Business Model Of McDonald’s

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business model mcdonalds

The moment one thinks of French Fries and Hamburgers, there might be an image of McDonald’s flashing right in front of one’s eyes. The business and revenue model of McDonald’s encompasses nearly 37000 outlets which cover more than 120 countries. Today, McDonald’s is the largest restaurant chain in the world in terms of revenue. Originally operating as a Drive-In Hamburger Bar, the concept was put forward in 1940 by The McDonald Brothers, Richard James (Dick) and Maurice James (Mac) Mcdonalds. It was only after the introduction of the Speedee Service System with shakes, fries, and hamburgers costing as low as 15 cents that the McDonald Brothers initiated the franchise of McDonald’s Hamburgers.

The McDonalds restaurant opened by Maurice and Richard McDonald

The McDonald’s restaurant opened by Maurice and Richard McDonald

McDonald brothers and Ray kroc

In 1954, Ray Kroc became the franchise agent of the McDonald Brothers. The first McDonald’s restaurant was opened by Kroc in 1955 in Des Plaines, Illinois, USA. It was in the year 1961 that the rights to the eating joint of the siblings were acquired by McDonald’s for a hefty sum of $2.7 million.

Ray Kroc's first McDonald's restaurant in Illionois

Ray Kroc’s first McDonald’s restaurant in Illinois

You might also be surprised to know that when the first McDonald restaurant opened, the very popular McD French Fries were eaten without any ketchup! Let’s take a closer look at the business and the revenue model of McDonald’s- the world’s fastest-growing foodchain.

1. Brand Mission

McDonalds brand mission

McDonald’s strives hard to be their customers “favourite place and way to eat.” The business model of McDonald’s is centred on the master plan “Plan To Win” which is put into order worldwide. With the mission statement “Quality, Service, Cleanliness, and Value,” McDonald’s has adhered to each one of the qualities. The customer experience is enhanced by the adoption of five basics- People, Products, Place, Price and Promotion. Moreover, McDonald’s aims to provide high-grade food, and that, too, at easily affordable prices to people across the globe. The sales at McDonald’s are grooved through one of its kind and well-organized sales channel which ensures unprecedented customer satisfaction at all the times.

2. Spectacular Vision

McDonald outlet in Richmond, British Columbia 1967

When Ray Kroc unlocked the Original McDonald’s in Illinois, he had a vision of not only expanding to the international market but also unrolling more than a 1000 outlets in the States itself. Staying true to its promise, McDonald’s broadened its global grasp by opening joints in, as early as, 1967, within just a decade of its official launch. The very first outlets were opened in Canada and Peurto Rico. By January 2018, McDonald’s was located in 120 countries had nearly 37200 restaurants with as many as 1.9 million employees and continues to serve close to 69 million people each day. The fact that every 14.5 hours, a new McDonald’s restaurant opens might surprise one, but what’s equally surprising is the fact that every second, McDonald’s sells more than 75 burgers.

3. Profound Growth Strategy

Velocity growth plan of McDonalds

McDonald’s has held onto a promising growth strategy not only to satisfy its customers but also to spread its wings. The introduction of the “Velocity Growth Plan” in March 2017 added value to the growth of the business as well as the shareholders. Its growth strategy is based on Retain, Regain, and Convert. The McDonald’s works hard to retain its old customers, regain the lost trust, and convert casual customers into regular ones. In addition, it has also adopted three accelerators, Digital, Delivery, and Experience of the future in the US, to power immense growth. It continues to reshape its interactions with its customers, bring more customers to McDonald’s experience, and raise the magnitude of customer satisfaction and experience through technology and human efforts.

4. Diversity IS Inclusion

mcdonalds around the world

Economically speaking, McDonald’s has impacted the world in a more profound way than any other company. McDonald’s sticks to the belief “Diversity IS Inclusion” and does not leave a single chance to make every individual from each community feel respected. Its proposition of “Diversity IS Inclusion” has confirmed its position at the top ranks. Each member of the organization is not only committed to its work but also actively participates in any sort of exchange of information. The culture pillars of McDonald’s- Customer Obsessed, Better Together, and Committed To Lead, coupled to its belief has made them excel in the field of entrepreneurship and marketing.

5. McDonaldization

McDonaldization

McDonald’s can rightly be termed as one of the most successful companies which has entailed the international strategy fittingly. The global diversification of the McDonald’s is often referred to as “McDonaldization.” Its success in more than 120 countries can be attributed to its organisational structure. The centralized organisational structure of McDonald’s takes into consideration increasing localisation, and, so, the whole business model of McDonald’s is usually revamped considering the mass appeal in the localities of the foreign countries. Th orientation of the organizational and strategic business model of McDonald’s helps in the international build-up of the network.

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6. Successful Acquisitions

McDonalds Acquisitions

Now, the fact that McDonald’s is the world largest fast-food chain is not a surprising fact. What might surprise one is that it is quite silent considering the number of companies acquired by it ever since its establishment. The McDonald’s Corporation Mergers and Acquisitions (M&A) has, over the period of time, indulged itself in careful acquisitions. Donato’s Pizza which is a Midwestern chain of 143 restaurants was acquired by McDonald’s on 6 May 1999. Apart from acquiring Donato’s, it also announced the acquisition of Boston Market on 18 May 2000. Boston Market is a fast-food restaurant chain which primarily focusses on home-style food.

7. Supporting Employees

McDonalds business support

McDonald’s does not, in any way, hamper the growth of its employees. It supports its employees in every possible way and enables them to set up business networks. At McDonald’s a positive work atmosphere and relationships are promoted, career opportunities are encouraged, and business growth is nurtured. Mentors, role-models, and sponsors are available at all the times to guide the network members on all the aspects of effective leadership, career strategies, and prosperous business. The McDonald’s network members are groomed so as to act as catalysts to the business preferences of the company.

8. Community Engagement & Education

Community Engagement

Apart from being one of the most successful fast-food ventures, McDonald’s leaves no stone unturned to make an effort for the community they serve. They actively engage in community services and continue to make a significant impact on diverse communities. The Global Diversity, Inclusion and Community Engagement Team along with its key partners has built treasured relationships with various community-based organizations. What’s more is the fact that the Global Diversity, Inclusion and Community Engagement Team believes in creating educational opportunities for one and all. McDonald’s Hamburger University prepares its network members to run the multi-million dollar business and global leadership development programs.

REVENUE MODEL OF McDonald’s

The revenue model of McDonald’s is based on Franchising. How the Franchising Model works is based on the utilization of money of small investors by the fast-food restaurant chains whose sole purpose is rapid and efficient expansion. Ray Kroc can rightly be termed as the father of the revenue model of the McDonald’s as he is the person who can be credited to perfecting the franchising techniques. Ray Kroc put forward the idea of expanding the size of the corporation and not compromising on the quality of the products. The McDonald’s Corporation generated a vast amount of revenue by becoming the landlord of its franchisees. It very carefully maintained a good distance from the franchisees and selling supplies to them. It might be quite surprising to know that despite having more than 120 eating outlets across the globe, only 15 per cent are owned and operated by the network itself; the rest are franchise-operated. Moreover, the company’s revenue model itself is an adoption of a three-legged stool strategy-suppliers, franchisees and McDonald’s.

McDonalds revenue

Revenue distribution McDonalds

  • The above-mentioned graph shows the distribution of the revenue generated by McDonald’s from the year 2005 to 2017.
  • From the revenue distribution bar-graph, it is clear that the revenue generated by McDonald’s worldwide in different periods of time is constant.
  • As of 2017, the revenue was approximately 22.82 billion U.S. dollars.
  • The brand value of the McDonald’s is over 88 billion U.S. dollars; surpassing Starbucks with a brand value of 43 billion U.S. dollars.
  • The net income of the company in 2017 was $5.2 billion; this value saw a rise of nearly 11% from the preceding year.

Worlds fastest growing restaurant chain

  • The above bar graph proves that McDonald’s is, undoubtedly, the fastest growing fast-food restaurant chain in the world.
  • In the year 2018, McDonald’s emerged as the most valuable fast-food chain with a brand value nearing 126.04 billion U.S. dollars.
  • In addition, the total assets of McDonald’s were nearly 33.8 billion U.S. dollars.

Revenue generated by different markets of McDonalds

  • The world’s fastest-growing fast-food chain divides its market into four different sections: U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate.
  • As per the report put forth by the company in the year 2017, the market in the U.S. generated the largest amount of revenue-$8 billion.
  • The International Leads Markets which comprise of Australia, Canada, France, Germany, the U.K., and similar generated revenue of $7.3 billion.
  • The High Growth Markets which include China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands, and similar brought into being $5.5 billion.
  • The Foundational Markets and Corporate encompass the remaining markets. In addition, it also includes all sorts of corporate activities. The revenue generated by this segment of the market accounted for approximately $1.9 billion.

Image Sources

  • https://i.nextmedia.com.au/
  • https://corporate.mcdonalds.com/
  • https://s3.amazonaws.com/
  • https://cdn.slidesharecdn.com/
  • https://www.mcdonalds.com/
  • https://www.benbria.com/
  • https://res.klook.com/
  • https://en.wikipedia.org/
  • https://upload.wikimedia.org/
  • https://www.statista.com/
  • https://s.thestreet.com/
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