"We were consumed with getting bigger and not getting better," recalls Ralph Alvarez, president of North America operations for the Oak Brook, IL-based fast-food giant, who oversees about 15,000 eateries in the US and Canada. "We had taken our eyes off the basis of our business."

Alvarez, speaking at the National Retail Federation's Annual Convention & Expo, said that the company started assessing successful chains, such as Starbucks, as well as its own business, and then began a turnaround plan that has lasted into the present. Now the average McDonald's brings in $2 million per year, $400,000 more than in 2002. November also marked the company's 37th-straight month of positive, year-over-year same-store sales. (Executives will release December results today.)

One of the remedies the company employed was to start renovating restaurants. Currently about half of the chain's North American units will have been revamped by the end of the year, Alvarez says. "An aging facility is symptomatic of a dying brand," he says.

New marketing campaigns that focus on targeted demographics, like Hispanic men, have also played a big role in McDonald's revitalization, Alvarez notes. "This is no longer about a 30-second commercial on prime time," he says.

In restaurants that have drive-thru's, about 60% of that unit's business is done from those facilities, so the chain is adding more areas where customers can order from their cars. An increasing number of stores are also open during longer hours, with some restaurants now operating around the clock.

Future initiatives the company is considering to increase sales include, adding more chicken items and extending breakfast hours. Executives are also working on adding increasing the visibility of promotional materials in restaurants.

Meanwhile, a session in the afternoon concentrated on online retailing as a growing medium in the industry. Internet retail sales totaled $172 billion last year, or 8% of total sales, according to Forrester Research, while two years ago, online transactions made up only 5% of the total.

"It's a real business," says Terry Lundgren, chairman, president and chief executive officer of Federated Department Stores, who was one of the panel's speakers. "It's a business that makes money." Lundgren's company has found that customers that shop both in stores and on the Internet spend 20% more than those that spend in one medium.

Another speaker, Brian Devine, Petco's executive chairman, says multi-channel shoppers spend 29% more. Online sales at Petco are growing twice as fast as sales in stores, he reveals. Additionally, customers who buy products on Petco's Web site tend to spend 2.5 times as much money as an average in-store transaction.

At the beginning of yesterday's NRF conference, Tracy Mullin, president and CEO of the Washington DC-based organization, says sales this year are projected to increase by 4.7% form last year, down from the 6.1% jump that NRF calculated from 2005. She blames rising interest costs and energy prices on the dip.