How does McDonald's make its money?
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McDonalds Corporation or as we better know it as “McDonalds” is one of the world’s largest, leading and widely recognised chain of fast food. Just the glimpse of the bright yellow double arched “M” symbol brings a smile across our faces as we drool to some of the best hamburgers available in the town. Imagine you’re visiting a new country and your stomach is struggling to find something it is familiar with. Locating a McDonalds in the vicinity would be a wish come true. Have you ever wondered how has McDonald's managed to grow this big? How did it start? How much has this fast-food chain has impacted and dominated the fast-food industry? And lastly, what is it's business model?

Before we jump on to the answers to the above questions, let’s take us a look at the history of this iconic brand and the people who it possible.

The McDonalds was founded by brothers Maurice (“Mac”) and Richard “McDonald” in San Bernardino, California in the year 1948. They started off by keeping their menu short ad selling just the hamburgers, cheeseburgers, French fries, shakes and apple pie. They entered into the franchising model in the year 1952 when a salesman named Ray Kroc brought a franchise and started its growth. By the year 1958, McDonald's had 34 restaurants and by 1959 – 102. Ray Kroc overtook and bought the McDonalds from the brothers in 1961 for $ 2.7 million and it was the year 1962 when McDonald's got its famous Golden Arched “M” logo. The impeccable expansion as a result of the opening of 1000 restaurants by the end of the decade, the company went public in the year 1965.

Being one of the leading fast-food chains, McDonald's is currently operational in 120 countries out of 196 countries overall; serving astonishingly approx. 6.8 Crore people per day which is equivalent to the entire population of France or 1% of the total world. Surprised? Wait till you read this – McDonald's presently employs approx. 7,61,000 people across 37,885 outlets. The United States of America tops the outlet count chart with 14,000+ restaurants followed by Japan and China with 2900+ & 2700+ outlets respectively. For the Desi People, McDonald's is serving at approx. 400 outlets here in India.

With the unstopping expansion, any business is deemed to face opposition and criticism of some form. McDonald's success attracted criticism around the globe whish associated with an increase in global obesity. In response to this, McDonald's introduced vegan hamburgers and eliminated the use of trans fat oil in a number of the items.

The biggest challenge that any food business operating in a different country or territory faces is the acceptance of the taste and dishes offered on the menu by the end-user. For example: In the USA, you won’t encounter an American peacefully enjoying an Aloo Patty Hamburger. For the Americans, it is not really a hamburger until it is loaded with Beef Patty and Bacon. Try imagining if the same bacon hamburger is served here in India. The consequence will be violence, rage and shut down of the outlet. This is because each country, territory and demographics have different tastes, traditions and cultures. In countries like ours, people strictly adhere to their traditions and are highly influenced by religions. If your religion doesn’t permit you to eat meat, you won’t be eating any. To overcome this obstacle, companies like McDonald's, improvise their menu to suit best to the public. Understanding the Indian demographics, McDonald's added veg items to their menu as there is a huge proportion of vegan customers.

Here are 10 mind-blowing facts about McDonald's on which we bet you didn’t know before:

  1. The headquarters of McDonald's is located in Oak Brook, Illinois (USA).
  2. McDonald's roughly sells about 70 hamburgers per second. That’s 210-280 hamburgers by the time you finish reading this sentence.
  3. Soft drinks are an important item in the McDonalds menu. About 5% of the total McDonalds revenue comes out of it.
  4. Each year, McDonald's buys 1.54 billion kilos of potatoes.
  5. By the time you complete the essential 8 hours of daily sleep, McDonald's would have opened two outlets around the world. That’s one every hour. Amazing, isn’t it?
  6. Paris is the only location where the Golden Arched “M” in white in colour.
  7. The fictional brand clown goes by the name “Ronald McDonald”. Whereas in Japan, it is known as “Donal McDonald”.
  8. The spokesperson list of McDonald's includes – Kobe Bryant, Justin Timberlake, Yao Ming, Michael Jackson, Samuel L Jackson, Ashanti, Prince and many more.
  9. In the year 1979, the demand for Chicken Nuggets overlapped the actual supply of chicken.
  10. The ear-catching phrase “I’m Loving it” was launched in on 2nd September 2003 in Germany.

And now for all the geeks reading this, who love numbers and figures, McDonald's does $ 25 billion in revenue in a year with 85% of it coming from the franchisees. And what if you’re told that McDonald's doesn’t make their money from selling burgers.

Does that really surprise you?

Most of us don’t comprehend that McDonald’s isn’t really a burger selling restaurant chain. Well, it is, but not with the sole principle. Peel back the skin and you’ll find that the corporate body is, in fact, one hell of a real estate company. Former McDonald’s CFO, Harry J. Sonneborn, quoted, “We are not strictly in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is that they are the greatest producer of income, from which our tenants can pay us our rent.”

In the present day, McDonald’s earns its wealth on real estate through two methods. Its real estate subsidiary will acquire and trade hot properties while collecting rents on each of its franchised locations. McDonald’s restaurants are in 120 countries and have almost certainly served beyond 100 billion hamburgers. There are more than 37,855 locations all around the world, of which only 15% are owned and operated by the McDonald’s corporation directly. The remaining is owned by franchisees. This is the sole reason why McDonald’s outlets are always in prime locations.

In 2014, the McDonald’s corporation ended up making $27.4 billion in revenues, out of which $9.2 billion came from franchised locations and the rest ($18.2 billion), was from company-operated restaurants.

McDonald's has $40 billion dollars’ worth of real estate assets (before taking depreciation into account) and yearly revenues of $9 billion, of which practically $4 billion in profit. That’s the McDonald’s real estate investment trust (REIT). Impressive, right?

So, the next time you visit the McDonalds, you know the story behind that burger now.

23 August 2019
good one

23 August 2019
good one