Day 045 - 03 Nov 94 - Page 37

     
     1        Our department does not place any media, for example; we do
     2        not place any advertising.  What we do is, we produce the
     3        television commercials, the radio commercials and the print
     4        commercials, and we pay for that.  That is something that
     5        is, by the way, unique to the United States.  Throughout
     6        the world, those elements would be within the co-operative
     7        expenditure on the store.  In the United States, however,
     8        we do pay out of the company's G and A for creative
     9        materials.
    10
    11   Q.   So in local areas or regions, there will also be some kind
    12        of marketing budget?
    13        A.  That is correct.
    14
    15   Q.   Separate from the actual payment for commercials?
    16        A.  Yes.  In fact, on a local basis, they may in fact
    17        produce additional commercials other than those that we
    18        make available nationally.  That would come out of those
    19        co-operative dollars that we were talking about before.
    20
         But just to maybe give you a bit of how it works: the local
    22        restaurants in a geographical area, let us say the
    23        Cleveland area, because that is television marketplace, all
    24        the restaurants that are within that television marketplace
    25        will get together and form a voluntary co-op.  They will
    26        then go and hire a local advertising agency, and they will
    27        supplement what we are doing on a national basis, with
    28        programmes on a local basis as well.
    29
    30        The hiring of that agency and the payment of that agency,
    31        whether it be advertising or public relations on a local
    32        basis, is paid out of the co-operative where the dollars
    33        are put in as a percentage of their sales, and that would
    34        be included in the overall 5.5 per cent.
    35
    36   Q.   You have recently started advertising on computer networks;
    37        is that correct?
    38        A.  We had an experiment.  I would not call it advertising;
    39        it was really sort of a test.  NBC has a portion -- that is
    40        National Broadcasting Company -- what they call a "home" on
         one of the computer networks; and, as a tie-in with NBC,
    42        they asked if we wanted to sponsor that area for a short
    43        period of time as a test, and we did so.
    44
    45   Q.   Was there a great deal of criticism by Internet users and
    46        computer users?
    47        A.  There was some criticism, but not a lot.  In fact, most
    48        of information I got back was positive to see McDonald's.
    49        But there was criticism.  The Internet, I believe, tries to
    50        -- the members of the Internet try to be non-commercial. 
    51 
    52   Q.   Does McDonald's have plans to expand its commercial concept 
    53        into the Internet?
    54        A.  I think that interactivity, when it comes to computers,
    55        is something that McDonald's would certainly look at that;
    56        if that is where our customers are, then we would like to
    57        be there.  But there are no specific plans, and this was a
    58        very low level test.
    59
    60   MR. MORRIS:   I am just trying to tie up one or two loose ends