Big Mac under threat as McDonald's looks to salads and low-fat yoghurt for salvation

McDonald's is in confessional mood. Reviled overseas as a symbol of ugly American capitalism and troubled at home because of shoddy service and health fears over fast food, the company is admitting its shortcomings and rethinking its operation from the ground up.

Almost nothing is to remain untouched, at least according to the vision outlined to Wall Street analysts after the announcement of the company's first quarterly loss.

Burgers will be respiced, buns reconfigured so they toast better (mostly, it seems, by adding more sugar), sandwiches will be repackaged in paper rather than plastic, more "health" items such as salads and low-fat yoghurt will be offered, and the notoriously underpaid, undermotivated staff will join a new "computerised" training programme – whatever that means.

"We took our eyes off our fries and lost our focus," the company's new chief executive, Jim Cantalupo, confessed to financial analysts this week.

In a major reorganisation of priorities, the company will scale back an ambitious project to refurbish all of its restaurants, will radically reduce how many outlets it opens and will use the money it saves to work on the basics of making and serving acceptable food. "We get it," Mr Cantalupo insisted. "We'll focus on adding customers to the restaurants we already have."

The message got a receptive hearing from Wall Street, which has called for reduced capital spending – that is, building and refurbishing restaurants – for months. The share price rose almost 9 per cent on the New York Stock Exchange after Monday's announcements.

But longer-term analysts wonder whether the changes can turn round a company that has been struggling with its image and a slowing rate of expansion for years. This is not a good time to be in fast food, as headlines bang on about child-obesity rates, food- infection scares and lawsuits over high fat content.

And that's not to mention McDonald's position in the front line of the battle over globalisation, or its increased vulnerability as a symbol of US power, exposed to bombings, grenade attacks and other forms of protest. In the past week, a stick of dynamite went off in a McDonald's in Beirut, injuring five people, and large protests in Indonesia called for a boycott of outlets there.

The rescue plan is also fraught with unanswered financial questions. Even according to Mr Cantalupo, the company will not return to steady growth until 2005. It has seen a fall in sales for each of the past nine months, and posted a $344m (£222m) loss for the fourth quarter of 2002.

Moreover, the company has sought to improve quality and move upmarket in the past with little success. Its "diversification" from burgers by buying chains such as Donato's Pizza has been judged to be mixed at best. Much speculation is being heard that its subsidiaries will soon be up for sale. Nobody knows whether a venture into Starbucks territory, the McCafe, will work.

Mr Cantalupo's meeting with analysts marked his first 100 days in the job. He was taken out of retirement to replace Jack Greenberg, whose vision of new fixtures and digital wiring was deemed to be an expensive recipe for failure.