The fast-food industry is struggling to adjust to changing consumer tastes and McDonald's has drawn the most attention.

Since Jack Greenberg took over as chief executive in 1998 the market capitalization of the world's largest fast-food company has dropped from $42.5 billion to $23.2 billion.

"For shareholders I hope that they make some changes," said Allan Hickok, restaurant analyst for U.S. Bancorp's Piper

Jaffray unit. "You've given this team long enough. ... The company would benefit from some new blood and fresh ideas."

And a recent Merrill Lynch note on McDonald's asserted that "more investors are calling for a management shake-up," though there is no evidence of one happening.

McDonald's operates about 30,000 restaurants worldwide and some 13,000 in the United States.

The franchisees, who control 80 percent of McDonald's restaurants, might be making less money, but are not organized to shake up senior management.

Also, the brand remains among the world's most powerful. McDonald's dominates the hamburger sector and continues to make money.

But investors have indicated their dissatisfaction by selling their McDonald's shares — "casting a no-confidence vote," as one analyst put it.

"Jack Greenberg has the full support of McDonald's board," longtime director Andrew McKenna said. Directors also back recently announced plans to build the company's U.S. business, McKenna said, adding that "the board is anxious to see positive results from these aggressive initiatives."

Greenberg survived an apparent boardroom challenge late last year. In a move widely seen as an attempt to reassure the market, the company included in its most recent 10-K report a note saying Greenberg had been asked by the board to "commit to continuing" as CEO "for at least three more years."

Several portfolio managers and analysts then want a change in direction.

"A mature McDonald's would do three things," said SunTrust Robinson Humphrey analyst Howard Penney. "It would eliminate growth capital expenditures. It would rationalize its existing asset base ... before spending another nickel" on its hamburger business. And it would buy back more stock and fatten its dividend, he said.

Penney also questioned whether an executive-suite shake-up is the solution. Citing Eastman Kodak Co., Home Depot Inc. and Kmart Corp., he said, "As history has shown, bringing in an outsider is not the panacea."

The rationale for according McDonald's stock a premium was its overseas business. For years, McDonald's mesmerized investors with its ability to take hamburger, fries and soft drinks around the globe.

Now it is time to back off, J.P. Morgan Securities restaurant analyst John Ivankoe wrote in a recent report. McDonald's should cut the number of countries where it operates from the current 121 and simultaneously lower by at least 1,000 the number of new stores it opens annually; the company will add 1,300 to 1,400 this year.

Greenberg initially won plaudits from franchisees and Wall Street for his affable nature and financial acumen. But a seemingly endless string of bad news and earnings disappointments has dogged him.

He championed a new kitchen that let McDonald's restaurants make food to order — like many competitors had been doing for years. Yet that cooking

system became a liability. Customers didn't appreciate the added time it took for them to get a fresher Big Mac. Today, slow service is among customers' biggest complaints.

Despite an array of tools, McDonald's results remain disappointing, and its stock depressed.

"It is frustrating that the current management — seemingly a nice balance of brains and experience — hasn't been able to fix it," Credit Suisse First Boston analyst Janice Meyer said.

 
 
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