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McDonald's Corporation

McDonald's Corporation (coql: Golden Arches, MacDonald's, MickeyD's) is the world's largest chain of fast-food restaurants. Although McDonald's did not invent the hamburger or the fast-food restaurant, their name has become nearly synonymous with both.

Table of contents

Corporate overview

McDonald's Corporation operates more than 30,000 quick-service restaurant businesses under the McDonald's brand, in 121 countries around the world. In addition, the Company operates other restaurant brands, such as Aroma Café[?], Boston Market[?], Chipotle Mexican Grill, Donatos Pizza[?] and Pret A Manger[?]. Revenues for 2001 were US$14.87 billion, with net income at $1.64 billion.

The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees, supplies and percentage of sales, McDonald's also collects rent. As a condition of the franchise agreement, McDonald's owns the property on which most McDonald's franchises are located. The corporation extracts income from the franchises in the form of rents, which are only partially linked to sales. As Harry J. Sonneborne[?], one of McDonald's founders put it, "We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants[?] can pay us rent." [1]

McDonald's restaurants are mainly one of two varieties:

  • "McDrive" near a highway; one can order and collect food from the car, to eat it on the parking lot or while driving, or order inside and take out, eat inside, or eat on the terrace outside;
  • a restaurant in the center of a city; one orders and collects food inside and takes it out or eats it inside, sometimes there is a also a terrace to eat outside.

Specially themed restaurants also exists, such as Rock and Roll McDonald's, or 50's themed restaurants. Some McDonald's feature large indoor or outdoor playgrounds, called Playlands[?].

McDonald's official training facility is Hamburger University in Oak Brook, Illinois.

History

The first McDonald's restaurant was founded in 1940 by brothers Dick and Mac McDonald in San Bernardino, California. The McDonald's restaurant gained fame after 1948, when the brothers implemented their innovative "Speedee Service System", an assembly-line hamburger construction and self-serve[?] operation.

In 1954, entrepreneur and milkshake-mixer salesman[?] Ray Kroc[?] became interested in the McDonald's restaurant when he learned of its extraordinary capacity. Upon seeing the restaurant in operation, he approached the McDonald brothers with a proposition to open new McDonald's restaurants, with himself as the first franchisee. Kroc worked hard to sell McDonald's. He even attempted to prevail on his wartime acquaintance with Walt Disney, in the failed hope of opening a McDonald's at the soon-to-be-opened Disneyland. Eventually he opened his first restaurant in Des Plaines, Illinois. It was an immediate success.

Kroc's new company was originally named "McDonald's Systems Inc.", and was founded March 2, 1955. In 1960, the company was renamed "McDonald's Corporation".

One of Kroc's marketing insights was his decision to market McDonald's hamburgers to families, and particularly to children. In the early 1960s, a Washington, DC McDonald's franchisee named Oscar Goldstein sponsored a children's show called Bozo's Circus, starring a clown played by Willard Scott[?]. When the show was cancelled, Goldstein hired Scott as McDonald's new mascot, "Ronald McDonald". The character was eventually spread to the rest of the country via an advertising campaign, although it was decided that Scott was too plump for the role. An entire cast of McDonaldland characters was developed.

Under Kroc's agreement with the McDonald brothers, he was responsible for the entire expansion process, while the brothers retained control of the production process and a share of the profits. By 1961, Kroc was frustrated with the arrangment. After some negotiation, the comfortably wealthy McDonald's brothers agreed to sell Kroc the business rights to their operation for $2.7 million, which was borrowed from a number of investors[?] (including Princeton University). The agreement allowed the brothers to keep their original restaurant-- renamed "The Big M"-- which remained open until Kroc drove it out of business by opening a McDonald's across the street. Had the brothers maintained their original agreement, which granted them 0.5% of the chain's annual revenues, they would have been collecting nearly $180 million per year today. [1]

Since that time, McDonald's has opened restaurants in countries throughout the world. On January 31, 1990 the first McDonald's Restaurant opened in Moscow, Russia. In contrast to the stereotype of McDonalds in the United States in which McDonalds is seen as the purveyor of cheap, inferior, and unhealthy food, in some parts of the world such as Russia and China, McDonald's food is seen as a status symbol and the restaurants are admired for their atmosphere and cleanliness.

The price of the Big Mac[?] hamburger sold by McDonald's has been used by The Economist as an informal measure of purchasing power parity between two currencies, called The Big Mac Index.

The standardization of McDonalds has been emblematic of globalization. Tom Friedman[?] proposed a McDonald's rule which was that no countries with McDonald's would go to war with each other. This "rule" was broken by the American bombing of Serbia.

Challenges

Around 1995, McDonald's starting receiving complaints from franchisers that they were granting too many franchises and stealing business from current stores. In effect, McDonald's was granting so many franchises that they began competing against themselves. For the first time, McDonald's proceeded to conduct market impact studies before granting any further franchises.

Posting its first quarterly loss for the last quarter of 2002, McDonald's faces stiff competition from other fast food restaurants offering higher quality burgers and more variety. According to a 2002 survey in Restaurants and Institutions Magazine[?], McDonald's ranked 15th in food quality of hamburger chains, behind Burger King and White Castle[?]. According to Technomic[?], a market research firm, McDonald's share of the market has fallen 3% in the last 5 years and is now at 15.2%. Subway Sandwich now has the largest share of the fast food market in the United States. [1] (http://www.nytimes.com/2003/03/03/business/03BURG?ex=1047272400&en=5a465b7c664cef9e&ei=5062&partner=GOOGLE)

Criticism

As the world's largest fast-food company, McDonald's has been the target of criticism for such alleged problems as exploitation of entry-level workers, ecological damage caused by agricultural production and industrial processing of its products, selling unhealthy (non-nutritious) food, production of packaging waste, exploitative advertising (especially targeted at children), and contributing to suffering and exploitation of livestock.

McDonald's also lost a famous lawsuit in which an elderly woman, Stella Liebeck of Albuquerque, New Mexico, was awarded 2.9 million dollars (this was later reduced) after receiving third degree burns from coffee that was spilled on her after going through a McDonalds drive thru. The large punitive award was given after the plantiff's lawyers were able to show that McDonald's operating procedure kept coffee far hotter than competitors at scalding[?] temperatures that would very quickly result in third degree burns. It was also demonstrated that the McDonald's had ignored similar cases in which customers had been very severely burned by its coffee. See McDonald's coffee case.

McDonald's holds the record for being a party to the longest civil trial in British history. In that action, often referred to as the "McLibel" case, the company sued unemployed environmentalists Helen Steel[?] and David Morris[?] for distributing allegedly libelous pamphlets on London streets. Although McDonald's has since won partial victories in British courts, the case has become a source of massive embarrassment to the company. Despite the fact that McDonald's has refused to collect the ₤40,000 awarded to it by the courts, the case remains on appeal to the European Court of Human Rights.

The company has also been a target of radical environmentalists such as José Bové. In addition, certain outlets in the Middle East have been subject to an increasing number of arson attacks and other acts of violence because the business represents, to the attackers, American business and culture at its worst.

Red and Yellow McDonald's restaurants tend to have a "red and yellow theme". An urban legend is that the corporation "calculated" that this color combination would entice people to leave the restaurant; thus, making room for new customers.

The yellow "Golden Arches" form the logo of McDonald's, often put on high poles to mark a restaurant.

See also:


[1] Schlosser, Eric. "Fast Food Nation". 2001. Houghton Mifflin, New York. pp. 96-97

Further Reading

  • Fast Food Nation, Eric Schlosser, Houghton Mifflin, 2002, hardcover, 288 pages, ISBN 0395977894

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