McDonald's is among the most profitable, popular, and widespread restaurant chains worldwide.
McDonald's serves hundreds of millions, if not billions, of customers every single year around the world, and they operate in close to every country on earth.
This is not by chance or coincidence; McDonald's is one of the ultimate success stories in business and has a big global business empire built to last for a long time.
Humble Beginnings and the American Standard
After moving their father’s restaurant “The Airdrome” from Monrovia to San Bernardino, California Richard and Maurice McDonald (brothers) changed the concept from a food stand to a burger restaurant, changing the name to “McDonald’s” back in 1940.
The McDonald brothers wanted to establish Standardized production and chain production to offer everyone consistent, high-quality, and affordable food, what they called the "Speedee Service System", after doing so in 1948 it became a great success.
They offered 15 cent burgers, fries, and drinks, which were popular.
After a few changes in their building, aiming for higher efficiency and eye-catching appearance, the emblematic golden arches first appeared in their building, and repeated them in their first franchise in Phoenix, Arizona in 1953.
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The McDonald's brothers already operated a restaurant chain when they met a milkshake machine salesman by the name of Ray Kroc.
Going big
Ray helped McDonald's to open up franchises of their restaurants, which brought the first McDonald's east of the Mississippi in 1954.
Kroc envisioned thousands of McDonald's restaurants across the US, and while this took some time to come to fruition, McDonald's quickly shot to national success over the 1950s.
In 1967, the restaurant opened its first store outside the US in Canada before spreading across the UK and Europe, bringing their burgers to the global stage. Currently, there are well over 33,000 McDonald's restaurants around the world.
Currently, there are well over 33,000 McDonald's restaurants around the world.
The business in the land instead of the bun
In 1955 Harry J. Sonneborn, former vice president of finances at Tastee Freeze (who later became president of McDonald’s), inspired Ray Kroc to look towards the real estate opportunity as a cash earner from their restaurants.
This strategy, later known as “Sonneborn model” was crucial to their long-term success, especially during economic downturns when people buy fewer burgers. The company still employs it.
In 1962 the McDonald's brothers sold the rights of the chain to Kroc for $2.7M.
Fostering Relationships with Concessioners
McDonald's success is largely due to how the business operates. McDonald's is the franchise, not the outright owner of each restaurant.
Business owners can come to McDonald's and pay them money to set up a store using their products and services.
This saves McDonald's money and massively reduces the risks of opening a new branch in a new location.
However, when opening a franchise, there are a number of risks, like a rogue concessioner damaging your reputation or some locations failing to uphold your standards and expectations.
McDonald's is dedicated to maintaining a great working relationship with their concessioners, providing excellent support, good earnings, and long-term training to help them succeed.
The concessioners have repaid McDonald's investment in them tenfold. For example:
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The Big Mac
In 1967, to compete against Big Boy in Pittsburgh, McDonald’s concessionaire Jim Delligatti created the Big Mac.
The burger was a huge success and continues to be a success story.
McDonald's estimates that about 550 million Big Macs are sold in the United States each year.
This shows how reliant McDonald's is on the enormous success of their flagship burger.
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The Happy Meal
A product for children with smaller portions was the original idea that came first to Yolanda Fernandez in 1979, she was a McDonald’s international concessionaire in Guatemala.
Since its beginnings the company pursued being a family company, since 1963 their main character was a clown Ronald McDonald.
The product later evolved to include a small toy which made the Happy Meals an immensely popular request by their younger customers.
It also became an excellent way for McDonald's to generate extra revenue by bringing out toys in suits with popular culture.
For example, McDonald's has brought out Star Wars-themed toys and Christmas and Halloween-themed toys every year, bringing in more customers for the company.
Setting the Standard for Global Fast Food Chains
McDonald's sets the standard for all global fast-food chains. They set the bar for how to operate in hundreds of countries worldwide at once, and every country McDonald's branches into leads to more success for the business.
One of the critical factors in McDonald's international success is a comprehensive global supply chain that links up with local suppliers of food, allowing for fresh local ingredients in every country.
McDonald's also alters the menu in each country, catering to the specific tastes of each country.
For instance, in most McDonald's in East Asia, like Thailand or Japan, you can find rice at reduced prices and are a standard add-on to meals, whereas in Europe or the US, fries are the usual option.
McCafé a trendy offer for a new generation
McDonald's sailed smoothly through the second half of the 20th century as it expanded into new markets and adjusted its menu to the tastes of different countries.
Since its beginnings, the company often seeks for innovations, back in 1975 they opened their first Drive-thru service in Arizona.
However, McDonald's mixed things up by introducing the McCafé, selling coffee, doughnuts, and to-go items to appeal to more consumers.
The McCafé was a genius move that debuted in Australia back in 1993 before spreading to the US and Europe in 2002.
This allowed McDonald's to compete with other restaurants that served young professionals, and it worked around the unhealthy tag associated with the brand.
McDonald’s at your fingertips
As the 21st century came about, McDonald's was looking down the barrel of a major issue: a younger generation with changing interests and expectations.
The younger age group was no longer impressed by slides and a ball pit with a little plastic toy.
They wanted technology, large screens, and bright lights, and oh boy, did McDonald's listen to them.
In 2015, McDonald's introduced touchscreen devices for easy ordering and updated their restaurants' interiors to appeal to younger consumers.
On top of this, McDonald's partnered with Uber EATS to offer deliveries on orders directly to people's homes.
This allowed the company to stay competitive with restaurants listed on ordering apps.
Conclusions
McDonald's has implemented a number of excellent strategies that have allowed it to grow into the Goliath empire it is today.
Here are some of the key business strategies used by the company-
- Franchising: Allowing for affordable, quick expansion and insight from local business people.
- Training: McDonald's long-term training keeps its standards high across the board for all restaurants, allowing for consistency in service to all customers.
- Product Development: The Big Mac and The Happy Meal are pillars of McDonald's epic success.
- Innovation: The McCafé and the introduction of technology have attracted younger customers to this 80-year-old country.
- Real Estate: McDonald's makes a huge proportion of their profits from real estate since it owns close to 70% of the buildings its restaurants operate out of.
