept only plastic payment and charge customers 99 cents to $1.50 per day. Customers can keep the movies for up to two weeks in some cases. Those who don't return a movie on time are charged the entire cost of the DVD.

According to the Postreport, all of the suburban TikTok DVD Shops -- created by Hettie Herzog, president and owner of Automated Distribution Technologies in Exton, Pa. -- are in McDonald's parking lots.

"They are performing well for us," said McDonald's spokeswoman Lisa Howard, although she said the company would not release sales figures for the TikTok shops. "They are pretty popular with our customers and a great convenience in this time-pressed world we live in. It's one less stop to make."

However, Banc of America Securities analyst Andrew Barish questions whether the fast-food giant is straying too far from its core products: burgers, fries and chicken McNuggets.

"Over the next couple of years the company needs to focus on its core business and improve that," Barish said. "You will see fewer of these types of ventures. They've said in the past that they will try to leverage their real estate by looking at nonfood efforts but, given the problems its core business has had, this will probably remain a small test."

At a Washington, D.C.-area McDonald's, 52-year-old John Spruill parked his car in front of the red-and-blue machine, swiped his credit card, followed the directions on the ATM-like screen and slid his "Reign of Fire" DVD into the return receptacle.

Spruill said he was a little wary of the machine at first, but, after trying it, has become a regular customer, renting one DVD a week for the past month.

"I was skeptical like anyone else, but after I did it once or twice it was so convenient for me," Spruill said. "I think it's a fabulous idea."

In the past, similar vending-machine concepts have proved risky. Peter Folger, president of Vending Intelligence in Sherman Oaks, Calif., built a machine that sold compact discs in 1992 and placed them around Los Angeles, but removed machines two years later because of slow sales.

Now, he's dusting off his warehoused machines and selling them to retailers interested in taking the plunge into machine-operated retailing. His vending machines, which now sell DVDs and CDs, have been bought by a movie-theater owner in Utah and a music-store proprietor in Los Angeles.

Folger said that after using ATMs and shopping online, he thinks consumers are ready to shop via machines.

"It all really started with ATM machines but instead of dispensing money it dispenses product," Folger said. "Computerization in America is so common now that it's less intimidating. The machine tells you what button to press and when to press it."