PRACTICAL – 1

AIM: Case Study on MCDONALD’S Website.

Introduction:
McDonald’s Corporation, founded in 1940 as a café by Richard and Maurice McDonald in
San Bernardino, California, USA, initially operated as a burger stand. Later, they revamped
their business model, evolving it into a franchise, with the iconic Golden Arches logo
introduced in 1953 at a location in Phoenix, Arizona. McDonald’s, previously headquartered
in Oak Brook, Illinois, relocated its global headquarters to Chicago in mid-2018.

McDonald’s restaurants are present in 120 countries and territories globally, serving
approximately 68 million customers daily. With a total of 37,855 restaurants worldwide,
McDonald’s employs over 210,000 people as of the end of 2018.

While McDonald’s is renowned for its burgers, cheeseburgers, and French fries, its menu
extends to include chicken items, breakfast selections, beverages like sodas and milkshakes,
wraps, and desserts. Responding to shifting consumer preferences and criticism regarding the
nutritional value of its food, the company has incorporated salads, fish, smoothies, and fruits
into its offerings.

McDonald’s Corporation generates revenue from leases and fees paid by its franchisees. As
per two reports released in 2018, McDonald’s ranks as the world’s second-largest private
employer, with 1.7 million employees, trailing only behind Walmart, which employs 2.3
million workers.

McDonald’s Company Highlights:

COMPANY NAME MCDONALD’S

Headquarters Chicago, Illinois , U.S.

Founded 1940

Founders Richard and Maurice McDonald’s and then by Ray Kroc

Sector Restaurants, Food Franchise, Real Estate

Valuation $185+ bn

Revenue $23.22 bn (FY21)

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 Industry:

McDonald’s primarily offers hamburgers, a variety of chicken options, chicken

sandwiches, French fries, breakfast items, and desserts. In most locations, they also provide
salads and vegetarian choices, wraps, and other menu items tailored to local preferences.
Additionally, the seasonal McRib sandwich adds excitement to the menu for some customers.
Meals are available for either dining in or take-out, with dine-in orders served on plastic trays
with paper inserts and take-out orders packaged in the distinctive brown paper bags branded
with the McDonald’s logo.

Under CEO Steve Easterbrook’s leadership, McDonald’s has simplified its

menu, reducing the number of items from nearly 200 in the United States. The company has
also focused on introducing healthier options, such as eliminating high-fructose corn syrup
from hamburger buns and removing artificial preservatives from Chicken McNuggets.
Artificial preservatives, flavors, and colors have been entirely eliminated from seven classic
burgers in the U.S. as of September 2018, although pickles still contain an artificial
preservative, though customers can request their burgers without pickles.

McDonald’s restaurants in various countries, especially in Asia, offer local

deviations from the standard menu, catering to regional food preferences or cultural norms. For
instance, in India, where beef consumption is prohibited for religious reasons, alternative menu
items are available. Similarly, McDonald’s offers items like McRice in Indonesia and prawn
burgers in Singapore and Japan to cater to local tastes. In some Western European countries,
including Germany, McDonald’s also sells beer. In New Zealand, McDonald’s sells meat pies,
following the partial relaunch of the Georgie Pie fast food chain, which McDonald’s acquired
in 1996.

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 About:

In 1940, Richard and Maurice McDonald launched the original McDonald’s restaurant at 1398
North E Street at West 14th Street in San Bernardino, California. However, the McDonald’s of
that time was quite different from the familiar chain we know today. It was Ray Kroc who
made significant alterations to the brothers’ business model, transforming and modernizing it
into the McDonald’s brand recognized worldwide.

Richard and Maurice McDonald in 1940, opened the primary McDonald's at 1398 North E
Street at West fourteenth Street in San Bernardino, California; however, it was not the
McDonald's you know today. Ray Kroc made changes to the siblings' business and modernized
it.

In 1948, the McDonald brothers introduced the “Speeded Service System,” which expanded
on the principles of the modern drive-thru restaurant, first tested by White Castle over two
decades earlier. McDonald’s revolutionized the dining experience with a delivery model that
utilized a conveyor belt to prepare and deliver food within a remarkable 2-minute timeframe.
This innovative approach created an extraordinary and unprecedented restaurant concept
featuring:

A limited menu offering only burgers, fries, and shakes

Elimination of plates and wait staff, providing a streamlined and efficient service experience
for customers.

As McDonald’s expanded its presence into numerous international markets, it became

synonymous with globalization and the American way of life. However, its prominence has
also made it a frequent subject of public debates concerning issues such as obesity, corporate
ethics, and consumer responsibility.

The siblings presented the "Speedee Service System" in 1948 by extending the standards of
cutting-edge drive-thru eatery that their antecedent White Castle had tried over two decades
earlier. McDonald's emerged with a delivery model where it made its food on a supply belt and
delivered it within 2 minutes.

It looked like a fantastic and impossible eatery that had:

 Only burgers, fries, and shakes on the menu

 No plates or waiters to serve the customers

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 How Did It start:

McDonald's began in 1940 when brothers Richard ("Dick") and Maurice ("Mac")
McDonald opened a small drive-in restaurant in San Bernardino, California, called the
"McDonald’s Bar-B-Q." It initially had a large menu featuring barbecue items and was run as
a traditional carhop service, where customers were served in their cars by waitstaff.

The Shift to Fast Food (1948):

In 1948, the McDonald brothers revolutionized their business by introducing the “Speedee
Service System,” a pioneering approach to food preparation inspired by assembly lines. They
simplified the menu to focus on burgers, fries, and beverages, emphasizing speed, efficiency,
and affordability. This innovation marked the beginning of the modern fast-food industry.

Ray Kroc’s Involvement (1954):

In 1954, Ray Kroc, a milkshake machine salesman, discovered McDonald's while selling his
products to the brothers. Impressed by their efficient operations, he saw the potential for
nationwide expansion. Kroc partnered with the McDonald brothers and opened the first
franchised McDonald’s restaurant in Des Plaines, Illinois, in 1955. He later purchased the
company outright in 1961 for $2.7 million.

The Beginning of a Global Empire:

Under Kroc’s leadership, McDonald's grew rapidly, becoming synonymous with fast food. The
iconic Golden Arches logo, the introduction of the Big Mac (1967), and Happy Meals (1979)
helped cement its status as a cultural and business phenomenon. Today, McDonald’s operates
in more than 100 countries, serving millions of customers daily.

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 Founder And Team:

Richard and Maurice McDonald in 1940, opened the primary McDonald's at 1398 North E
Street at West fourteenth Street in San Bernardino, California; however, it was not the
McDonald's you know today. Ray Kroc made changes to the siblings' business and modernized
it.

 Richard McDonald and Maurice McDonald:

The McDonald brothers opened their first restaurant in 1940 in San Bernardino,
California. They introduced the Speedee Service System in 1948, emphasizing efficiency
and affordability, which laid the foundation for the fast-food industry.

 Ray Kroc:
A visionary entrepreneur, Ray Kroc joined McDonald’s in 1954 after being impressed by
the brothers' efficient model. He opened the first franchised McDonald's in Des Plaines,
Illinois, in 1955. Kroc was determined to expand the business nationally and
internationally, eventually buying out the McDonald brothers in 1961 for $2.7 million.

 Current Leadership:
McDonald's is led by a global executive team that focuses on innovation, digital
transformation, and sustainability.

o Chris Kempczinski: Current President and CEO of McDonald’s Corporation (as

of 2020).

o The leadership team includes experts in finance, operations, marketing, and

sustainability, ensuring the company’s global strategy aligns with modern customer
demands.

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 Mission And Vision:

 McDonald’s Mission Statement:

McDonald’s commercial charge is centred on being the preferred destination for guests to enjoy
their refection’s and potables. This charge underscores the significance of guests as the central
focus of the business, while also emphasizing McDonald’s part as a significant influencer in
their food and libation choices. The main factors of McDonald’s commercial charge statement
are:
Being the guests’ favourite place to eat and drink.
Being the guests’ favourite way to eat and drink.

McDonald’s has remained committed to its mission of “Quality, Service, Cleanliness, and
Value,” upholding each of these attributes throughout its operations. Enhancing customer
experience is achieved through a focus on five key fundamentals: people, products, place, price,
and promotion.

Furthermore, McDonald’s aims to offer high-quality food at prices that are accessible to people
worldwide. The company’s sales are facilitated through an efficient sales channel, ensuring
consistently high levels of customer satisfaction at all times.

 McDonald’s Vision Statement:

McDonald’s Vision Statement can be summarized as striving to accelerate growth and enhance
its position as a leading global provider of delicious food, catering to a larger customer base
every day. This articulation underscores the company’s commitment to maintaining excellence
in food quality while investing in its employees, technology, and resources to foster further
expansion. Achieving profitable growth and enhancing customer satisfaction aligns closely
with McDonald’s core mission.

The vision statement underscores the pursuit of continuous improvement, as indicated by the
aspiration to be “even better.” This reflects McDonald’s ongoing efforts to enhance its service
and product offerings, aiming to deliver an exceptional customer experience. By continuously
striving for improvement, McDonald’s remains competitive in the dynamic restaurant industry,
staying ahead of evolving trends and meeting customer expectations effectively.

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 Name, Tagline and Logo:

 Name:
The name “McDonald’s” honors the founders, Richard and Maurice McDonald.

 Tagline:
1. "I’m Lovin’ It" (introduced in 2003): This iconic slogan resonates globally, focusing
on positive emotions associated with food and happiness.
2. Previous taglines include:
o "You Deserve a Break Today" (1971)
o "We Do It All for You" (1975)

 Logo:
Initially, McDonald’s first mascot was “Speedee,” depicted as a cooking cap atop a burger.
However, in 1962, the Golden Arches symbol replaced Speedee as the company’s universal
mascot. The iconic character of Ronald McDonald, a clown, was introduced in 1965 to engage
with children and promote the brand.

On May 4, 1961, McDonald’s filed its first U.S. trademark application for the name
“McDonald’s,” specifying “Drive-In Restaurant Services.” Subsequently, on September 13,
under the guidance of Ray Kroc, McDonald’s filed another trademark application for a new
logo— covering, twofold curved “M” image.

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 Marketing Strategy:

Marketing Strategy:
McDonald’s marketing strategy is centred around maintaining brand loyalty, driving
innovation, and connecting emotionally with customers.

1. Global Branding with Local Adaptation:

 McDonald’s leverages its global brand image while tailoring menus and campaigns to
suit local cultures and preferences.
 Examples:
o India: Vegetarian items like the McAloo Tikki Burger.
o Japan: Teriyaki Burgers and Ebi Filet-O (shrimp burger).

2. Emotional Advertising:
 Campaigns like "I’m Lovin’ It" focus on happiness, family, and good times.
 McDonald’s frequently uses nostalgia and emotional storytelling in its commercials.

3. Promotions and Limited-Time Offers:

 McDonald’s regularly introduces limited-time menu items, promotional discounts, and
combo deals to attract customers.

 Popular promotions include Monopoly games and celebrity meals (e.g., BTS, Travis
Scott).

4. Digital Marketing and Social Media:

 Active on platforms like Instagram, Twitter, and Facebook, McDonald’s connects with
younger audiences through memes, interactive posts, and influencer collaborations.

 Mobile apps provide exclusive deals, loyalty rewards, and order tracking, boosting
customer engagement.

5. Sponsorships and Events:

 McDonald’s has been a long-term sponsor of the Olympic Games and FIFA World
Cup, associating its brand with global sportsmanship and unity.

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 Business Model:

McDonald’s business model is a mix of franchising, real estate, and operational efficiency,
ensuring profitability and scalability.

1. Franchising Model:
 93% of McDonald’s restaurants are owned and operated by franchisees.
 Franchisees pay:
o An initial fee for using the brand.
o Ongoing royalties (based on a percentage of sales).
o Rent for the property, often owned by McDonald’s Corporation.

2. Real Estate Revenue:

 McDonald’s owns or leases most of its restaurant properties worldwide.

 The company earns significant income by charging franchisees rent, often at premium
rates.
 This model allows McDonald’s to generate stable, long-term profits.

3. Menu and Operations:

 Standardization: McDonald’s ensures consistent quality and service across its global
outlets.

 Localization: Regional menus cater to cultural and dietary preferences, enhancing

customer satisfaction.

 Efficiency: The company emphasizes speed, cost control, and streamlined supply
chains through the "Speedee Service System."

4. Technology and Digital Innovation:

 Self-order kiosks, mobile apps, and delivery partnerships (with Uber Eats, Door Dash
 , etc.) help modernize customer interactions.

 The My McDonald’s Rewards loyalty program encourages repeat visits and customer
retention.

5. Sustainability and Corporate Responsibility:

 McDonald’s is working toward reducing carbon emissions, transitioning to
sustainable packaging, and sourcing ingredients responsibly.

 Community initiatives include support for the Ronald McDonald House Charities,
which assist families with sick children.

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 Revenue Model:

McDonald’s revenue model revolves around two primary streams: franchising and company-
operated restaurants, with a focus on leveraging real estate for financial stability.

Revenue Streams:
1. Franchise Revenue (Key Driver – 60%–70% of total revenue):
o McDonald’s generates revenue from franchised restaurants through:

 Initial franchise fees: Paid by franchisees for the right to operate under
the McDonald’s brand.

 Royalties: A percentage of each franchisee’s monthly sales (typically 4–

5%).

 Real Estate Rent: McDonald’s owns or leases the land and buildings of
most franchised locations and charges franchisees rent, which is a
significant portion of its income.
2. Company-Operated Restaurants:

o McDonald’s directly owns and operates a smaller portion (around 7%) of its
outlets, earning revenue from food and beverage sales. These restaurants help
the company maintain operational control and test new concepts.
3. Other Sources:

o Licensing agreements for branded products (e.g., McCafe coffee sold in grocery
stores).
o Revenue from partnerships with delivery services like Uber Eats and DoorDash.

Profitability Focus:
 Franchise-based restaurants are more profitable due to low operational costs. The
franchisees bear most of the operational risks, while McDonald’s benefits from stable
royalty and rent income.

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 Funding and Investors:

 Funding History:
 Early Years: McDonald’s expansion was initially financed through Ray Kroc’s
personal investments and profits from early restaurant operations.
 IPO: McDonald’s went public in 1965, which provided significant capital for rapid
global expansion. The company raised approximately $2.7 million during its initial
public offering (IPO).

 Current Investors:
As a publicly traded company listed on the New York Stock Exchange (NYSE) under the
ticker symbol MCD, McDonald’s has a diverse set of institutional and individual investors.
Major Institutional Investors:
1. Vanguard Group
2. BlackRock
3. State Street Corporation
4. Berkshire Hathaway (Warren Buffett’s company has held McDonald’s shares in the
past).

 Capital Allocation Strategy:

 McDonald’s focuses on reinvesting profits into expanding its franchise model,
upgrading technology, and enhancing customer experiences.
 The company also prioritizes returning value to shareholders through dividends and
share buybacks.

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 Challenges:
1. Health and Nutrition Concerns:
 McDonald’s has often been criticized for contributing to unhealthy eating habits,
obesity, and related health issues due to its calorie-dense menu.
 Rising consumer preference for healthier food has forced McDonald’s to introduce
options like salads, fruit, and plant-based items (e.g., McPlant).

2. Intense Competition:
 The fast-food industry is highly competitive, with players like Burger King, Wendy’s,
KFC, Subway, and emerging local brands posing constant threats.

 Additionally, newer brands focusing on healthier, organic, or specialty food (like

Chipotle or Sweet green) are attracting younger, health-conscious customers.

3. Labour and Wage Issues:

 McDonald’s frequently faces criticism over low wages and poor working conditions,
leading to employee protests and lawsuits in several regions.
 Increased labour costs due to minimum wage hikes also impact profit margins.

4. Sustainability and Environmental Pressures:

 McDonald’s generates significant waste from single-use packaging and plastic
materials, drawing criticism from environmental groups.

 The company has committed to reducing its environmental footprint, but implementing
these changes on a global scale is challenging.

5. Economic Uncertainty:
 Rising inflation, fluctuating commodity prices, and global economic downturns can
affect consumer spending and increase operational costs.

 Currency fluctuations in international markets also pose risks to revenue generated

outside the U.S.

6. Changing Consumer Preferences:

 Younger consumers demand convenience, personalized experiences, and transparency
in sourcing and operations. Meeting these expectations requires constant innovation.

7. Supply Chain Challenges:

1. As a global brand, McDonald’s relies on a vast supply chain, making it vulnerable to
disruptions caused by geopolitical tensions, natural disasters, or pandemics.

2. For example, during COVID-19, McDonald’s faced supply shortages and delivery
delays in several regions.

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 Acquisitions:

1. Dynamic Yield (2019)

 Purpose: To personalize the customer experience.

 Details: McDonald’s acquired Dynamic Yield, an artificial intelligence (AI) company,

for over $300 million.
 Impact:

o The AI-powered technology enables McDonald’s to personalize drive-thru

menus based on factors such as weather, time of day, customer preferences, and
current restaurant traffic.

o Enhanced upselling and cross-selling strategies, leading to improved sales and

customer satisfaction.

 Sale: In 2022, McDonald’s sold Dynamic Yield to MasterCard, retaining a strategic

partnership to continue leveraging the technology.

2. Apprente (2019)
 Purpose: To enhance automation in drive-thru operations.

 Details: McDonald’s acquired Apprente, a voice-recognition start-up specializing in

AI-powered conversational technology.
 Impact:

o The acquisition helped automate drive-thru ordering by using AI to understand

and process customer orders.
o This reduced wait times, increased accuracy, and streamlined operations.

3. Donatos Pizza Partnership (2004)

 Purpose: To test new menu options.

 Details: McDonald’s entered into a partnership with Donatos Pizza, a regional pizza
chain, to offer pizzas at selected McDonald’s locations.
 Impact:

o While this effort was discontinued due to operational challenges, it showcased

McDonald’s willingness to experiment with menu diversification.

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 Growth:

McDonald’s Corporation introduces a new growth strategy, “Accelerating the Arches,” which
encompasses all aspects of McDonald’s business as the leading global Omni-channel restaurant
brand. This strategy includes a refreshed purpose to nourish and support the communities
served by McDonald’s and its franchisees worldwide, updated values to guide actions and
behaviours, and growth pillars that leverage McDonald’s competitive advantages. The growth
pillars, rooted in the Company’s identity, MCD, build upon historical strengths and identify
areas for further development. Specifically, the Company will activate the MCD in the
following ways:

Maximize Marketing: By investing in innovative and culturally relevant approaches to

effectively communicate the brand, food offerings, and purpose. Commit to the Core: By
responding to customer demand for familiar favourites and prioritizing the delivery of delicious
burgers, chicken items, and coffee. Double Down on the 3 D’s (Digital, Delivery, and Drive
Thru): By capitalizing on competitive strengths and developing a robust digital experience
engine that enhances convenience and speed for customers through digital, delivery, and drive-
thru channels

In different terms, McDonald’s growth strategy relies on retaining existing customers, winning
back those who have drifted away, and enticing occasional customers to become regulars.
Moreover, the company has also implemented three key drivers: digital innovation, food
delivery services, and enhancing customer experiences. By leveraging technology and human
efforts, McDonald’s continuously evolves its interactions with customers, aiming to elevate
satisfaction levels and enhance overall experience.

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 Future Plans:

The reported objective is to source all visitor bundling from inexhaustible, reused, or ensured
sources, reuse visitor bundling in 100% of eateries, and overcome framework challenges by
2025.

McDonald's turned into the principal eatery organization on the planet to set an endorsed
Science-Based Target to lessen ozone-depleting substance emanations. It also joined the "We
Are Still In Leader's Circle", driving activity to relieve environmental change.

McDonald's USA completed five years as the sole worldwide café organization to serve MSC-
ensured fish in each U.S. area. It united with Closed Loop Partners to build up a worldwide
recyclable and additionally compostable cup arrangement through the NextGen Cup Challenge
and Consortium. Official pioneers called for atmosphere activity and offered arrangements at
the primary Global Climate Action Summit (GCAS).

McDonald's co-facilitated the "Way to Green build" occasion with Illinois Green Alliance at
its new worldwide home office. The structure, a collaboration among Sterling Bay,
McDonald's, and Gensler Chicago, got USGBC LEED Platinum accreditation.

McDonald's is establishing the tone for other inexpensive food organizations to pursue. Given
the present want by numerous buyers to spend cash on organizations that are doing great on
the planet, where McDonald's leads, others will pursue.

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