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June 27, 2003

McDonald's to Launch in Three Cities with Three Providers

McDonald's on branding panel at 802.11 Planet says three markets will launch next week: New York, SF Bay (along Highway 101), and Chicago: Their brand will be the at-sign with a "m" in it, and they will put three-foot tall round signs with this brand on store signs that offer this service. They will test with three providers, Cometa being one (and Wayport appearing in a slide shown as one of the others).

Mark Jamison of McDonald's said, the "fairly public bake-off" is to "show us that you can deploy, you can operate at certain service levels," bring in customers, that the revenue share is correct especially because "we're running our back office" off the network and it needs to work for corporate IT purpose.

Jamison noted that McDonald's has an extremely large mobile workforce that visit hundreds of stores on a regular basis, so the network will be useful for this workforce as well as their customers.

The slogan: "Bites or Bytes. We do both."

On the same panel, Lovina McMurchy of Starbucks said, "We're exceeding our own internal financial models for what we expected at this point." (However, a story a few days ago quoted a Starbucks spokesperson saying that only 10,000s of thousands of users were connecting each month, which would be an average of 5+ connections per store per month.)

In terms of Starbucks relationship with T-Mobile, "Our role is to really endorse the service provider in this environment."

In Q&A: McMurchy: 60 percent of Starbucks business is before 9 in the morning, so resources aren't taxed the rest of the day, and 80 percent of the business is to go. Customers value the environment but "they don't really use it that much."

90 percent of Wi-Fi usage in the stores is after 9 am in the morning. The model "encourages people to come to the store at a time" that they want people to come into the store. "It's a really good fit. Spend as much as time you a frappachino."

Jamison said, about Starbucks, "They don't stay, but they believe that they could." People come in and then leave, so don't have to deal with it operationally. 60 percent of McDonald's business is through drive-thru. 40 percent of remainder come in because drive-thru is crowded -- and then leave.

Most stores have capacity to handle folks most of the time, outside of, say, mid-town Manhattan.

Moderator: as people stay in stores, do they buy more food? Jamison: no metrics yet. McMurchy: same store comps better over same time, but can't tie. Retail surveys ask if people come more often: "a fairly large percentage of them" say yes they stay longer, which translates into an increase in sales and food.

McMurcy asked Jamison: in example of housewife who spends time while kids play, would that housewife have laptop? Would you put in equipment?

Jamison: "yeeeeah..." without going too much into their future plans. They're considering all of that kind of stuff because they have a high-end enterprise network in the location. We could open it up. "Given the content play" and partnerships with Disney and others, could have interesting content. "What kind of devices could we have in the store to allow customers to do that?" In the Bay Area, they will have devices in the store.

Moderator (Bob Ferrari): Part to drive brand loyalty, but part to drive goods. McDonald's making money off the Internet. Starbucks: relationship with T-Mobile, maybe some income, not just pure loyalty? Is income from Wi-Fi a major piece of the business model?

McMurcy: "That's a great question, Bob, and one we studiously avoid answering." Good to have many ways to make money. Efficiencies and synergies across back office over pipe. 1,000 remote workers are using service in the stores.

Audience Q: costs of Wi-Fi Zone? You need to be a member ($25,000) but no signage or license fees.

Audience Q: Parking lots -- Wi-Fi reaches the parking lot. Encourage/discourage this use? McMurchy: "We're perfectly satisfied if customer wants to do that." Stores aren't open 24 hours a day, so folks can pull up after they're closed. Or if they like sitting in the car, "if they find it more comfortable, we're cool with that." Q: Do you design the sites to cover the parking lot? McMurchy: We design for maximum coverage area.

Jamison: IBM Global Services does all deployment, and they specifically say they need to include parking lot coverage. "We're going to track that pretty closely as to when people connect." What happens when police drive by at 2 am and there are cars in the lot? "It can be a valuable part of the offering."

Q: Brand critical to future success, but when I tried to sell to other companies, didn't want to deploy because it might not work perfectly. Ease of use is a problem. Lack of on-site support? Different question because of different clientele between Starbucks and McDonalds, maybe?

McMurchy: On whole "pretty good service." How do you compare against free services? Let's choose service providers that have T-1s, premium quality service. Confident in endorsing T-Mobile because the service is pretty good. "We try hard to indicate to their customers that the network isn't perfectly secure."

Q: Is McDonalds or Starbucks using Wi-Fi Zone? And Mark, consumer education might be high, but with internal staff turnover, how do you educate?

Jamison: Zone branding -- short term, no. "We have to be careful of the Nascar effect." Intel relationship strong: wireless logo, McDonalds logo, service provider logo, Centrino logo. But when Centrino logo obligation ends -- [that obligation ends--glenn] -- that could change.

Training workforce: we're equivalent to the top 20 universities in the world in terms of how much training we do. Top 10 questions are part of training: do you have this service, what does it do ("allows you to connect wirelessly"). 30,000 restaurants. Have to do it multi-lingually.

But are designing programs to make available and open for use for employees. "Hopefully, they're in the target market."

McMurchy: not in Wi-Fi Alliance strategy. "I can see the benefit of that in theory if there was a public awareness of" that logo. But in working with many tech companies, "they underestimate how much a retailer does value that real estate." T-Mobile is first logo to put on the store. "It's the most valuable thing we have."

Without strong or compelling customer argument that logo already has meaning, we're not going to put it up. "I know this creates this awful chicken and egg thing for the alliance," but we're not going to do it.

Q: Does alliance have marketing program to push awareness of logo? Retailers: public access, so is there content filtering to prevent "mischievious activities"?

Hayes of WFA: "We're still really in the customer acquisition phase." Outreach to carriers, venue owners, providers, get critical mass.

McMurchy: We don't have a liability around that because we want the service provider to deal with it, like T-Mobile.

Jamison: "tough, tough question that we've struggled with a bunch." No content filtering. But a few interesting points. "We have more risk because we've branded it much more McDonalds." And, "people bring their families there." We have deep pockets and people love to sue McDonalds.

So service agreement says that you agree to not do bad things. Managers are trained and will kick out people. On liability side, which "scares the heck out of us." But content filtering isn't so sophisticated that it's perfect. So if you purport to have it, and someone comes in and beats it, you have some liability for it.

But if you state upfront that you're not filtering, then your liability is reduced. So it doesn't make sense to add it. "The cost of content filtering on any scale is really really expensive."

Q: Is alliance concerned that major brands (next to him) don't want to associate with your logo?

Hayes: the brand of Wi-Fi has association with high-speed services, that's what accrues to the brand. It is the major brand in the space. "I understand reasons why at this stage of the market not everyone is jumping behind it, so we just continue to add value through some of the activities to make the connectivity experience more predictable and easy to use." "We'll be patient about it."

4 TrackBacks

Would You Like Broadband With That? from From Behind the Wall of Sleep on June 27, 2003 10:20 AM

Depending on your address, Glenn Fleishman at Wi-Fi Networking News may have good news for you, especially if you have a serious 802.11 — or Wi-Fi — habit . . . Read More

I'm not sure how many of you are keeping up with the various companies deploying WiFi commercially in quasi-public settings (like hotels, airports, pay-phones, etc.), but Starbucks is probably the best known example currently -- utilizing a partnership... Read More

Big Mac Meets WiFi from Digital Common Sense on June 29, 2003 7:36 PM

I'd like a side if WiFi with my Big Mac special please. Wi-Fi Networking News... Read More

- Nothing like typing on a keyboard while chowing down on a greasy Big Mac and Fries (coming to a SF 101 McDonald's) - Now that Linksys has updated their 802.11g drivers to match the spec, you can finally... Read More

1 Comment


Great coverage as usual. I continue to be amazed at the lack of real numbers coming from Starbucks or T-Mobile after almost a year or so of being deployed.

I have to wonder what they're hiding by not releasing the numbers...?

Any thoughts?