Get our 300+ Products Library!

Details

 

BUSINESS MODEL CANVAS EXAMPLES

McDonald’s Business Model

POSTED ON APRIL 24, 2023 BY DANIEL PEREIRA

With close to 40,000 restaurants in more than 100 countries, the McDonald’s
business model depends mainly on the sale of McDonald’s products by their
franchisees, which usually lease properties owned by McDonald’s. The business
model was first adopted by the brothers Richard James and Maurice James
McDonald, who sold their business to Ray Kroc, their first franchise agent, at the
then heavy sum of US$ 2.7 million, back in 1961.
 Get our 300+ Products Library! Details

Contents

1. A brief history of McDonald’s:

2. McDonald’s mission statement:
3. How McDonald’s makes money
3.1. Developmental License
3.2. Conventional Franchising
3.3. Affiliates
3.4. Company-Operated Restaurants
4. McDonald’s Business Model Canvas
4.1. Download FREE!
4.2. McDonald’s customer segments
4.3. McDonald’s value proposition
4.4. McDonald’s channels
4.5. Mcdonald’s customer relationships
4.6. McDonald’s revenue streams
4.7. McDonald’s key resources
4.8. McDonald’s key activities
4.9. McDonald’s key partners
4.10. McDonald’s cost structure
5. McDonald’s competitors
6. McDonald’s swot analysis
 6.1. McDonald’s Strengths
GetWeaknesses
6.2. McDonald’s our 300+ Products Library! Details
6.3. McDonald’s Opportunities
6.4. McDonald’s Threats
7. Conclusion

A brief history of McDonald’s:

Launched in 1948, Speedee Service System was the forerunner of McDonald’s. It
was launched by the two McDonald’s brothers, who adopted the drive-in and
franchising concept for fast-food delivery. Their first franchise agent was Ray Kroc,
who opened the first McDonald’s franchise back in 1955. He bought the rights to
their business for US$ 2.7 million in 1961, after seeing what their business and its
business model could become.

Through its business model and insistence on offering quick service and delivery of
products of a consistent quality, in 2021 McDonald’s became the most valuable QSR
brand with a brand value of US$ 154.9 billion and worldwide revenue of US$ 19.21
billion.

McDonald’s mission statement:

McDonald’s mission statement is “to be our customers’ favorite place and way to
eat and drink.”

How McDonald’s makes money

While McDonald’s business model focuses mainly on franchising, they also
generate income in other ways. However, under franchising, they operate three
different types of it. They are:
Get our 300+ Products Library! Details

Developmental License
Under this type of franchising, the franchisee invests their own capital in setting up
their restaurant, which includes operational and real estate costs.

McDonald’s supplies the products and receives a percentage as royalty from the
sale. The company also charges a predetermined amount for every franchise that
wants its license.

This type is the exact opposite of conventional franchising and is in use in more
than 6.950 restaurants in over 80 countries.

Conventional Franchising
This structure is the most effective in the McDonald’s business model. The company
either obtains a long-term lease or owns the land where the restaurant is built,
while the franchisee pays a minimum rent for a 20-year period and ongoing royalty
to the company.

The franchisee also pays for the signs and interior decor of the restaurant, while
getting innovative and operational help from their parent company. This structure
ensures that McDonald’s revenue stream is stable and predictable, while
maintaining profitability amidst low operational costs.

Affiliates
This structure receives the lowest investment from the company and accounts for
equity investments.

It’s mostly in use in China and Japan, where companies pay a percentage of sales as
royalty for McDonald’s products. These products include hamburgers, french fries,
milkshakes, soft drinks, salads, coffee, and desserts.
 Get our 300+ Products Library! Details

Company-Operated Restaurants

While few, McDonald’s has a number of restaurants that they own and operate,
hiring employees and ordering supplies by themselves. However, the company’s
goal is to have 5% percent of its restaurants company-owned, while 95% will be
owned and operated by franchisees.
McDonald’s most profitable business model structure, the conventional franchising,
allows them to keep up to 82% of revenue generated by their franchises, unlike the
company-operated restaurants that only keep about 16% of their revenue. The
success of their strategies in the international market has resulted in the term
‘McDonaldization’.

Over the years, McDonald’s has developed and improved upon its marketing
strategies with the intent of increasing profits for its franchisees and the parent
company. Such strategies include the enhancement of customer experience, by
focusing on people, products, price, place, and promotion, which works together
with its mission statement.

They have also worked on their growth strategies by working on strategies for
retaining existing customers, regaining lost clients, and converting non-customers.
This was their 2017 continuous growth plan and was listed as:

Retain
Regain
Convert
In their efforts to carry this out, they made improvements on their digital platform,
Get our 300+ Products Library! Details
such as delivery services, while adding an experience of the future (EOTF) by the
introduction of new technologies in their restaurants.

Tezpur to Lilabari

from

Sea

To further boost growth, they have also worked on diversity with the proposition of
“Diversity IS Inclusion” and the acquisition of other companies, such as Donatos
Pizza in 1968, and Boston Market in 2000.

McDonald’s Business Model Canvas

 DOWNLOAD HIGH-R ESOLUTION PDF OF THE MCDONALD’S BUSINESS MODEL
Get our 300+ Products Library! Details
CANVAS

McDonald’s customer segments

Buyers: People who want to buy McDonald’s products like hamburgers, french fries,
desserts, etc.;
Franchisees: Restaurants that want to increase their profit, by using the McDonald’s
brand name.

McDonald’s value proposition

Buyers: Cheap and quick food, and service with consistent quality from a trusted
brand;
Franchisees: Become a successful entrepreneur and have more profit through the
McDonald’s brand name.

McDonald’s channels
Website
App for iOS and Android
Franchisees/Restaurants

Mcdonald’s customer relationships

Social Media
Customer Service
Community Service

McDonald’s revenue streams

Royalties
Rent Fees
License Fees

McDonald’s key resources

 Brand
Get our 300+ Products Library! Details
Supplier Network
Real State
Platform

McDonald’s key activities

In-store Product Sale
Delivery
Payment Processing
Innovation Testing and Implementation

McDonald’s key partners

Suppliers
Delivery Providers: Uber Eats & Door Dash

McDonald’s cost structure

Salaries
Marketing
Payment Processing
Administration and Operations

McDonald’s competitors
Burger King: Available in more than 90 countries and at over 18,000 locations, Burger
King is the most direct competitor of McDonald’s and has approximately 90% of its
restaurants as franchisees;
Subway: In terms of size, the privately-owned Subway has one of the largest QSR
chains, and they have a presence in more than 80 countries at over 37,000 restaurants;
Chipotle: With its slogan as “Food with Integrity”, Chipotle operates more than 2,800
restaurants with none of them franchised. Their fast-foods have higher prices than
their competitors, and they also serve fast-foods that are a bit different, like tacos,
salads, and burritos;
 Yum brands (KFC, Taco Bell, Pizza Hut): Yum brands operate top fast-food
restaurants, suchGet ourBell,
as Taco 300+ Products
Pizza Hut, andLibrary! Details
KFC. Altogether they make up a
worldwide chain of more than 50,000 restaurants, with about 98% of them franchised;
Wendy’s: With a market cap of US$ 5.1 billion and stock trading at US$ 23 per share in
2021, Wendy’s operates its fast-food restaurant chain in more than 6,800 locations
worldwide. Just like McDonald’s and Burger King, they serve burgers, fries, and a few
other American foods;
Starbucks: Operates the largest coffeehouse chain in nearly 90 countries, and at over
32,000 locations. They serve coffee, pastries, espresso, tea, sandwich, cappuccino, etc.
And just like Chipotle, their products have higher prices than their competitors.

McDonald’s swot analysis

Below, there is a detailed swot analysis of McDonalds:

McDonald’s Strengths
Suppliers: McDonald’s choice of suppliers have ensured that they and their
franchisees always have enough items in stock to satisfy their 25 million daily
customers;
 Brand Recognition: McDonald’s brand name has enabled it to gain and keep its
Get our 300+
customers and franchisees. Products
Franchisees Library!
purchase Details
the company’s license and become
affiliated with it to increase their profits through its brand reputation and recognition.
On the other hand, customers visit McDonald’s restaurants because of their brand
name and their insistence on consistent quality on cheap fast-foods;
Balance Sheet: The company’s high revenue generation allows it to test out
innovations on some restaurants and implement them efficiently in its other
franchisees;
Quick Service: Their consistent quality and fast service have gained them the trust of
customers;
Quick Delivery: McDonald’s use of popular delivery services with a strong presence in
several countries helps them to ensure a quick delivery;
Pricing Strategy: McDonald’s pricing strategy of offering cheap meals allows them to
maintain a huge chunk of the QSR market.

McDonald’s Weaknesses
Delivery: Their dependence on other companies for delivery puts them at a
disadvantage, in case of sour business relationships, shutdown, or poor customer
service on the part of the delivery personnel;
Customer Demands: Like healthier organic menus with fast-food convenience means
other QSR operators are taking a part of unserved customers from McDonald’s.

McDonald’s has tried to offer healthier options, like the removal of all preservatives,
fake colors, and other artificial ingredients from seven of its burger products,
adding a Southern Grilled Chicken Salad to its menu, the option to add apple slices
to kid’s apple meal, and recently, the introduction of McPlant. However, they are still
yet to meet up with other restaurants that offer several fast-casual options.

McDonald’s Opportunities
Expansion: Although available in several countries, there are still available
international markets for the fast-food giant to enter;
Diverse Options: More vegan options in its restaurants will pull in vegan customers.
Some efforts are already being made in this direction, however, its pace might result in
 a situation where customers don’t recognize the company as a vegan-friendly
restaurant. Get our 300+ Products Library! Details

McDonald’s Threats
Competition: With already fierce competition in the QSR market, an increase in home
deliveries caused by the pandemic might result in more companies entering the
market with competitive prices and same or better quality products and diversity;
Economic Conditions: inflation caused by the pandemic will result in changes in
customer behaviors, demands, and spending habits, which might affect the company
and the QSR market.

-> Read more about Mcdonalds’ SWOT Analysis.

Conclusion
As stable as it may seem, McDonald’s grasp in the QSR industry might — because of
changing demands and economic conditions — see a few shoves and push, in the
coming years. However, its revenue won’t be impacted as much, because people
still need to eat. Also, because of their innovative nature and strategies, they will
eventually bounce back in the long run. Their franchising business model will be of
help in their recovery and/or growth.

     

DANIEL PEREIRA

 Palantir Business Model Youtube Business Model 

SEARCH
SEARCH 
Get our 300+ Products Library! Details
Get our 300+ Products Library! Details
ADVER TISEMENT Get our 300+ Products Library! Details

POPULAR POSTS

FEATUR ED POSTS

Business Model Canvas: The Defi nitive Guide

Business Model – What is it and How it works

Amazon Business Model

Uber Business Model

Netfl ix Business Model

 Get our 300+ Products Library! Details

ADVER TISEMENT

All you Need to Know about Business Model Canvas Innovation

SUBSCRIBE TO THE BLOG

Business Model Examples and Types Using the Business Model Canvas for
Detailed Analysis

Learn

Concepts
Business Model Canvas Examples
Types of Business Models
Companies Profitability
Get our 300+ Products Library! Details
Business Failures
Competitors
Swot Analysis Examples
Who Owns

Product

Business Model Template

Super Guides
Bundles

Company

About
Contact
Privacy Policy
Disclaimer
Refunds and Policy
Terms and Conditions

Copyright 2019 Daniel Pereira - The Business Model Analyst