020840 McDonald's Set for Debut in Times Square

New York (Reuters) - In one of the splashiest premieres in Manhattan's theater district this year, McDonald's next month will open a store that it hopes will restore some of the sizzle it's lost in recent years on Main Street.

The fast-food chain next month opens its biggest U.S. restaurant ever on 42nd Street, the epicenter of New York's tourism and entertainment business.

The impresario of the New York debut is lifelong New Yorker Irwin Kruger, a soft-spoken restaurateur who opened the city's first McDonald's in 1973 and owns six other McDonald's in the city. His new fast- food restaurant has a theater-type marquee and is designed to showcase aspects of the old Manhattan theater district.

"It's still a hamburger business," said Kruger. "But the Times Square neighborhood and architecture of this place gives us a huge opportunity to show a new side of McDonald's."

That should be welcome news for a chain that could use some image-boosting. The Oak Brook, Ill.- based fast-food giant has posted earnings declines in six of the last seven quarters.

Though its global sales have continued to rise, sales in its outlets open for at least 13 months -- a key gauge of industry performance -- have remained stubbornly soft in the United States, its biggest market. Meanwhile, rivals such as Wendy's International are gaining market share.

Midtown New York would seem to be a strange spot to launch a fast-food renaissance. Chains generally do not fare well in the city, which prides itself on the variety and quality of its restaurants. Just 46 of McDonald's 30,000 restaurants are located in Manhattan, a compared with hundreds of Chinese, Mexican and other ethnic restaurants.

But Times Square, which now draws throngs of tourists after it was cleaned up in the mid-1990s, appears to be an exception. Olive Garden, the mid-priced Italian chain owned by Darden Restaurants, has its highest revenue-generating restaurant in Times Square, which produces sales above the chain's average unit volume of $3.9 million a year, said a spokesman for the Orlando, Florida-based company.

Kruger would not say how much it cost to build his newest restaurant, but expects it will bring in big business.

"I expect this will be one of the busiest McDonald's in the country," he said, proudly standing beneath the sweeping red and yellow McDonald's marquee that dominates the glitzy storefronts on 42nd Street.

It's not the first time McDonald's has broken the mold as it tries to draw more customers and create some excitement to counter the fast-food fatigue many consumers appear to be suffering. In May, it opened a massive outlet in the National Air and Space Museum in Washington, D.C., serving pizza and equipped with movie screens. Last year, it opened a test restaurant in Indiana offering diner-style food and table service.

The new Times Square restaurant will allow for still more experimentation and new product roll-outs in a highly visible location. To start, Kruger will put McDonuts and ice cream on the menu, a departure from the typical McDonald's fare.

The chain that built its franchise empire on the uniformity of its Big Macs is enthusiastic about the new concepts, Kruger said.

"They see me as a local entrepreneur, so they give me free rein," he said.

The store, scheduled to open in September, looks unlike any other of its other 30,000 outlets in the world.

Gone are the usual plastic chairs, formica tables, and brightly colored Playlands on the premises.

Instead, dozens of theatrical lights hang from the exposed, blackened ceiling of the cavernous, 17,000 square-foot space, punctuated with columns of aqua blue glass.

Dark gray ceramic tiles cover the walls, alternating with sections of exposed brick from the original building built in 1913. Black, industrial-grade rubber covers the floors on all of its three levels. The industrial, high-tech decor is meant to combine elements of Broadway theater and New York City street life with hallmarks of the world's biggest fast-food chain, says franchiser Kruger.

The McDonald's debut marks another step in the transformation of a part of the city once known for porn shops and sleaze. The opening of McDonald's reinforces Times Square as a top tourist and flagship spot for many of the biggest family-oriented retailers. Toys R Us and Walt Disney Co have opened big retail stores, and even Seven Eleven convenience stores is about to join the Times Square crowd with a major store opening of its own.

McDONUTS AND OTHER NEW ITEMS

The stores themselves are being turned into theatrical events. Kruger plans to showcase a doughnut- making machine in the storefront. The restaurant will also feature a separate shop selling ice cream products now being tested by the company.

When complete, a row of flat-panel interactive displays showing subway maps, theater and movie schedules will line the corridor on the ground-floor level, which stretches for an entire city block.

Another multimedia exhibit on the upper floor will feature movie trailers and photos of historic Times Square. And on the uppermost level, a glass enclosed-conference room equipped with high-speed Internet access will be available for private meetings and parties.

The high-tech features are part of a plan for a restaurant that goes beyond selling fast food and is integrated with the rest of the neighborhood, Kruger said.

"Knowing New York and what New Yorkers expect gives me a huge opportunity to showcase Times Square and how it used to be," Kruger said. "But more important, I'm just trying to have fun."

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