Have you ever pondered how McDonalds has become a top dog in the fast food industry?
This article will examine the successful business model which has made McDonalds so successful. Get ready to find out how McDonalds continues to thrive and outshine its rivals.
Introduction to McDonald’s
McDonald’s is a world-famous fast food restaurant chain present in over 120 countries! It was founded by brothers Richard and Maurice McDonald in 1940 as a small drive-in eatery in San Bernardino, California. Now, it is one of the biggest restaurant chains and has a unique, complex business model.
Most McDonald’s restaurants are owned by franchisees or licensees, who must pay fees to open and operate them. These franchisees supply ingredients and arrange same-day deliveries to McDonald’s distribution centers. Franchise contracts often offer more stability than other jobs as they have exclusive rights to certain areas. Franchise owners use tech like point-of-sale systems to implement procedures from corporate headquarters. McDonald’s also give financial and marketing support to help retain customers.
Plus, McDonald’s owns some stores which employ their own employees. Across its 36000+ locations, 80% of workers are part-time or casual. Despite this, labor expenses remain half (42%) of restaurant revenue due to no minimum wage laws globally. As such, McDonalds is known for its cost-management strategies, making them successful even during tough economic times in numerous countries.
McDonald’s Business Model
McDonald’s is a well-known and successful fast-food chain in the US. It has become a leader in the quick service industry through innovation, operational excellence, and strategic investments. This article looks at McDonald’s business model and how it provides value to customers.
McDonald’s business model has 5 main components: franchising, supply chain management, technology innovations, marketing & promotion, and diversification.
Franchising – Since 1967, McDonald’s has been a franchise-based business. Ray Kroc bought the company from the McDonald brothers and implemented franchise operations worldwide. This model helps McDonald’s increase its market share, while reducing capital costs for store construction and operations & management expenses.
Supply chain management – McDonald’s has a streamlined system between producers/suppliers and franchises. They supply the raw materials needed to produce food items efficiently at low cost. Hundreds of food suppliers are contractually obligated to meet quality control requirements of McDonald’s. To do this, McDonald’s has an efficient process in place to ensure products arrive on time.
Technology innovations – Technology helps increase efficiency in stores and lets customers order online from their mobile devices or computers. With mobile ordering options, customers can select menu items from virtual menus on app stores – providing convenience benefits by accommodating more people quickly. Automated payment systems can also make transactions faster, so buyers don’t have to wait in line.
Marketing & promotion – McDonald’s has successful marketing campaigns to build relationships between brand owners and customers. Advertising is done on TV, radio, publications, newspapers, and social media platforms. McDonald’s also promotes socially responsible practices like health, nutrition, education, and children’s causes. They offer loyalty incentives and points schemes to remain loyal. They also organize special events and promotions for seasonal offers.
Diversification – As part of its growth strategy, McDonald’s diversifies by providing services like catering, events, commissions, outdoor patios, etc. They also develop second-tier related industries like retail, manufacture, food lines, greetings cards, DVDs, merchandise, books, magazines, etc. This helps increase sales and creates additional revenue, resulting in year-round growth prospects and improved brand loyalty in the long-term.
McDonald’s Franchising Model
McDonald’s is a renowned and huge brand. Its franchising option is an attractive choice for entrepreneurs wanting to own their own company with the assurance of a recognized brand.
In a McDonald’s franchising deal, a licensee/franchisee pays fees to McDonald’s Corporation depending on its sales. Franchisees must obey operational methods, like maintaining cleanliness and hygiene standards. In return, they get instruction and operational aid from McDonald’s Corp. plus access to exclusive products, supplies, and services. They also benefit from McDonald’s advertising campaigns, while they support local advertising efforts.
The terms of each agreement differ based on the location, size of store and type of business model chosen by the franchisee like a free-standing store or location within another building like a shopping mall or strip mall. All agreements include standardized terms concerning payment requirements, royalties schedule and maintenance activities which are standard across all franchises.
Besides buying supplies from vendors accepted by McDonald’s Corp., franchisees must stick to certain guidelines when it comes to setting menu prices, purchasing approved products from McDonald’s approved suppliers, selecting approved computer software packages for use within their restaurants and other standards to provide a consistent experience for customers globally.
McDonald’s Menu and Pricing Strategies
McDonald’s offers a variety of food at an affordable price. They watch customer preferences and adjust their menu accordingly. Categories include Value Meals, All Day Breakfast, Salads, Sandwiches, Snacks & Sides, McCafé Beverages, Extras and Happy Meals. The Value Meal category contains staple items, discounted to entice customers to buy more. All Day Breakfast is available all day.
McDonald’s also caters to dietary restrictions and cultural tastes with items such as salads and gluten free buns. They have localized items like the McLobster in Canada and McAloo Tikki burger in India.
Their pricing model is ‘cost plus’. This means, food costs are used to determine how much to charge for each product, allowing them to make a profit and remain competitive. $2-$3 is the price range for an item that costs $2 to produce.
McDonald’s Supply Chain
McDonald’s has an intricate supply system to make sure its customers get high-quality and consistent meals. They get most ingredients in the US, to ensure food safety, freshness and availability.
For beef, they use Cargill and Tyson Foods. Further down, distributors bring the finished products such as burgers, fries, sauces and drinks to McDonald’s locations. Supplies from vendors like cleaning providers, tech services, printers and many more are also necessary in each restaurant.
Globally, McDonald’s has a portal system with 250+ distribution centers in over 120 countries. This system procures 10 million tons of beef yearly, plus other food items from McDonald’s suppliers, and local products in each region it operates in.
McDonald’s Advertising and Marketing Strategies
McDonald’s is a renowned fast-food franchise. Its success can be attributed to its successful advertising and marketing tactics. It first opened as a BBQ joint in San Bernardino, CA, in 1940. Then, it spread across the U.S. in 1955. McDonald’s has been modifying its branding and advertising strategies to keep up with changing customer tastes.
McDonald’s spends a lot of money and effort into researching what their customers like. They create campaigns to increase customer loyalty. These include limited edition items, coupons, and discounts. Their campaigns showcase particular menu items and emphasize themes like family meals, and supporting local communities.
The company also uses digital advertising, such as mobile apps, social media, banner ads, search engine ads, video ads with influencers, etc. McDonald’s is always looking to be innovative, and connect emotionally with customers by showing affordable, convenient and fun experiences associated with their food.
McDonald’s Global Expansion
McDonald’s has become a global name! Their strategy? To enter each major market, through franchises and joint ventures. This way, they can better understand the local culture, and offer menu items that fit the tastes.
Burgers and fries are their core items, but they also have vegan-friendly options, McFlurries, McMuffins, salads and wraps, and hot beverages like espresso. Plus, they opened restaurants in Myanmar to cater to the local population.
McDonald’s global expansion strategy helps them gain access to new markets and build brand recognition. By understanding their customers’ cultures, tastes, and preferences, they can provide tailored products that still stay true to their core values – quality food, reasonable prices, and friendly service.
McDonald’s Future Outlook
McDonald’s has always been successful due to their ability to adapt to customer needs. Now, they have a growth strategy that targets both existing and new markets. They plan to spend over $1 Billion on remodeling restaurants in 2019. This includes modernizing dining experiences and making drive-thrus more efficient.
McDonald’s will also be expanding their delivery services with third-party providers such as UberEats and Door Dash. Furthermore, they will invest in digital marketing and offer healthier options for lunch and dinner.
McDonald’s goal is to become a modern, progressive burger company. They want to offer food experiences that match today’s lifestyles, while still keeping classic favorites.
Frequently Asked Questions
Q: What is McDonald’s business model?
A: McDonald’s business model is based on a franchising system. The company owns the brand and trademarks, as well as the supply chain and restaurant designs. Franchisees pay fees for the right to use the McDonald’s brand and for support services, such as training, marketing, technology, and procurement.
Q: What are the advantages of McDonalds’ franchising model?
A: McDonald’s franchising model has a number of advantages. It allows the company to expand rapidly, as it is able to recruit local entrepreneurs to operate its restaurants. It also enables McDonald’s to reduce costs associated with opening and running restaurants, as the franchisees shoulder much of the costs and risks. Furthermore, the franchising model allows McDonald’s to focus on its core competencies, such as marketing, while allowing the franchisees to manage their own restaurants.
Q: How much does it cost to become a McDonald’s franchisee?
A: The cost to become a McDonald’s franchisee varies from market to market and can range from hundreds of thousands to millions of dollars. The costs include the franchise fee, equipment and construction costs, working capital, and other fees.