"Taste, service and value are the three big hitters," Chairman Michael Quinlan told shareholders.

At the annual meeting here, McDonald's executives said the fast-food chain is working to improve the taste of its products, with an emphasis on fresher food.

McDonald's is also testing several food initiatives in some of its units. These include toasting sandwich buns and preparing food to order, Jack Greenberg, chairman of the McDonald's USA, told reporters after the meeting.

McDonald's, which last year rolled out the Arch Deluxe hamburger, may also be adding a chicken item.

"We just might have some real hot new chicken stuff," Quinlan said, but did not give details.

McDonald's executives said the company was also raising the bar on its service, particularly at the drive-through window.

Improved service is part of McDonald's long-term Campaign 55 promotion, which offers featured sandwiches for 55 cents when consumers also buy a drink and french fries or hash browns.

Campaign 55 has been touted by McDonald's as a means to bring more customers into its U.S. units, which suffered a decline in same-store sales in 1996.

For the first quarter of 1997, U.S. same-store sales rose.

Greenberg did not project U.S. results for the year, but said he expected the domestic business to be better than last year.

In the U.S. market, where McDonald's has more than 12,000 units out of more than 21,000 worldwide, Greenberg said competition remains intense.

"It's going to continue to be quite competitive.... Everybody in the business is going to be fighting over a lot of the same customers.

Speaking to reporters, Greenberg criticized some McDonald's franchisees who have raised complaints publicly about the company and its rapid expansion in the United States.

At an American Franchisee Association news conference on Wednesday, some franchisees complained that McDonald's U.S. expansion has hurt their profit margins.