McD's playground concept grows by 'Leaps & Bounds.'

Nation's Restaurant News, March 15, 1993 by Peter O. Keegan

OAK BROOK, Ill. -- Pleased with results of an 18-month test of Leaps & Bounds, its indoor playground concept for kids, McDonald's is opening 25 to 30 units in suburban locations across the country this year.

The 10,000-to-12,000-square-foot concept prototype features climbable toys, balls, tubes and games supervised by trained counselors with a 100-seat foodservice facility, retail shop, quiet rooms and party rooms for children and adults. Entry fees for kids range from $4.95 to $5.95, depending on location; adults are free. Even though Leaps & Bounds might be small potatoes compared with serving trillions of hamburgers, McDonald's may be sliding toward national expansion of the concept and is funneling money and personnel into it.

"We're planning a fairly aggressive expansion this year; it's a new growth vehicle for the company," said Leaps & Bounds marketing director Kathy Hartman. "Frankly, we can't get them open fast enough."

While Hartman said only about one in four Leaps & Bounds patrons purchases food, sources estimate that foodservice represents between 30 percent and 40 percent of sales.

The "Great Eats" snack bar serves "kid friendly" food, including hot dogs, pizza, nachos, jumbo pretzels, fresh fruit, fruit rollups, granola bars, popcorn, doughnut assortments, brownies and chocolate chip cookies. "We prepare the food, but we don't manufacture it," Hartman said. "We do use our own brand of pizza, but we also use Kraft and Oscar Mayer products."

Hartman said the menu -- a departure from typical McDonald's fare -- was designed to replenish children's energy levels during play. "Food is not allowed in the play area but is allowed at the tables that surround the play areas," she said.

Hartman used the phrase "expanded test" as opposed to rollout, but all signs point to an eventual nationwide expansion of the concept. "We certainly plan to expand throughout '94," she added.

Branching out from original test sites in the Chicago, Milwaukee and Cincinnati areas, new operations are going into the Indianapolis, Kansas City (Mo.), Dallas, Houston and Atlanta markets, and the company is finalizing real-estate deals for other cities.

"We've been real successful with locations," Hartman pointed out. "And now we're ready to take the country by storm."

Leaps & Bounds targets baby-boomer families with children 12 and younger. And the future looks promising. Statistics from the U.S. Census show a mini baby boomlet on the way, with more than 4 million children born in 1991 and 1992, the highest since the early 1960s.

"People are looking for a safe, secure place for their kids to play," said Hartman, adding that more than 100,000 children visited each test facility in the last year.

And where kids play, they want to eat as well -- with one in four visitors buying food, she added.

McDonald's past experience playing to children includes years of success with Happy Meals, the Play Land play centers outside of units and also its sponsorship of Ronald McDonald House, which houses terminally ill children.

Even though targeted for children less than 12 years old, parents, older siblings and baby sitters are encourged to play with kids at the facility.

Rick Steffan, senior purchasing manager for the concept, said each unit contains from 500 to 700 feet of linear tubing -- which comes in the forms of slides, mazes, crawl ball pits -- and each has a separate area for toddlers, 3 years and younger. "There's also a quiet room designed for adult comfort with reading materials and comfortable chairs," Steffan explained. "There adults can watch the children on the video monitor."

Steffan said prototypes are located on parcels at major shopping centers, in-line malls as well as freestanding units. "It takes about four to five weeks to assemble," he said, adding that the play area takes up two-thirds of the total space.

Analysts are somewhat wary of the concept, thinking that the company might get sidetracked with the subsidiary while McDonald's per-store sales remain relatively flat. "I was wondering why they were focusing on Leaps & Bounds when they have their own business," said Mike Mueller, a managing director for San Francisco-based Montgomery Securities.

"They do have experience with kids, and the margins are probably better than in the restaurants, because you have to pay to use the facilities," Mueller noted. "It's surprising, but maybe it's a way to leverage their expertise with children." Mueller added that Happy Meal sales have been steadily increasing over the past few years.

"It certainly sounds interesting," said John C. Maxwell, an analyst with Wheat First Butcher & Singer. "McDonald's always tests everything to death, but nine times out of 10 it works."

Both agreed that with McDonald's franchising expertise, the concept could grow rapidly if and when it decides to roll Leaps & Bounds nationally. At present, all test stores are company owned, and there were no immediate plans for franchising.

The facilities also feature seven party rooms, which are typically used for two hours. For $6.50 per child, cake and fruit punch is served and hot dogs and pizza are added for $7.50 per child.