Dvd rental machine

OAK BROOK, ILL. -- Looking to lure customers with the latest Hollywood blockbusters, McDonald's Corp. is expanding its test of automated DVD rental machines by installing them in more than 100 units in the Denver area.

The fast-food giant, which has posted strong U.S. same-store sales increases over the past year, already has the machine, also known as a Redbox, in operation at six stores in Las Vegas and 11 restaurants in Washington, D.C., according to spokeswoman Lisa Howard. The company disclosed neither the costs associated with installing or maintaining the device nor sales projections.

"We hope that it will bring in more new customers," Howard said. "As busy as people are today, now they can come to McDonald's and get dinner and a movie."

But one industry observer pointed out that consumers traditionally haven't associated a movie rental with a McDonald's meal.

"Usually, they think of ordering pizza," noted Bob Sandelman, president of Sandelman & Associates of Villa Park, Calif., a marketing research firm that tracks consumer trends for the foodservice industry. He said that while national pizza chains have featured some limited promotions with DVD purchases, the category has yet to experiment with the delivery of movie rentals, which could be a compelling offer.

Still, Sandelman said McDonald's has the opportunity to draw customers from a convenience standpoint and gain the "ancillary benefit of driving people late in the day," which potentially might boost the chain's dinner or late-night business. However, a lot of the items on McDonald's menu don't "travel as well as chicken or pizza do," according to Sandelman.

Nonetheless, McDonald's officials characterized the experiment as "small" and insisted that it is too soon to determine the viability of the rental device, despite speculation that the machines could be launched at the chain's restaurants nationwide.

"We are always looking for new, relevant offerings for our customers, so we will see how the Denver test goes," Howard said. "Customers continue to look to McDonald's for solutions in their busy lives, and we are responding with convenience and value."

For the Denver pilot program, the machines will be located inside about 60 restaurants, and the remaining rental units would be outside restaurants, allowing for 24-hour-a-day access, Howard said. The Redbox rental devices have been installed at more than two dozen restaurants in Denver, and the rollout is expected to be completed at 104 units by the end of June, McDonald's said. The restaurants included in the test are both corporate and franchised stores, Howard said.

The cost of renting a DVD will be $1 a day plus tax, and once a week new movies will be added to a selection of the current top 30 titles. In comparison, the Blockbuster movie-rental chain charges about $3.99 plus tax for a three-day rental.

The automated machines accept credit or debit cards for payment, and the rental process takes about one minute, McDonald's said. Customers can enter their e-mail addresses to receive an instant electronic receipt, and they can return their DVDs to any participating Denver McDonald's, which observers noted could drive more business to the restaurants.

McDonald's touted that the devices charge "no late fees." Instead, customers can keep the DVD as long as they like for an additional $1 each night, and after 21 nights, Redbox considers the rental a purchase and then automatically charges the customer a total of $25, allowing him or her to keep the single DVD.

"Denver was chosen because it's a great market for testing new ideas and consumer innovation," said Bernie Schaefer, vice president and general manager of McDonald's Rocky Mountain Region.

In addition to serving as the pilot city for the rental machines, Denver also is part of McDonald's test with self-order kiosks. Five units in the market are experimenting with automated machines that allow customers to place orders on a touch screen. After the order is placed, the kiosks send the information to the back-of-the-house.

But even as McDonald's continues to expand its current technology tests, the chain last November pulled the plug on its four-unit experiment of a robotic vending kiosk, named Tiktok Easy Shop, located in the parking lots of McDonald's restaurants in the Washington, D.C., area. At the time company officials said they would focus instead on the burger business, explaining that the convenience format didn't fit with the company's long-term growth strategy.

The refrigerated Tiktok units, which stood 15 feet high by 12 feet wide, were stocked with nearly 200 items, including milk, cartons of eggs, pantyhose and diapers. Prices ranged from $1 to $4, and customers could pay with credit cards or coins and dollar bills. At the time the units were shut down McDonald's did not comment on whether or not it lost money.

Still, McDonald's officials said they remain encouraged about the potential for the DVD rental devices, particularly as consumer acceptance of automated equipment has grown over the last several years with the national explosion of ATM terminals and other similar machines.