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, the brothers began 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 by their business model, which led to him becoming their franchise agent.
He opened 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 14, 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 leveraged the McDonald’s brothers’ “Speedy Service System” to initially scale the restaurant chain’s operations.
This process was developed by the McDonald’s brothers (what we would later call “fast food”), which was an incredible development that provided an improved product faster.
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.
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 Interstate 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”) made up a whole new experience that made it a new business model: the heavily franchised McDonald’s business model.
Turning into a real estate business
As highlighted in the McDonald’s SWOT Analysis, below are some of the factors affecting McDonald’s business model:
- Strong brand recognition.
- Technology integration.
- Franchise model.
- Low employee satisfaction.
- Dependency on western markets.
- Brand image rebuild.
- Investment in McCafe.
- Health trends and competition.
- Cultural insensitivity.
- Environmental concerns.
Related Visual Stories
McDonald’s EV/Revenue Multiple
McDonald’s Organizational Structure
Read Also: McDonald’s Business Model, Coca-Cola Business Model, Coca-Cola Distribution Strategy.