History Of McDonald’s

As explained on McDonald’s website “Dick and Mac McDonald moved to California to seek opportunities they felt unavailable in New England.” In 1948 they launched Speedee Service System featuring 15 cent hamburgers. As the restaurants gained traction that led the brothers to begin franchising their concept until they reached nine operating restaurants.

A native Chicagoan, Ray Kroc, in 1939 was the exclusive distributor of a milkshake mixing machine, called Multimixer. In short, he was a salesman.

He visited the McDonald brothers in 1954 and was impressed to their business model which led to him becoming their franchise agent. He opened up the first restaurant for McDonald’s System, Inc., until in 1961 he acquired McDonald’s rights to the brother’s company for $2.7 million.

Ray Kroc, died on January 1,4 1984, all the rest is a legend.

And indeed, while most people associate McDonald’s with the Ray Kroc story, in reality, McDonald’s was founded in 1940 by Richard and Maurice McDonald, with the first restaurant being a BBQ stall in San Bernardino, California.

Ray Kroc, in fact, leveraged on the McDonald’s brothers “Speedy Service System” to initially scale the operations fo the restaurant chain. In fact, this process was developed by the McDonald’s brothers (what we would later call “fast food”) which was an incredible process development able to provide an improved product at a faster pace.

This stall was eventually sold to businessman Ray Kroc, who opened the first McDonald’s franchise in 1955 and made the company what it is today.

Indeed, McDonald’s now has close to 39,000 restaurants in 119 countries. While it remains a highly successful franchise, shifting consumer preferences pose the most serious challenge to the company moving forward.

As the story goes McDonald’s started to use a franchising model to grow its restaurant business, and it became over the 1960s a giant in the restaurant business (or real estate depending on the perspective). 

The speedy system itself represented the application of the manufacturing process to the restaurant business. Later another important building block was added. 

The franchising model really became widely applied during the 1920s and 1930s in the restaurant business. As new physical communication networks (in the US the Interestate Highway System) enabled people to move long distances with their cars. 

Later on, Ray Kroc would apply in its most aggressive form the franchising model (different formats already existed centuries before) to McDonald’s existing operation to create one of the most scalable restaurant businesses in the world. 

Franchising combined with a product delivered differently (the “speedy system”) making up a whole new experience, that made it a new business model: the heavy franchised McDonald’s business model.

Turning into a real estate business

who-owns-mcdonalds
The major institutional shareholders comprise The Vanguard Group (8.98%), BlackRock (7.1%), and State Street Corporation (5.2%). Major individual shareholders comprise Kevin Ozan (Executive Vice President and Chief Financial Officer), Stephen Easterbrook (President and CEO), and other John Rogers, Jr. investor, philanthropist, Ariel Capital Management founder. And a few other individual shareholders.
mcdonald's-business-model
McDonald’s is a heavy-franchised business model. In 2018, of McDonald’s total restaurants, 93% were franchised. The long-term goal of the company is to transition toward 95% of franchised restaurants. The company’s operating income in 2018 was $8.8 billion compared to $9.55 in operating income for 2017.
mcdonalds-swot-analysis

As highlighted in the McDonald’s SWOT Analysis, below some of the factors affecting McDonald’s business model:

Strengths:

  • Strong brand recognition.
  • Consistency. 
  • Technology integration.

Weaknesses:

  • Franchise model.
  • Low employee satisfaction.
  • Dependency on western markets.

Opportunities:

  • Brand image rebuild.
  • Investment in McCafe.

Threats:

  • Health trends and competition.
  • Cultural insensitivity.
  • Environmental concerns.

Below also the McDonald’s PESTEL Analysis assessment:

mcdonalds-pestel-analysis

Read Next: McDonald’s PESTEL Analysis, McDonald’s SWOT analysis, Who Owns McDonald’s, McDonald’s Heavy Franchised Business Model In A Nutshell.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"