McDonald’s seems to be on the path to taking over the world
We’re not blowing smoke when we say McDonald’s is taking over the world. Somewhere in the world, a new McDonald’s opens every 5 hours.
Many say that McDonald’s is one of the few businesses that will always make money and will not be affected by a recession. When you look at the stock, it looks like it’s true.
So how did McDonald’s go from selling hot dogs to being a huge company worth billions of dollars?
How does it plan to take over the world?
Keep reading to find out!
Don’t worry if you don’t have time to read the article, you can enjoy the video below or watch it on YouTube:
To give you some background, here’s a fun fact that might blow your mind.
Eric Schlosser, author of the best-selling book “Fast Food Nation: The Dark Side of the All-American Meal,” did a survey.
He found that more people know the golden arches of McDonald’s than the holy cross.
You might say that’s impossible, but let’s go back to the beginning of McDonald’s to see how we got here in the first place.
A brief history of McDonald’s
It’s the year 1940.
Richard and Maurice McDonald, two enterprising brothers, didn’t know it at the time, but they were about to change the world of fast food forever.
In sunny San Bernardino, California, the McDonald brothers opened their first drive-in restaurant. It was called McDonald’s Bar-B-Q, and it had a menu with 25 items.
But they quickly learned that the key to success was to make their products easier to use.
These days, any serious restaurant owner knows this.
Richard and Maurice’s “Speedee Service System,” which was a big deal in 1948, changed the way fast food was done.
They got rid of the carhops and cut their menu down to nine items so they could focus on making the best burgers, fries, and shakes.
Soon after, that became a huge success.
Their way of making food on an assembly line became the best way to make fast food everywhere, which made investors take notice.
Now, let’s jump ahead to 1954 when a man named Ray Kroc came into the picture to sell milkshake machines.
Ray was so impressed with how the McDonald brothers ran their business that he talked them into giving him a franchise.
The rest, as they say, is history. Ray Kroc opened the first McDonald’s franchise in Des Plaines, Illinois, on April 15, 1955.
The Golden Arches were born, and they became the most well-known sign of happiness and good food very quickly. He knew that McDonald’s had the potential to take over.
Under Ray’s direction, the brand grew quickly, and in 1959, the 100th restaurant opened. In the 1960s, McDonald’s made some of its most popular items and characters.
Ray Kroc bought out the McDonald brothers in 1961, and in 1963, the famous mascot Ronald McDonald made his first appearance.
The well-known Big Mac, which is still the most-ordered item on the menu, came out in 1968.
As the 1970s and 1980s came along, McDonald’s expanded around the world. There are now McDonald’s restaurants from London to Tokyo. Soon, the Golden Arches became known around the world as a symbol of American culture.
And now, McDonald’s serves more than 69 million customers every day.
But with a lot of success comes a lot of rivalries.
How exactly did McDonald’s manage to stay ahead of its rivals?
The secret answer lies in their business philosophy and their apparent immunity to recessions.
Let’s go down the rabbit hole. Things are about to get more interesting, so pay attention.
The QSC&V principle is the most important part of McDonald’s business plan. You may ask, “What’s that?” Quality, Service, Cleanliness, and Value.
Let’s quickly talk about each:
Quality: McDonald’s is committed to making sure their food is made with high-quality ingredients.
And that is the most important thing to them. In the food business, a lot is at stake.
Fun fact: They use about 3.4 billion pounds of potatoes every year to make their famous fries, and everyone knows that they are the best fries in the fast food industry.
I’m sorry, KFC…
So, they work with trusted suppliers, keep strict standards, and make sure the food tastes the same all over the world. It’s no wonder that so many people choose to eat every day at their restaurants.
Service: In the world of fast food, speed, and efficiency are very important.
McDonald’s spends a lot on training and technology for its employees to make sure that customers get great service with a smile. They are always looking for ways to improve the customer experience. They stay ahead through their app, delivery services, or drive-thru innovations.
In 2017, McDonald’s set a world record for the fastest drive-thru service, taking an average of just 189.49 seconds. As a side note, it only takes an average of 112 seconds for your Big Mac to arrive on your plate after you order it.
That’s what it looks like to be at your best.
They have used mobile ordering, self-service kiosks, and even drive-thrus that are run by AI to improve the customer experience.
McDonald’s is also known for trying out new ways to set up their stores, like with their McCafés and “Create Your Taste” customizable burgers.
They are always looking for new ways to stay ahead of the competition.
McDonald’s is taking over by knowing how important it is for both customers and employees to work in a clean and healthy environment.
They have strict rules about cleanliness in all of their restaurants. They have an interesting thing called “Hamburger University” where they teach employees how to do things right.
There are many ways for students to learn at Hamburger University, such as through lectures, seminars, group discussions, and hands-on simulations. Some classes even use a real McDonald’s restaurant on campus to help students learn how to handle real-world situations.
The courses are available in more than one language. They use cutting-edge technology to make learning fun and effective. After passing all of their classes, graduates get a degree in Hamburgerology, which shows that they know how McDonald’s works and how to run a business.
Fun fact: Since it started, more than 275,000 people have graduated from Hamburger University and gone on to use the skills and knowledge they learned there in their jobs at McDonald’s.
Last but not least value.
McDonald’s tries to offer tasty food at prices that most people can afford.
In the early 1990s, they were one of the first fast-food chains to offer a value menu with items that cost just $1 each. Even now, they are always making changes to their menu, adding new items and specials, and making sure you get the most for your money.
McDonald’s focus on customers is another important part of its business philosophy. They are always trying to figure out what their many different customers want and give it to them. This is a winning mentality. That’s why McDonald’s is taking over!
This has led to menu items like the McArabia in the Middle East, the Maharaja Mac in India, and the Ebi Burger in Japan that are only available in those places.
McDonald’s started the “Our Food, Your Questions” campaign in 2014.
This campaign encouraged customers to ask any questions they had about McDonald’s food, its ingredients, and where it comes from.
This open initiative was meant to clear up any misunderstandings and have an honest conversation with customers. It showed that the company was serious about addressing problems and building trust.
Customers could ask questions about the campaign through social media, and McDonald’s answered them in an honest and helpful way.
This project brought customers and McDonald’s closer together and showed that McDonald’s was willing to listen to, change, and improve based on customer feedback. The success of the campaign showed that the brand places a lot of importance on customer satisfaction and honesty as key parts of its ongoing relationship with customers.
But some people might say that this is too broad and not enough to compete with new restaurants and still be the leader in the fast food market.
You are correct!
McDonald’s has a unique advantage over its competitors: it’s simply recession-proof!
Even though it might not make sense, fast-food restaurants have usually done well when the economy is bad.
When money gets tight, people tend to cut back on spending, and one of the first things to go is often eating out.
People on a budget can still enjoy a meal at fast-food places like McDonald’s because they have options that don’t break the bank. But this is only one of many things.
Let’s turn our attention to the 2008 financial crisis
Even though the economy was in bad shape, McDonald’s was able to not only stay in business but also grow.
What did they do? Well, here are a few important things:
Value Proposition: During the recession, McDonald’s did more to offer good deals like adding the Dollar Menu
This strategy brought in customers who were short on cash and looking for cheap meal options.
Global Diversification: McDonald’s has locations in more than 100 countries
Some markets were hit harder than others, but because they were in so many places, they were able to stay in business.
McDonald’s didn’t just use the same business model they had always used.
They kept coming up with new ideas and making changes to their menu, stores, and marketing.
For instance, they added more breakfast and coffee options at McCafé, which brought in a new group of customers. But there is one more thing that makes McDonald’s stand out from its competitors. We’ll talk more about that later in the article.
For now, let’s take a quick look at how McDonald’s makes money
McDonald’s business model is based on:
- franchising
- standardization
- economies of scale
- owning real estate
- adapting menus
- marketing
- making things easy for customers
McDonald’s is taking over and has become one of the biggest and most successful fast-food chains in the world thanks to this mix of strategies.
Another important part of McDonald’s plan to grow is to open franchises. Over 90% of McDonald’s stores are franchises, which means that independent operators pay McDonald’s fees and royalties to use the brand, systems, and support.
This strategy lets McDonald’s grow quickly while investing little money. McDonald’s success also has a lot to do with how they keep things the same.
Through strict standardization of processes, ingredients, and equipment, the company makes sure that all of its locations have the same menu options and quality.
This makes sure that customers have the same experience at any McDonald’s, no matter where they are. McDonald’s is taking over the market by pressing on this feature.
McDonald’s uses economies of scale to cut costs and keep quality the same. McDonald’s gets better deals on food, equipment, and supplies because of how big it is.
The company also gains from putting all of its marketing and supply chain management in one place. McDonald’s is able to meet the tastes and preferences of different areas by changing its menu.
Even though the company has a core menu, it changes its offerings to fit local markets. This helps it attract a wider range of customers and stay relevant in different places.
This makes them stand out from its competitors and adds to its global popularity. McDonald’s is taking over at such a pace by being highly adaptable.
And most importantly, owning real estate gives McDonald’s more ways to make money, which is the most important thing that makes its stock resistant to recessions.
Most of the time, the company owns the land and buildings for its stores and charges franchisees rent.
McDonald’s sometimes rents out space near its stores to other businesses, which helps it get more kinds of income.
But in some places, like China, McDonald’s model for owning real estate does not work.
China is a communist country, which means that all of the lands belong to the government. Because of this, companies can only get the right to use the land for a certain amount of time.
This rule made it hard for McDonald’s to own land and buildings outright, which made it hard for the company to use its usual real estate model.
Instead, McDonald’s decided to stop owning properties and start renting them out. This method lowers the initial costs and financial risks that come with owning a home.
McDonald’s is taking over markets by working with local partners. Partners who know the real estate market better and can help find great spots.
And the brand is able to do this because they have local management teams take care of these things for them. Creating strategic partnerships with Chinese companies is a key part of McDonald’s business plan in China.
These partnerships not only help the fast-food giant grow but also give it important information about the Chinese market.
McDonald’s took a big step forward in 2017 when it sold the majority of its businesses in mainland China and Hong Kong to CITIC Ltd., a major Chinese conglomerate and the Carlyle Group, a well-known global investment firm.
This partnership, called “Vision 2022,” helped McDonald’s open 2,000 new restaurants in China by the end of 2022. Bringing the total number of locations to 4,500.
McDonald’s is taking over. And they have no plans to stop here.
McDonald’s recently said that they plan to grow in the biggest way they ever have.
This partnership has helped McDonald’s grow faster in China. Both CITIC and the Carlyle Group know a lot about the local market. These giants have strong business connections, especially with the communist government.
McDonald’s China, which is a local franchise of the global quick-service restaurant chain, said that its business picked up in the first quarter of this year. McDonald’s wants to speed up its growth in the country by making long-term investments and trying new things to give customers more value.
In its fourth-quarter financial report, which came out late last year, the company said it would open a record-breaking 900 or more new restaurants in China this year.
Market watchers said this could mean that on average, a new McDonald’s quick-service restaurant will open in China every 10 hours this year.
This year, McDonald’s plans to open about 1,900 new locations around the world.
Crazy, we know. Even more so when you think about the fact that a global recession has not yet been confirmed.
China is McDonald’s second-largest and fastest-growing market. So the fact that nearly half of the new restaurants will be there shows how important China is to the company.
People often say, “Where there’s money to be made, there’s a way.”
McDonald’s has figured out how to fit into local cultures because of its flawless business model. This is one way that McDonald’s is taking over the market.
McDonald’s is taking over the globe, to the point where there is even a Big Mac Index
And for those who don’t know, the Big Mac Index is like a ruler that helps us see if money from different countries can buy the same amount of things.
By looking at how much a Big Mac costs in different countries, we can figure out if one country’s currency is worth more or less than another’s.
Let’s break it down:
Let’s say you’re in the U.S. and you want to buy a Big Mac.
The price of a burger is $5.50. Imagine that you are going all the way to the UK and want to buy the same Big Mac.
The burger costs £4.00 in the UK.
In this case, the Big Mac Index is a fun way to compare how much the US dollar and the British pound are worth. We use the price of a burger in both countries to figure out if one currency is worth more or less than the other.
First, let’s figure out how much it would cost in dollars to buy a Big Mac in the UK.
When we divide the price in the US ($5.50) by the price in the UK ($4.00), we get a ratio of 1.375.
According to the Big Mac Index, £1.00 should be equal to $1.375
Now, let’s look at another case.
Imagine you are in Japan and you want to buy a Big Mac. The price of a burger is ¥550. We’ll see how this compares to the price in the US, which was $5.50.
We want to find out how much Japanese yen it would take to buy the same Big Mac in the US using the Big Mac Index.
So, we divide the United States price ($5.50) by the price in Japan (550), which gives us 0.01. The Big Mac Index says that $1.00 should be worth 100.
Simple math.
Using the price of a Big Mac, the Big Mac Index is a fun and easy way to compare the value of different currencies. The Economist gets props for making this fun tool.
And because their locations are so diverse, we wrote a piece about the most unique McDonald’s locations.
Anyway, as you can see, McDonald’s does more than just sell good food. It is a complicated machine that works well in many ways.
Let’s imagine you want to open a McDonald’s franchise
Here’s what the entire process would look like and the steps you would need to take:
With a McDonald’s franchise, you and McDonald’s Corporation work together to run a business.
You open and run a McDonald’s restaurant, and the company gives you the brand, training, and support you need to make your business successful.
The first step is to learn about McDonald’s franchise system through research.
Visit their website, read some articles, and even talk to people who already own franchises to learn more about the business. When you’re ready, fill out an application on McDonald’s website with information about yourself and your finances.
McDonald’s has certain requirements, like having at least $500,000 in liquid assets and a net worth of at least $500,000. That might sound like a lot of money, but keep in mind that we’re talking about one of the biggest brands in the world. And by judging by the way McDonald’s is taking over the market, it’s only going to get bigger.
If your application is accepted, McDonald’s representatives will invite you to interviews where they will judge your business skills, commitment, and fit with their brand.
If all goes well, you’ll receive a formal invitation to become a franchisee
Your next step is to go through a full training program that lasts between 12 and 18 months and teaches you everything from how to run a restaurant to how to be a good manager.
This training takes place at different McDonald’s locations so that you can learn as much as possible. After you’ve had training, you’ll work with McDonald’s to find the best place for your restaurant.
Their real estate and market research experts will help you make sure that the site you choose will help you succeed. Once you’ve found a place, you’ll work with McDonald’s to design and build your restaurant, using their standard layouts and equipment packages.
After the building is done, you’ll put together and train your team in preparation for the grand opening of your own McDonald’s.
When you join McDonald’s huge global family, you’ll be able to serve your community famous menu items and get help with marketing, training, and running your business.
That sounds simple enough on paper, but there are some details that most people overlook
You’ll also have to pay a one-time franchise fee of around $45,000, in addition to meeting the financial requirements.
So, the total cost of opening a McDonald’s can be anywhere from $1 million to $2.3 million. This includes the building, the equipment, and the first stock of food.
As a franchisee, you’ll also have to pay ongoing fees, like a monthly service fee (usually 4% of gross sales) and a monthly contribution to the advertising fund (usually 4% of gross sales).
And, as we’ve already said, the company owns most McDonald’s locations, so you’ll rent the land and buildings from them for 20 years.
Most of the time, the rent is based on a percentage of how much money your restaurant makes.
McDonald’s has strict rules about service and cleanliness because it’s important to keep the brand consistent and give customers a good experience.
Losses of billions of dollars can be caused by just one restaurant. Remember that the competition is tough, and you can’t make any mistakes.
Franchisees are given an exclusive territory in which to run their restaurants. This keeps you from having to compete directly with other McDonald’s restaurants in your area.
The franchise agreement usually lasts for 20 years. If you do well and follow the rules, you can renew it at the end of that time.
If you want to sell your franchise, you’ll need McDonald’s permission. And the person you sell it to will have to meet their requirements.
The McDonald’s model also perfected their land and construction processes
And this makes sure they’ll make money no matter how many burgers they sell.
By the time the building is done and the first fry is made, they are already making money. And even if the franchise doesn’t work out, they can always make money by selling the land and building.
When it comes to business models like McDonald’s, it’s hard to stop the snowball effect. They own the market so they set the standard.
That’s why Americans are never more than 115 miles from a McDonald’s.
This is why many consider McDonald’s a recession-proof business.
No matter how bad things were or how many cultural differences stood in their way, they always found a way to do well and make a lot of money.
And that’s why McDonald’s is taking over the world, and their competitors can only stand in their way!
This was our take on McDonald’s massive expansion across the global fast-food market. There is a lot to learn from their business model. Read this a few more times to make sure you get everything right. See you next time!
