REVIEW OF LITERATURE

McDonald’s, the long-time leader in the fast-food wars, faced a crossroads in the early 1990s.
Domestically, sales and revenues were flattening as competitors encroached on its domain. In
addition to its traditional rivals—Burger King, Wendy’s, and Taco Bell—the firm encountered
new challenges. Sonic and Rally’s competed using a back-to basics approach of quickly serving
up burgers, just burgers, for time-pressed consumers. On the higher end, Olive Garden and
Chili’s had become potent competitors in the quick service field, taking dollars away from
McDonald’s, which was firmly entrenched in the fast-food arena and hadn’t done anything with
its dinner menus to accommodate families looking for a more upscale dining experience. While
these competitive wars were being fought, McDonald’s was gathering flak from
environmentalists who decried all the litter and solid waste its restaurants generated each day. To
counter some of the criticism, McDonald’s partnered with the Environmental Defense Fund
(EDF) to explore new ways to make its operations more friendly to the environment.
Facts
McDonald’s roots go back to the early 1940s when two brothers opened a burger restaurant that
relied on standardized preparation to maintain quality—the Speedee Service System. So
impressed was Ray Kroc with the brothers’ approach that he became their national franchise
agent, relying on the company’s proven operating system to maintain quality and consistency.
Over the next few decades, McDonald’s used controlled experimentation to maintain the
McDonald’s experience, all the while expanding the menu to appeal to a broader range of
consumers. For example, in June 1976, McDonald’s introduced a breakfast menu as a way to
more fully utilize the physical plant. In 1980, the company rolled out Chicken McNuggets.
Despite these innovations, McDonald’s tremendous growth could only continue for so long. Its
average annual return on equity was 25.2% between 1965 and 1991. But the company found its
sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the quick
service market fell from 18.7% in 1985 to 16.6% in 1991. Plus growth in the quick service
market was projected to only keep pace with inflation in the 1990s. McDonald’s faced
heightening competition on several fronts. First, its traditional rivals—Burger King, Wendy’s,
and Taco Bell—were eating into its margins through promotions and value pricing strategies.
Taking a leaf from McDonald’s own playbook, Sonic and Rally’s were using a very limited menu
approach to attract time strapped consumers. Finally, Chili’s and Olive Garden were appealing to
diners looking for something a little more enticing that the familiar Golden Arches for their
families.
In the late 1980s, McDonald’s began recognizing the importance of maintaining an ecologically
correct posture with the public, which was becoming more concerned about the environment. For
example, in 1989, 53% of respondents in one survey revealed that they had not bought a product
because they didn’t know what effect the packaging would have on the environment. Closer to
home, a 1990 study showed that each McDonald’s generated 238 pounds of on-premise solid
waste per day. It’s no surprise, then, that McDonald’s sought a way to reduce its solid waste
while providing a more environmentally acceptable face to the public. Beginning in 1989, it
partnered with the Environmental Defense Fund, a leading organization devoted to protecting the
environment, to seek ways to ease the company’s environmental burden on the landscape.
Together, EDF and McDonald’s considered its impact on a wide range of stakeholders—
customers, suppliers, franchisees, and the environment. The company gave its franchisees much
autonomy in finding ways to eliminate environmental blight. The company’s hope was that from
these divergent approaches, it stood a greater chance of finding solutions with broad applicability
than if it had tried to pursue a one-size-fits-all approach from the outset. Some of the
environmentally inspired solutions that came out of the collaboration with EDF were the:
Introduction of brown paper bags with a considerable percentage of recycled content.
Solicitation of suppliers to produce corrugated boxes with more recycled content, which had the
twin effect of reducing solid waste and building a market for recycled products. Abandonment of
polystyrene clamshell containers to hold sandwiches in favor of new paper-based wraps that
combined tissue, polyethylene, and paper to keep food warm and prevent leakage.
facts

McDonald's restaurants are found in 120 countries and territories around the world and
serve 68 million customers each day.[13][14] McDonald's operates 36,899 restaurants
worldwide, employing more than 375,000 people as of the end of 2016. [9][13] There are
currently a total of 5,669 company-owned locations and 31,230 franchised locations,
which includes 21,559 locations franchised to conventional franchisees, 6,300 locations
licensed to developmental licensees, and 3,371 locations licensed to foreign affiliates,
primarily Japan.[9]
Focusing on its core brand, McDonald's began divesting itself of other chains it had
acquired during the 1990s. The company owned a majority stake in Chipotle Mexican
Grill until October 2006, when McDonald's fully divested from Chipotle through a stock
exchange.[15][16] Until December 2003, it also owned Donatos Pizza, and it owned a
small share of Aroma Cafe from 1999 to 2001. On August 27, 2007, McDonald's
sold Boston Market to Sun Capital Partners.[17]
Notably, McDonald's has increased shareholder dividends for 25 consecutive years,
[18]
making it one of the S&P 500 Dividend Aristocrats.[19][20] The company is ranked 131st
on the Fortune 500 of the largest United States corporations by revenue. [21] In October
2012, its monthly sales fell for the first time in nine years. [22] In 2014, its quarterly sales
fell for the first time in seventeen years, when its sales dropped for the entirety of 1997.
[23]

In the United States, it is reported that drive-throughs account for 70 percent of sales. [24]
[25]
McDonald's closed down 184 restaurants in the United States in 2015, which was 59
more than what they planned to open.[26][27] This move was also the first time McDonald's
had a net decrease in the number of locations in the United States since 1970. [

MCDONALD’S AN INTRODUCTION
McDonald's Corporation ( NYSE : MCD ) is the world's largest chain
of hamburger fast food restaurants , serving around 68 million customers
daily in 119 countries.
Headquartered in the United States, the company began in 1940 as a barbecue
restaurant operated by Richard and Maurice McDonald ; in 1948 they
reorganized their business as a hamburger stand using production
line principles. Businessman Ray Kroc joined the company as a franchise
agent in 1955.
Ray Kroc subsequently purchased the chain from the McDonald brothers and
oversaw its worldwide growth.
A McDonald's restaurant is operated either by a franchisee, or an affiliate , or
the corporation itself. The corporation's revenues come from the rent, royalties
and fees paid by the franchisees, as well as sales in company-operated
restaurants.
McDonald's revenues grew 27 percent over the three years ending in 2007 to
$22.8 billion, and 9 percent growth in operating income to $3.9 billion.
McDonald's primarily sells hamburgers , cheese
burgers , chicken , French fries , breakfast items, soft
drinks , milkshakes and desserts . In response to changing consumer tastes,
the company has expanded its menu to
include salads , wraps , smoothies and fruits.
In July 2011, McDonald's announced that their largest restaurant in the world
will be built on the 2012 London Olympics site. The restaurant will contain
over 1,500 seats and is half the length of an American Football field. Over 470
staff will be employed serving on average (during the 2012 Olympics) 100,000
portions of fries, 50,000 Big Macs and 30,000 Milkshakes. This restaurant will
overshadow the current largest McDonald's in the world in Moscow, Russia. In
January 2012, the company announced revenue for 2011 reached an all-time high
of $27 billion, and that 2400 restaurants would be updated and 1300 new ones
opened worldwide.

HISTORY OF MCDONALD’S
The McDonald's restaurant concept was introduced in San Bernardino,
California by Dick and Mac McDonald of Manchester, New Hampshire . It
was modified and expanded by their business partner, Ray Kroc , of Oak
Park, Illinois , who later bought out the business interests of the McDonald
brothers in the concept and went on to found McDonald's Corporation .
Early history
In 1937, Patrick McDonald opened "The Airdrome", an octagonal food stand, on
Huntington Drive in Monrovia, California . In 1940, his two sons, Maurice
and Richard ("Mac" and " Dick"), moved the entire building to 1398 North E
Streets in San Bernardino, California . The restaurant was renamed
"McDonald's Famous Barbeque" and served over forty barbequed items.
In 1953, the McDonald brothers began to franchise their successful restaurant,
starting in Phoenix, Arizona and Downey and California . The McDonald
brothers created Speedee to symbolize the quick and efficient service system
that they had devised. Downey's Speedee is one of only a few remaining and
Downey’s restaurant is the oldest operating McDonald's in the world.
Recognizing the historic and nostalgic value of the intact 1953 structure, the
McDonald's Corporation acquired the store in 1990 and rehabilitated it to a
modern but nearly original condition.
In 1954, Ray Kroc, suggested that they franchise their restaurants throughout the
country. He got the rights to set up McDonald's restaurants throughout the
country, except in a handful of territories
in California and Arizona already licensed by the McDonald brothers.
Kroc's first McDonald's restaurant opened in Des Plaines, Illinois ,
near Chicago , on April 15, 1955, the same day that Kroc incorporated his
company as McDonald's Systems, Inc. (which he would later rename McDonald's
Corporation).
By 1958, there were 34 restaurants. In 1959, however, Kroc opened 68 new
restaurants, bringing the total to 102 locations.

Phenomenal growth in the 1960s and 1970s

In 1960, the McDonald's advertising campaign "Look for the Golden Arches "
gave sales a big boost In 1962, McDonald's introduced its now world-famous
Golden Arches logo. A year later, the company sold its billionth hamburger and
introduced Ronald McDonald , a red-haired clown with particular appeal to
children.
In the early 1960s, McDonald's really began to take off. In 1961 Kroc bought
out the McDonald brothers for $2.7 million, aiming at making McDonald's the
number one fast-food chain in the country.
In 1965, McDonald's Corporation went public. In 1985, McDonald's Corporation
became one of the 30 companies that make up the Dow Jones Industrial
Average .
McDonald's success in the 1960s was in large part due to the company's skilful
marketing and flexible response to customer demand. In 1968 the now
legendary Big Mac made its debut, and in 1969 McDonald's sold its five
billionth hamburger. Two years later, McDonald's restaurants had reached all 50
states.
In 1968, McDonald's opened its 1,000th restaurant; Kroc became chairman and
remained CEO until 1973.
By the late 1960s, many of the candy-striped Golden Arches stores had been
modified with enclosed walk-up order areas and limited indoor seating. By June
1969, " mansard roof " building design featuring indoor seating became the
standard for McDonald's restaurants.
The company pioneered breakfast fast food with the introduction of the Egg
McMuffin in 1972 and five years later McDonald's added a full breakfast line
to the menu.
In 1975, McDonald's opened its first drive-thru window in Sierra Vista,
Arizona . This service gave Americans a fast, convenient way to procure a quick
meal. Drive-thru sales eventually accounted for more than half of McDonald's
systemwide sales.
Surviving the 1980s "Burger Wars"
In the late 1970s, competition from other hamburger chains such as Burger
King and Wendy's began to intensify. A period of aggressive advertising
campaigns and price slashing in the early 1980s became known as the "burger
wars." Burger King suggested to customers: "have it your way"; Wendy's offered
itself as the "fresh alternative". But McDonald's sales and market share
continued to grow.
During the 1980s, McDonald's further diversified its menu to suit changing
consumer tastes. The company introduced the McChicken in 1980. It proved
to be a sales disappointment and was replaced with series of different chicken
sandwiches a year later. Chicken McNuggets were invented in 1979. By the
end of 1983, McDonald's was the second largest retailer of chicken in the world.
In 1985, ready-to-eat salads were introduced to lure more health-conscious
consumers. The 1980s were the fastest-paced decade yet. Efficiency, combined
with an expanded menu, continued to draw customers. McDonald's, already
entrenched in the suburbs, began to focus on urban centres and introduced new
architectural styles.
Despite experts' claims that the fast-food industry was saturated, McDonald's
continued to expand. The first generation raised on restaurant food had grown
up. Eating out had become a habit rather than a break in the routine, and
McDonald's relentless marketing continued to improve sales.
McDonald's growth in the United States was mirrored by its stunning growth
abroad. By 1991, 37 percent of system wide sales came from restaurants outside
the United States. McDonald's opened its first foreign restaurant in British
Columbia , Canada, in 1967. By the early 1990s the company had established
itself in 58 foreign countries and operated more than 3,600 restaurants outside
the United States, through wholly owned subsidiaries, joint ventures, and
franchise agreements. Its strongest foreign markets
were Japan , Canada , Germany , Great Britain , Australia ,
and France .
Braille menus were introduced in 1979, and picture menus in 1988.
Experiments were conducted to find new technology and to research new
markets to keep McDonald's in front of its competition. New locations such as
hospitals and military bases were tapped as sites for new restaurants.
1990s: Growing pains
The 10,000th unit was opened in April 1988.It took McDonald's 33 years to open
its first 10,000 restaurants. Incredibly, the company reached the 20,000-
restaurant mark in only eight more years, in mid-1996. By the end of 1997 the
total had surpassed 23,000, and by that time McDonald's was opening 2,000 new
restaurants each year, an average of one every five hours.
In 1993, a new region was added to the empire when the first McDonald's in the
Middle opened in Tel Aviv , Israel.
As the company entered new markets, it showed increasing flexibility with
respect to local food preferences and customs. In Israel, for example, the
first kosher McDonald's opened in a Jerusalem suburb in 1995. In Arab
countries, the restaurant chain used " Halal " menus.
McDonald's entered India for the first time in 1996, where it offered a
Big Mac made with lamb called the Maharaja Mac.
Overall, the company derived increasing percentages of its revenue and income
from outside the United States. In 1992 about two-thirds of systemwide sales
came from U.S. McDonald's, but by 1997 that figure was down to about 51
percent. Similarly, the operating income numbers showed a reduction from about
60 percent derived from the United States in 1992 to 42.5 percent in 1997.
The company made several notable blunders in the United States in the 1990s.
A seemingly weakened McDonald's was the object of a Burger King offensive
when the rival fast-food maker launched the Big King sandwich, a Big Mac
clone. Meanwhile, internal taste tests revealed that customers preferred the fare
at Wendy's and Burger King.
In response to these difficulties, McDonald's drastically cut back on its U.S.
expansion. Plans to open hundreds of smaller restaurants in Wal-Mart and
gasoline stations were abandoned because test sites did not meet targeted goals.

Failed turnaround: late 1990s

Following the difficulties of the early and mid-1990s, several moves in 1998
seemed to indicate a reinvigorated McDonald's. Announcements were made that
McDonald's would improve the taste of several sandwiches and introduce several
new menu items.
McDonald's also said that it would overhaul its food preparation system in every
U.S. restaurant. The new just-in-time system, dubbed "Made for You," was in
development for a number of years and aimed to deliver to customers "fresher,
hotter food"; enable patrons to receive special-order sandwiches (a perk long
offered by rivals Burger King and Wendy's); and allow new menu items to be
more easily introduced thanks to the system's enhanced flexibility.

Refurbishing and creating a healthier image: Early 2000s

McDonald's was sued in 2001 after it was revealed that for flavoring purposes a
small amount of beef extract was being added to the vegetable oil used to cook
the french fries.
McDonald's soon apologized for any "confusion" that had been caused by its use
of the beef flavouring, and in mid-2002 it reached a settlement in the litigation,
agreeing to donate $10 million to Hindus, vegetarians, and other affected
groups.
McDonald's also had to increasingly battle its public image as a purveyor of
fatty, unhealthy food. McDonald's responded by introducing low-calorie menu
items and switching to a more healthful cooking oil for its French fries.
McDonald's continued to curtail store openings in 2004 and to concentrate on
building business at existing restaurants. McDonald's also aimed to pay down
debt by $400 million to $700 million and to return approximately $1 billion to
shareholders through dividends and share repurchases
With the new "Forever Young" design (adopted in 2006), the first major redesign
since 1969, McDonald's turned a new page for itself. Most of new and
remodelled restaurants feature dining zones with three sections or zones. Free
wifi access points were also granted. Also, harsh colours and hard plastics have
been replaced with custom earth tones and flexible padded fabric. The
McDonald's menu has been tweaked to offer a larger variety of what the
corporation refers to as more healthy food.

2010s
In July 2011, McDonald's announced that their largest restaurant in the world
will be built on the 2012 London Olympics site. The restaurant will contain
over 1,500 seats and is half the length of an American Football field. Over 470
staff will be employed serving on average (during the 2012 Olympics) 100,000
portions of fries, 50,000 Big Macs and 30,000 Milkshakes. This restaurant will
overshadow the current largest McDonald's in the world in Moscow, Russia. In
January 2012, the company announced revenue for 2011 reached an all-time high
of $27 billion, and that 2400 restaurants would be updated and 1300 new ones
opened worldwide.
LIST OF PRODUCTS
Burgers
All beef patties are seasoned, consisting primarily of salt and black pepper.
Big Mac : Along with the Quarter Pounder with cheese, this is one of the two
McDonald's signature menu items, introduced in 1967 as a response to the
flagship burger at Big Boy restaurants. Two 1.6-ounce ground beef patties,
special Big Mac sauce, shredded iceberg lettuce, cheese, two gherkin slices, and
re-hydrated onions on a toasted sesame seed bun, with an additional middle bun
separating both beef patties.
Big N' Tasty : The Big N' Tasty consists of a seasoned quarter-pound beef
patty with ketchup, mayonnaise, slivered onions, two dill pickle slices, leaf
lettuce, and one tomato slice on a sesame seed bun.
 Quarter Pounder : Along with the Big Mac, this is one of the two McDonald's
signature menu items. 4-ounce of ground beef patty with ketchup, mustard,
slivered onions, two gherkin slices, and two slices of cheese.
Hamburger and cheeseburger : A 45 g ground beef patty, with ketchup ,
mustard, a single dill pickle , re-hydrated onions , on a toasted bun. Also
sold as a double or triple, adding an extra pickle slice for each beef patty added
Double Cheeseburger: It has two 45 g ground beef patties, with ketchup ,
mustard, two slices of dill pickle , re-hydrated onions , and two pieces of
cheese on a toasted bun.
McDouble: It similar to a Double Cheeseburger, but with just one slice of
cheese. It was reintroduced as a permanent dollar-menu item in December 2008.
Daily Double: Similar to the double cheeseburger, however the toppings are
different. The Daily Double is made with lettuce, tomato, slivered onions, and
mayonnaise. It also has only one slice of cheese, rather than the two slices that
are on the double cheeseburger.
The Big N' Tasty : It was introduced in 1997 and has beef patty with
ketchup, cheese, mayonnaise with a grill flavouring, diced onions, two pickles,
leaf lettuce, kebab meat and a tomato slice, on a toasted bun. It was devised to
resemble Burger King 's Whopper sandwich.
McFeast: A hamburger with lettuce, tomato, and mayonnaise, the McFeast
contains a quarter pounder patty, lettuce, and modified mayonnaise with lemon
juice, ketchup, onion and tomato.
Chicken, Fish, Pork
McChicken : It is a mildly spicy chicken sandwich. Made from ground white
meat chicken, mayonnaise, and shredded lettuce, on a toasted bun. It still
remains one of the biggest sellers, just behind the Big Mac.
Premium chicken sandwiches : The Classic is a rebranding of the Crispy
Chicken and Chicken McGrill sandwiches, with mayonnaise, leaf lettuce, and a
tomato slice. All are served on a whole-grain roll, with either a grilled or crispy
chicken breast.
Southern Style Chicken Sandwich : A southern-style fried chicken breast filet,
on a steamed bun, dressed with butter and two pickles.
Snack Wrap : McDonald's version of a wrap made with white
meat chicken breast , lettuce , shredded Cheddar cheese and Monterey
Jack cheese , and a sauce, wrapped in a soft flour tortilla . There is also a
Mac Snack Wrap which features the fixings of the Big Mac, but without the bun
and wrapped in a tortilla shell, and uses one half of a piece of quarter meat.
Chicken Fajita : Chicken, cheese, red and green bell peppers , and diced
onions in a flour tortilla. Comes with Picante sauce packets on request, which is
available in mild and spicy.
Chicken McNuggets : Introduced in 1980 as a replacement for the McChicken,
these are small chicken chunks served with dipping sauces
of Barbecue , Sweet n' Sour , Honey , and Hot Mustard . In 2011, 4 new
dipping sauces were introduced and added to the lineup: Sweet Chili, Honey
Mustard, Spicy Buffalo, and Creamy Ranch.
Chicken Selects : McDonald's version of chicken strips . They include
choices of spicy buffalo , creamy ranch , Honey Mustard ,
and Chipotle barbecue dipping sauces; sauce selections in the UK are
Smokey barbecue , sour cream and sweet chilli sauce .
Filet-O-Fish : It is a whitefish fillet with tartar sauce and a half slice of
cheese, on a steamed bun.
McRib : It is a sandwich featuring boneless pork with barbecue sauce,
slivered onions, and pickles.
McArabia : There are two versions of the McArabia: Grilled chicken and
grilled kofta (beef with spices). Both are served with lettuce, tomatoes,
onions, and garlic mayonnaise in addition to two small patties of grilled chicken
or kofta , all wrapped in an Arabic style pita bread. The McArabia has been
very well received throughout the Middle East.
Chicken McBites : They are Popcorn chicken breast with "home-style
seasoning”. Dipping sauces include ranch, Sweet n' Sour, Tangy BBQ, Chipotle
BBQ, and Honey Mustard.
Fish McBites: Similar to the Chicken McBites, these are small pieces of flaky
whitefish dipped in batter and fried until golden brown, and served with tartar
sauce for dipping.
Salads and side orders
McDonald's first introduced salads to its menu in 1985. The Premium Salads all
are a mixture of iceberg lettuce and a special lettuce assortment,
with cherry tomatoes and different toppings to differentiate them;
additionally all salads can be topped with warm grilled or crispy chicken. All of
its salads are part of McDonald's move towards creating a healthier image.
McDonald's sells French fries as its primary side order. They also sell potato
wedges, a type of French fry that is thick cut and wedge shaped, fried onion
pieces and onion rings .

CORPORATE OVERVIEW
Facts and figures
McDonald's restaurants are found in 119 countries and territories around the
world and serve 58 million customers each day. McDonald’s operates over
31,000 restaurants worldwide, employing more than 1.5 million people. The
companies also operate other restaurant brands , such as Piles Café.
Focusing on its core brand, McDonald's began divesting itself of other chains
it had acquired during the 1990s. The company owned a majority stake
in Chipotle Mexican Grill until October 2006, when McDonald's fully
divested from Chipotle through a stock exchange. Until December 2003, it also
owned Donatos Pizza . On August 27, 2007, McDonald's sold Boston
Market to Sun Capital Partners . Notably, McDonald's has increased
shareholder dividends for 25 consecutive years, making it one of the S&P 500
Dividend Aristocrats.

Types of restaurants
Most standalone McDonald's restaurants offer both counter
service and drive-through service, with indoor and sometimes outdoor
seating. Drive-Thru, Auto-Mac, Pay and Drive, or "McDrive" as it is known in
many countries, often has separate stations for placing, paying for, and picking
up orders, though the latter two steps are frequently combined; it was first
introduced in Arizona in 1975, following the lead of other fast-food chains. The
first such restaurant in Britain opened at Fallowfield , Manchester in 1986.
In some countries, "McDrive" locations near highways offer no counter
service or seating. In contrast, locations in high-density city neighbourhoods
often omit drive-through service. There are also a few locations, located
mostly in downtown districts that offer Walk-Thru service in place of Drive-
Thru.
To accommodate the current trend for high quality coffee and the popularity of
coffee shops in general, McDonald's introduced McCafé , a café -style
accompaniment to McDonald's restaurants in the style of Starbucks . McCafé
is a concept created by McDonald's Australia, starting with Melbourne in 1993.
Today, most McDonald's in Australia have McCafés located within the existing
McDonald's restaurant. In Tasmania , there are McCafés in every store, with
the rest of the states quickly following suit. After upgrading to the new McCafé
look and feel, some Australian stores have noticed up to a 60% increase in sales.
As of the end of 2003 there were over 600 McCafés worldwide.
Some locations are connected to gas stations / convenience stores , while
others called McExpress have limited seating and/or menu or may be located
in a shopping mall . Other McDonald's are located in Wal-Mart
stores. McStop is a location targeted at truckers and travellers which may have
services found at truck stops .
Since 1997, the only Kosher McDonald's in the world that is not
in Israel is located in the " Abasto de Buenos Aires ", Argentina .

Global operations
McDonald's has become emblematic of globalization , sometimes referred to as
the " McDonaldization " of society.
 The Economist newspaper uses the " Big Mac Index ": the comparison of
a Big Mac 's cost in various world currencies can be used to informally
judge these currencies' purchasing power parity . Norway has the most
expensive Big Mac in the world as of July 2011, while the country with the least
expensive Big Mac is India .
Some observers have suggested that the company should be given credit for
increasing the standard of service in markets that it enters. A group of
anthropologists in a study entitled Golden Arches East looked at the impact
McDonald's had on East Asia , and Hong Kong in particular.
When it opened in Hong Kong in 1975, McDonald's was the first restaurant to
consistently offer clean restrooms, driving customers to demand the same of
other restaurants and institutions.
McDonald's has taken to partnering up with Sinopec , the second largest oil
company in the People's Republic of China, as it takes advantage of the
country's growing use of personal vehicles by opening numerous drive-thru
restaurants.
McDonald's has opened a McDonald's restaurant and McCafé on the underground
premises of the French fine arts museum, the Louvre .
The company stated it will open vegetarian-only restaurants in India by mid-
2013.
Redesign
In 2006, McDonald's introduced its "Forever Young" brand by redesigning all of
its restaurants, the first major redesign since the 1970s. McDonald's has
invested $1 billion to redesign nearly all of the 14,000 restaurants by 2015.
The goal of the redesign is to be more like a coffee shop, similar to Starbucks .
The design includes wooden tables, faux-leather chairs, and muted colours; the
red is muted to terra cotta, the yellow was turned golden for a more "sunny"
look, and olive and sage green were also added.
To warm up its look, the restaurants have less plastic and more brick and wood,
with modern hanging lights to produce a softer glow.
Many restaurants now feature free Wi-Fi and flat screen TVs. Other upgrades
include double drive-thrus, flat roofs instead of the angled red roofs, and
replacing fibre glass with wood. Also, instead of the familiar golden arches, the
restaurants now feature "semi-swooshes" (half of a golden arch), similar to
the Nike swoosh .

Business model
McDonald's Corporation earns revenue as an investor in properties, a franchiser
of restaurants, and an operator of restaurants. Approximately 15% of
McDonald's restaurants are owned and operated by McDonald's Corporation
directly. The remainder are operated by others through a variety of franchise
agreements and joint ventures.
The McDonald's Corporation's business model is slightly different from that
of most other fast-food chains. In addition to ordinary franchise fees and
marketing fees, which are calculated as a percentage of sales, McDonald's may
also collect rent , which may also be calculated on the basis of sales.
As a condition of many franchise agreements, which vary by contract, age,
country, and location, the Corporation may own or lease the properties on which
McDonald's franchises are located. In most, if not all cases, the franchisee does
not own the location of its restaurants.
The United Kingdom and Ireland business model is different than the U.S, in
that fewer than 30% of restaurants are franchised, with the majority under the
ownership of the company. McDonald's trains its franchisees and others
at Hamburger University in Oak Brook , Illinois .
In other countries, McDonald's restaurants are operated by joint ventures of
McDonald's Corporation and other, local entities or governments.
As a matter of policy, McDonald's does not make direct sales of food or
materials to franchisees, instead organizing the supply of food and materials to
restaurants through approved third party logistics operators.
According to Fast Food Nation by Eric Schlosser , nearly one in eight
workers in the U.S. have at some time been employed by McDonald's. It also
states that McDonald's is the largest private operator of playgrounds in the U.S.,
as well as the single largest purchaser of beef , pork , potatoes ,
and apples . The selection of meats McDonald's uses varies with the culture of
the host country.

The Indian beginning

A 50-50 joint venture partnership between McDonald’s Corporation [USA]
and two Indian businesses, McDonald’s began its journey in India in October 1996.
Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the
northern and eastern operation which includes restaurants in New Delhi, Uttar Pradesh,
Rajasthan, Punjab, Haryana, West Bengal etc.
Amit Jatia’s company Hardcastle Pvt. Ltd. Owns and operates McDonald’s
restaurants in West and South India. HRPL has restaurants in Maharashtra, Madhya
Pradesh, Karnataka and Andhra Pradesh, Chennai and its growing rapidly.
The head office for Hardcastle Restaurants Pvt. Is spread across two building
in Mumbai, one at Bhulbhai Desai Road and the other at Santa Cruz. The
head office houses all the support departments required to run the restaurants
in the western and southern region.
FRANCHISE MODEL
RAY KROC
VIKRAM BAKSHI AMIT JATIA
VISION
Our vision is to be the world’s best quick service restaurant experience.
That means that our restaurant will be the best place for our customers to enjoy
fast, friendly services, fresh food, a clean welcoming environment and a fun
experience at a fair price.
OUR VALUES
Our vision is supported by a set of core values:
1. We are dedicated to providing customers unparalleled levels of quality,
service, cleanliness, and value. It is what RAY KROC taught us.
2. We are committed to our people because we know that a diverse team of welltrained
individuals working together is the key to our continued success.
3. We approach all aspects of our business with honesty and integrity.
4. We always give back to the communities in which we do business.
5. We celebrate our achievements, yet we are never satisfied with our results.
“To be our customer –favorite place and way to eat.”
STRATEGY AS PER INDIAN MARKETS
➢ Regiocentricism : Re-engineering the menu -
McDonald’s has continually adapted to the customer’s tastes, value
systems, lifestyle, language and perception. Globally
McDonald’s was known for its hamburgers, beef and pork burgers. Most
Indians are barred by religion not to consume beef or pork.
To survive, the company had to be responsive to the Indian sensitivities.
So McDonald’s came up with chicken, lamb and fish burgers to suite the
Indian palate.
➢ The Vegetarian Customer -
India has a huge population of vegetarians. To cater to this customer
segment, the company came up with a completely new line of vegetarian
items like McVeggie burger and McAlooTikki. The separation of
vegetarian and non-vegetarian sections is maintained throughout the
various stages.
SEGMENTATION, TARGETING AND
POSITIONING
McDonald’s uses demographic segmentation strategy with age as the parameter.
The main target Segments are children, youth and the young urban family.
As shown above, kids reign supreme in FMCG purchase related to food
products. So to attract children McDonald's has Happy Meal with which toys
ranging from hot wheels to various Walt Disney characters are given (the latest in
this range is the toys of the movie Minions). For this, they have a tie-up with
Walt Disney. At several outlets, it also provides special facilities like ‘Play Place’
where children can play arcade games, air hockey, etc.
This strategy is aimed at making McDonald’s a fun place to eat. This also
helps McDonald’s to attract the young urban families wanting to spend some
quality time while their children have fun at the outlet.
To target the teenagers, McDonald’s has priced several products
aggressively, keeping in mind the price sensitivity of this target customer. In
addition, facilities like WI-Fi are also provided to attract students to the outlets
like the one at Vile Parle in Mumbai.
“McDonald’s Mein Hai Kuch Baat” projects McDonald’s as a place for the
whole family to enjoy. When McDonald’s entered in India it was mainly
perceived as targeting the urban upper class people. Today it positions itself as an
affordable place to eat without compromising on the quality of food, service and
hygiene. The outlet ambiance and mild background music highlight the comfort
that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed
your inner child”. This commitment of quality of food and service in a clean,
hygienic and relaxing atmosphere has ensured that McDonald’s maintains a
positive relationship with the customers.
TARGET SEGMENTS VISITS McDONALD's TO
A parent with two
children.
Visits McDonald’s to give the children a treat.
Children Want to visit McDonald’s as it is a fun place to eat.
A business customer Visits McDonald’s during the day as service is quick;
the food tastes great and can be eaten in the car
without affecting a busy work schedule
Teenager Hangout with friends, but keep it affordable.
STANDARDIZATION V/S ADAPTATION
 Standardization :
McDonald's has a slogan.” Think globally and act locally”.McDonald's sell
standardized product the taste, make up,ingredients,looks,weight etc will be
similar
In one part of the world to the other part of the world. Cheese Burger in United
Kingdom will taste similar to a cheese burger in USA. Think globally and act
locally can be proved in India as McDonald's in India has changed its menu
list,.Halal Burger and McVeggie burgers have been introduced looking to the
customers believes in India.
Similar experience has been exercised in Middle east and Fiji. In Middle east
eating of Bacon is banned by government and Religious beliefs, .Halal food is
served in Middle east, .McVeggie Burger in India will taste the same in
comparison to McVeggie burger in Fiji. McDonald's sell standardized products.
All the products should be looking,tasting,weighing and prepared in the same
way across the globe. McVeggie burger was prepared in India after Research and
Development was conducted purely in India.
 Adaptation :
McDonald's follows strategy of product adaptation. McDonald's slogan ”think
globally and act locally” is the best example for McDonald's Adaptation strategy
will be India. McDonald's cannot use beef at all to fry the fries and burger cutlets
(Cows are sacred due to religious belief of Hindu’s)
Bacon cannot be used in Middle east as there are Muslim countries and it is
against their religious belief to eat pork products are tailored according to the
personal taste of the country people where it operates.
Due to adaptation McDonald's menu in various countries is different.

THE MCDONALD’S EXPERIENCE

The paradigms of service marketing demand a passionate understanding of customer
expectations and perceptions, and linking them to product design & delivery as well as
operational planning. This is where McDonald’s has excelled due to its ability to
successfully integrate the customer’s perspective in its products and operations in a
comprehensive manner. The revamped menu in India is an example of McDonald’s
strategy of integrating the customer’s perspective in its products. And, the operational
integration is evident from McDonald’s emphasis on its suppliers as its customers as
well as its treatment of its consumers as co-producers of services.

Moments of Truth
During the Service Delivery Process, each moment of interaction between the
firm and the customer, called “Moments of Truth”, helps understand the opportunities
that a firm has to win or lose the customer. For example, these “moments of truth” are
created for McDonald’s every time the guard at the McDonald’s outlet meets the
customer, every time an attendant takes down the order from the customer waiting in
the queue, every time the cashier interacts with the customer, every time the attendant
helps the customer guided the customer towards the table, every time the attendant
cleans the tables etc.
“Moments Of Truth” – The Service Encounter
Service Provider Service Delivery Points
Managing these “moments of truth” is a great challenge in Service Marketing
especially due to customer’s involvement as a co-producer of services (e.g.
McDonald’s self-service concept wherein the customer not only collects the order but
also cleans the table after consuming the food). However, McDonald's has been able to
create a great experience for its customers by understanding the nature of the entire
Service Delivery Process and the various stages in the process that are exposed to the
customers. Transparency in the processes at its outlet has helped McDonald’s bring the
back office in its Outlet at the front so that the customer is able to know the operations
and provide feedback on service design improvements.
Internal Customer Focus is equally important as External Customer Orientation
in order to win these “moments of truth”. McDonald’s focus on its People and their
service delivery methods therefore plays a very important role in creating a successful
Service Brand. The quality and the consistency of the service delivered by McDonald’s
have been greatly enhanced by the combination of the factors mentioned above. This
has helped McDonald’s become Service Leader and a successful Service Brand. This is
evident from the fact that very few of its customers opt for take-home parcels or home
deliveries while most of them prefer to eat at the outlet and enjoy the McDonald’s
experience.

The Road Ahead

➢ Entry to Tier 2 and Tier 3 cities – The main target customer for McDonald’s is
the new urban Indian family. With the customer demographics constantly changing and tectonic
social and cultural shifts being observed in Tier 2 and Tier 3 cities due to globalization, the
company is now expanding to Tier 2 cities like Pune and Jaipur.
➢ Rolling out McBreakfast across all outlets – In India, the company has
recently launched its entry into the breakfast food category. This is now launched on a pilot
basis on select stores. In Mumbai, it available at the Vile Parle outlet. The company views this
category as a key growth driver in future.
ANALIYSIS ON MCDONALDSCORPORATION ATINTERNATIONAL LEVEL.
McDonald's International through its wholly
owneds u b s i d i a r y M c D o n a l d ' s I n d i a e n t e r e d i n t o t w o J V s , o n e w i t h
ANALIYSIS ON MCDONALDSCORPORATION ATINTERNATIONAL LEVEL.
McDonald's International through its wholly
owneds u b s i d i a r y M c D o n a l d ' s I n d i a e n t e r e d i n t o t w o J V s , o n e w i t h

Connaught Plaza Restaurants Pvt. Ltd. in the Northern & Easternregion and another with
Hard Castle Restaurants Pvt. Ltd. in the Western & Southern regionMcDonald's restaurants are
found in 119 countries andterritories around the world and serve nearly 47 million
customerse a c h d a y . M c D o n a l d ' s o p e r a t e s o v e r 3 1 , 0 0 0 r e
staurantsworldwide, employing more than 1.5 million
p e o p l e . T h e c o m p a n y a l s o o p e r a t e s o t h e r r e s t a u r a n t brands, s u c h a s
P i l e s C a f é , a n d h a s a m i n o r i t y s t a k e i n Pret a Manger . The
companyo w n e d a m a j o r i t y s t a k e i n C h i p o t l e M e x i c a n G r i
l l untilcompleting itsdivestmentin October 2006. Until December 2003,i t a l s o o w n e d Donatos
Pizza. On August 27, 2007, McDonald'ssoldBoston MarkettoSun Capital Partners.Most
standalone McDonald's restaurants offer bothc o u n t e r s e r v i c e anddrive-
throughs e r v i c e , w i t h i n d o o r a n d s o m e t i m e s o u t d o o r s e a t i n g . D r i v e -
T h r u , A u t o - M a c , P a y a n d Drive, or McDrive as it is known in many
c o u n t r i e s , o f t e n h a s separate stations for placing, paying for, and picking up
orders,
26

though the latter two steps are frequently combined; it was firstintroduced in
Arizona in 1975, following the lead of other fast-
food chains. In some countries "McDrive" locations nea
r highwayso f f e r n o c o u n t e r s e r v i c e o r s e a t i n g . I n c o n t r a s t , l
o c a t i o n s i n h i g h - d e n s i t y c i t y n e i g h b o r h o o d s o f t e n o m i t drive-throughservice.
There are also a few locations, located mostly
ind o w n t o w n d i s t r i c t s , t h a t o f f e r Wa l k - T h r u s e r v i c e i n p l a c e o f
Drive-Thru. Especially themed restaurants also exist, such as
the" S o l i d G o l d M c D o n a l d ' s , " a 1 9 5 0 s r o c k - a n d - r o l l
t h e m e d r e s t a u r a n t . I n Victoria,B r i t i s h C o l u m b i a , t h e r e i s a l
s o a McDonald's with a 24 carat (100%) gold chandelier and similar light
fixtures.Each McDonald's restaurant is operated by a franchisee,
ana ff i l i a t e , o r t h e c o r p o r a t i o n i t s e l f . T h e c o r p o r a t i o n s ' r e v e n u e s come from
the rent, royalties and fees paid by the franchisees, asw e l l a s s a l e s i n c o m p a n y -
o p e r a t e d r e s t a u r a n t s . M c D o n a l d ' s revenues grew 27% over the three years ending
in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.Full year
2008 highlights included:
• Global comparable sales increase of 6.9%, includingU.S. 4.0%, Europe 8.5%, and Asia/Pacific,
Middle East andAfrica 9.0%
• Growth in McDonald’s combined operating margin of 320 basis points to 27.4%,
after adjusting for the impact of the 2007 Latin America transaction
• O p e r a t i n g i n c o m e i n c r e a s e s i n t h e U . S . 8 % , E u r o p e 2 3 % (17% in constant
currencies) and Asia/Pacific, Middle East and Africa 33% (28% in constant currencies)
• Earnings per share from continuing operations of $3.76, an increase of 16% (14% in
constant currencies), after adjustingfor the impact of the 2007 Latin America transactionReturn
of $5.8 billion to shareholders through shares repurchased a n d d i v i d e n d s p a i d , i n c l u d i n g
a 3 3 % i n c r e a s e i n t h e q u a r t e r l y cash dividend to $0.50 per share for the fourth quarter –
bringingour current annual dividend rate to $2.00 per share Individual franchise arrangements generally
include a leaseand a license and provide for payment of initial fees, as well
asc o n t i n u i n g r e n t a n d r o y a l t i e s t o t h e C o m p a n y b a s e d u p o n a
p e r c e n t o f s a l e s w i t h m i n i m u m r e n t p a y m e n t s t h a t p a r a l l e l t h e Company’s
underlying leases and escalations (on properties
thata r e l e a s e d ) . M c D o n a l d ’ s f r a n c h i s e e s a r e g r a n t e d t h e r i g h t t o oper
ate a restaurant using the McDonald’s System and, in most
28

DEPARTMENT STRUCTURE & FUNCTION

M c D o n a l d ’s F i n a n c e D e p a r t m e n t h a s t w o k e y a r
e a s o f responsibility: financial reporting and management accounting. Although
each of these functions has different priorities, workingtogether ensures the best financial
position for the company nowand for the future.

HOW DOES MCDONALD’S MAKE A PROFIT?

McDonald’s has two sources of profit:• Sales made by company-owned restaurants• Rental and royalty
income from franchised restaurants.

RESTAURANT SALES
McDonald’s retains all of the profit earned by company-owned restaurants. An example
Profit & Loss Statement for a restauranti s s h o w n l e f t a n d h i g h l i g h t s h o w f o o d a n d
labour constitute
a r e s t a u r a n t ’s l a rg e s t c o s t s . I n a d d i t i o n t o v a r i a b l e c o s t s , w h i c h increase or
decrease depending on the level of sales, McDonald’salso incurs costs that are largely
fixed, for example utilities andadvertising, which need to be paid for even before the
restaurantm a k e s a n y s a l e s . I n c r e a s i n g s a l e s a n d c o n t r o l l i n g c o s t
s a r e fundamental to ensuring the profit of each restaurant is
e i t h e r maintained or increased.
9

McDonalds’ risks

While the restaurant industry, which can be accessed through the PowerShares
Dynamic Leisure and Entertainment ETF (PEJ) and the PowerShares Dynamic
Food & Beverage ETF (PBJ), is susceptible to a wide array of risks of macro and
micro factors. As a huge global brand, McDonalds (MCD) faces unique risks.
Let’s look at some of them below.

Operational risk

There have been several labor strikes and protests against McDonalds by its
workforce relating to matters such as increasing minimum hourly wages and the
right to unionize. The Guardian reported the most recent protest occurred on May
21, 2013 in Chicago. Strikes have also taken place against Yum! Brands (YUM)
and Burger King (BKW) according to Investors.com and the Huffington Post,
respectively.

Currency risk

At the end of 2013, McDonalds had 40% of its debt denominated in foreign
currency. The Euro, Australian Dollar, British Pound, and Canadian Dollar
represented 65% of McDonalds operating income over the same period. The
management estimates about $0.25 change to the earnings per share if any of
these currencies moved even by 10%. A $0.25 change would be a 20% change
in the earnings per share (or EPS) of $1.21 as of the quarter ending March,
2014. Compared to other risks, financial risks can be mitigated through various
hedging instruments. Sometimes these risks are mitigated due to natural hedging
—if the revenues declined, the costs would also decline.
Legal risk

Operating in developed markets like the U.S. and Europe, McDonalds faces
tighter regulations. Some regulatory changes include printing nutritional content
on items, product packaging, taxation, and marketing to the children. This could
translate into higher costs of compliance. For example, effective January 1, 2012,
McDonalds had committed itself to The EU Pledge, in which it would fulfill
nutritional criteria for items advertised to kids under the age of 12. In the same
effort McDonalds also committed to not engage in communication to primary
schools in Europe.

Reputation risk

There have been several studies and some criticism surrounding McDonalds, on
a broad range of topics such as food quality and treatment of employees. All of
these contribute to changes in consumer perception of McDonalds and the food
it serves. Trends in food habits, such as a move towards a healthier menu, also
impact sales when McDonalds can’t keep up with the demands. Introducing a
healthier menu and changing the image from a junk food restaurant
to a healthy food restaurant poses a huge risk due to customer’s set perception
about McDonalds. Also, a lot of the marketing budget is already committed to the
existing items.

McDonalds’ competition

McDonalds (MCD) is a global company facing national and international

competition form other restaurant operators. The management has identified its
competitors to be “quick-service eating establishments, casual dining, full-service
restaurants, street stalls or kiosks, cafes, 100% home delivery or takeaway
providers, specialist coffee shops, self-service cafeterias, and juice or smoothie
bars.”

According to Euromonitor International, the segment with above formats had a

total annual sales of $1.2 trillion in 2012 which was comprised of eight million
outlets. Competition is fierce for McDonalds. It competes directly with similar
format chains such as Yum! Brands (YUM), Wendy’s (or WEN), Domino’s Pizza
(or DPZ) Burger King (or BKW), and Jack in the Box (JACK). It’s also facing
increased competition from other formats such as Chipotle Mexican Grill (or
CMG), The Cheesecake Factory (or CAKE), Panera Bread (or PNRA), and many
more. Apart from these big names, McDonalds also faces competition from local
stand-alone restaurant chains.

In terms of sales, McDonalds had a total sales company operated margin of

17.5% and Yum! Brands (YUM) had 15% for fiscal year 2013. Apart from these
numbers, we can analyze these companies using other performance parameters
in the restaurant industry. These can be accessed through the PowerShares
Dynamic Leisure and Entertainment ETF (PEJ) and the PowerShares Dynamic
Leisure and Entertainment ETF (PBJ). We’ll discuss that next.

In terms of sales, McDonalds had a total sales company operated margin of

17.5% and Yum! Brands (YUM) had 15% for fiscal year 2013. Apart from these
numbers, we can analyze these companies using other performance parameters
in the restaurant industry. These can be accessed through the PowerShares
Dynamic Leisure and Entertainment ETF (PEJ) and the PowerShares Dynamic
Leisure and Entertainment ETF (PBJ). We’ll discuss that next.
The previous chart compares McDonald’s with four of its closest competitors in
the restaurant business. An investor can gain exposure to the restaurant
business through the PowerShares Dynamic Leisure and Entertainment
ETF (PEJ) and the PowerShares Dynamic Leisure and Entertainment ETF (PBJ).

At the end of 2013, McDonalds’ year-over-year (or YoY) sales increased by

1.95% compared to its competitors that experienced a decline, collectively. The
average sales declined by 9.18% for these five players. Same store sales
increased the highest for Wendy’s (WEN) by 1.8% with average same store sales
of 0.30%. The earnings before interest, taxes, depreciation, and amortization (or
EBITDA) margin of all five players averaged to 28.2%. McDonalds’ EBITDA
margin of 36% was above the competition’s average. So, let’s see how this turns
out for the McDonalds’ stock.

McDonald’s is trading at a price-earnings (or PE) of 18.2x, at a discount to the

competition’s average of 28.3x. Burger King (BKW) and Wendy’s (WEN) are both
trading at a PE of 34x. The price-earnings to growth (or PEG) ratio for
McDonald’s is slightly higher at 1.87x than the average of 1.59x. This means that
the estimated growth is lower compared to its peers. Return on assets is 15.66%,
which is above competition’s average of 8.04%. The return on equity is 35.19%,
which is above the average of 25.10%.

In the previous chart, McDonald’s appears to be a good performer compared to

its peers. Continue reading the next section in this series to learn how an
investment in McDonald’s would turn out overs a five-year period.

McDonalds’ stock performance

McDonalds (MCD) came up with an initial public offering (or IPO) in 1965,
offering stock at $22.5 per share. Fast-forward to July, 2014, the company is
trading at $100 levels.

Profitability

The company revenue growth has seen a volatility from anywhere between the
low of -3.3% in 2009 to a high of 12.18% in 2011. Net income has also been
equally volatile with the low of -0.7% in 2012 to a high of 11.26% in 2011. The
return on assets (or ROA) and return on equity (or ROE) have both been stable
at 15.5% and 35.7% at the end of 2014. Compared with other competitors in the
restaurant industry, Yum! Brand (YUM) sales declined by 4% and Burger King
(BKW) sales declined 41% year-over-year (or YoY). Investors can gain access to
the industry through the PowerShares Dynamic Leisure and Entertainment
ETF (PEJ) and the PowerShares Dynamic Leisure and Entertainment ETF (PBJ).

Leverage

McDonalds has increased leverage since 2009. The debt to equity ratio at the
end of 2013 was 0.88x. So, how does this translate if you made an investment in
this company on January 1, 2009?

A $10,000 investment on January 1, 2009, would return a total of $16,127 as of

July 15, 2014. It would also earn a dividend of ~$2,700 over the same period.
This is a total return of ~88% over five years and a Compounded Annual Growth
Rate (or CAGR) of ~12% every year.

Zoom1M3M6MYTD1YClick Ticker Above to Show/Hide on GraphMCDPBJPEJYUMJan '19Jul

'180%+ 20%-20%+ 40%
14
Why McDonald's may be a REIT stock
By Adam JonesJul 19, 2014 | 12:39 AM



McDonald’s might be a REIT stock

McDonalds’ (MCD) books contain a significant portion of real estate assets. At

the end of 2013, McDonald’s had $40 billion in property, plant, and equipment on
the depreciation and amortization balance sheet. This was 40% of its market
capitalization. These real estate assets collect rents and fees from franchises.

Active investors have been urging McDonald’s to consider spinning off the real
estate assets to unlock value to investors. Suggestions include setting up a real
estate investment trust (or REIT). An REIT consists a pool of real estate assets
that is publicly traded on the stock exchange. This includes the PowerShares
Dynamic Leisure and Entertainment ETF (PEJ) and the PowerShares Dynamic
 Leisure and Entertainment ETF (PBJ) for restaurant industry. It would
give investors an opportunity to invest in real estate without the requirement of
huge capital. For McDonald’s, setting up an REIT would mean transferring the
ownership of the real estate it owns to a third party.

McDonalds’ management believes that spinning off the real estate assets would
harm the company more than creating value for investors. According to the
company, it has stated that the restructuring of ownership would take a long time.
It believes that the company’s assets may not qualify as REITs according to
Marketwatch.

Taking secured loans and the rents earned from these properties can be used
towards debt servicing. Also, the royalties earned from franchise can provide
additional cushion for debt servicing. At the end of December, 2013, revenues
from rent and royalties were $9 billion, which was 32% of total revenues. Interest
coverage ratio was 16.7x and the debt to equity (or DOE) ratio was 0.88x. The
total debt at the end of 2013 was $14 billion. This all indicates that the company
has room to take more leverage and return capital to shareholders to boost
return on equity (or ROE). An investor can look at its competitors Yum! Brand
(YUM) and Burger King (BKW) to compare them with McDonalds’ asset
composition.
Zoom1M3M6MYTD1YClick Ticker Above to Show/Hide on GraphMCDPBJPEJYUMJan '19Jul
'180%+ 20%-20%+ 40%
15
Must-know: McDonalds' earnings preview
By Adam JonesJul 19, 2014 | 12:40 AM



McDonalds’ earnings preview

McDonalds (MCD), will report its 2Q14 earnings on July 22. Let’s look at what
Wall Street has to say about McDonalds’ upcoming earnings.
Wall Street analysts estimate an earnings per share (or EPS) of $1.44
with forecast as high as $1.48 to as low as $1.41. The consensus also estimates
$7.28 billion in sales, $1.42 billion in net income, $2.23 billion in operating profits
and an earnings before interest, taxes, depreciation, and amortization (or
EBITDA) of $2.64 billion. McDonalds (MCD) reported an EPS of $1.21 in March,
2014, which was a -1.63% surprise from consensus of $1.23.

Analysts’ also estimate that in June, U.S. same-store sales will be 1.1% with
some analysts estimating it as high as 1.5%. According to a survey conducted by
Janney, sales outlook for franchises’ has been the weakest in a decade. A recent
survey by Consumer Reports, showed that McDonald’s burgers tasted the worst
in the restaurant industry according to the PowerShares Dynamic Leisure and
Entertainment ETF (PEJ) and the PowerShares Dynamic Leisure and
Entertainment ETF (PBJ). The editor of the report said “more food quality is
emerging as a deciding factor for Americans.” Some analysts link this to the
disappointing same-store sales in May. This may have a continuing effect in
June.

Save the calendar with dates in the chart above to follow earnings of fast-food
restaurant players such as Yum Brands (YUM), Burger King (BKW), Wendy’s (or
WEN), and Jack in the Box (JACK).

Click on this link to go to the Restaurant sector page to read more about
the restaurant industry and companies.
Zoom1M3M6MYTD1YClick Ticker Above to Show/Hide on GraphMCDPBJPEJJACKJan '19Jul
'180%+ 20%-20%
McDonald’s Long Term Business Objectives
Organisation’s long term objectives mean the performance goals that can be gained
within five years period or more. Long term objectives normally require improvements in
certain sides of an organisation which are-

Competitive position of the organisation

Profitability

Technology leadership

Market share

Employee relationship and productivity

Corporate image(Source: www.businessdictioonary.com)

Setting successful long term objectives requires a strong basement of an organisation

and skilful management can achieve the expected goals. McDonald’s has already
ensured a sustainable basement in global market. On the basis of previous business
performance, its profitability is really in a secure position.

As McDonald’s believes in market dominance, it wants to utilize the modern

technological advantages by using all technological access. To meet the requirements of
ongoing market competition, it tries to dominate the share market and it also conscious
about employee productivity. As a result, MacDonald’s has already made a loyal
corporate image.

The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant
menu of quality food and beverages sold at various price points in more than 100 countries.
McDonald’s global system is comprised of both Company-owned and franchised restaurants.
McDonald’s franchised restaurants are owned and operated under one of the following structures
- conventional franchise, developmental license or affiliate. The optimal ownership structure for
an individual restaurant, trading area or market (country) is based on a variety of factors,
including the availability of individuals with the entrepreneurial experience and financial
resources, as well as the local legal and regulatory environment in critical areas such as property
ownership and franchising. We continually review our mix of Company-owned and franchised
restaurants to help optimize overall performance, with a goal to be approximately 95%
franchised over the long term. The business relationship between McDonald’s and its
independent franchisees is of fundamental importance to overall performance and to the
McDonald’s brand. This business relationship is supported by an agreement that requires
adherence to standards and policies essential to protecting our brand. The Company is primarily
a franchisor, with more than 90% of McDonald's restaurants currently owned and operated by
independent franchisees. Franchising enables an individual to be their own employer and
maintain control over all employment related matters, marketing and pricing decisions, while
also benefiting from the strength of McDonald’s global brand, operating system and financial
resources. One of the strengths of this model is that the expertise gained from operating
Company-owned restaurants allows McDonald’s to improve the operations and success of all
restaurants while innovations from franchisees can be tested and, when viable, efficiently
implemented across relevant restaurants. Directly operating McDonald’s restaurants contributes
significantly to our ability to act as a credible franchisor. Having Company-owned restaurants
provides Company personnel with a venue for restaurant operations training experience. In
addition, in our Company-owned and operated restaurants, and in collaboration with franchisees,
we are able to further develop and refine operating standards, marketing concepts and product
and pricing strategies that will ultimately benefit McDonald’s restaurants. Under a conventional
franchise arrangement, the Company generally owns the land and building or secures a long-term
lease for the restaurant location and the franchisee pays for equipment, signs, seating and décor.
The Company believes that ownership of real estate, combined with the co-investment by
franchisees, enables us to achieve restaurant performance levels that are among the highest in the
industry. Franchisees are also responsible for reinvesting capital in their businesses over time. In
addition, to accelerate implementation of certain initiatives, the Company frequently coinvests
with franchisees to fund improvements to their restaurants or their operating systems. These
investments, developed with input from McDonald’s with the aim of improving local business
performance, increase the value of our brand through the development of modernized, more
attractive and higher revenue generating restaurants. The Company’s typical franchise term is 20
years. The Company requires franchisees to meet rigorous standards and generally does not work
with passive investors. The business relationship with franchisees is designed to ensure
consistency and high quality at all McDonald’s restaurants. Conventional franchisees contribute
to the Company’s revenue through the payment of rent and royalties based upon a percent of
sales, with specified minimum rent payments, along with initial fees paid upon the opening of a
new restaurant or grant of a new franchise. This structure enables McDonald’s to generate
significant levels of cash flow. Under a developmental license arrangement, licensees provide
capital for the entire business, including the real estate interest. The Company generally does not
invest any capital under a developmental license arrangement. The Company receives a royalty
based upon a percent of sales as well as initial fees upon the opening of a new restaurant or grant
of a new license. We use the developmental license ownership structure in over 80 countries with
a total of approximately 6,900 restaurants. The largest developmental licensee operates
approximately 2,200 restaurants in 19 countries in Latin America and the Caribbean. Finally, the
Company also has an equity investment in a limited number of foreign affiliated markets,
referred to as “affiliates.” In these markets, the Company receives a royalty based on a percent of
sales and records its share of net results in Equity in earnings of unconsolidated affiliates. In
2017, the Company completed the sale of its businesses in China and Hong Kong, while
retaining a 20% ownership in the entity that now owns the business. There are approximately
5,800 restaurants in foreign affiliated markets, the largest of which are Japan and China, where
there are about 2,900 and 2,600 restaurants, respectively. Supply Chain and Quality Assurance
The Company and its franchisees purchase food, packaging, equipment and other goods from
numerous independent suppliers. The Company has established and enforces high quality
standards and product specifications. The Company has quality centers around the world
designed to ensure that its high standards are consistently met. The quality assurance process not
only involves ongoing product reviews, but also on-site supplier visits. A Food Safety Advisory
Council, composed of the C

The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant menu of
quality food and beverages sold at various price points in more than 100 countries. McDonald’s global
system is comprised of both Company-owned and franchised restaurants. McDonald’s franchised
restaurants are owned and operated under one of the following structures - conventional franchise,
developmental license or affiliate. The optimal ownership structure for an individual restaurant, trading
area or market (country) is based on a variety of factors, including the availability of individuals with the
entrepreneurial experience and financial resources, as well as the local legal and regulatory environment
in critical areas such as property ownership and franchising. We continually review our mix of Company-
owned and franchised restaurants to help optimize overall performance, with a goal to be approximately
95% franchised over the long term. The business relationship between McDonald’s and its independent
franchisees is of fundamental importance to overall performance and to the McDonald’s brand. This
business relationship is supported by an agreement that requires adherence to standards and policies
essential to protecting our brand. The Company is primarily a franchisor, with more than 90% of
McDonald's restaurants currently owned and operated by independent franchisees. Franchising enables an
individual to be their own employer and maintain control over all employment related matters, marketing
and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating
system and financial resources. One of the strengths of this model is that the expertise gained from
operating Company-owned restaurants allows McDonald’s to improve the operations and success of all
restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented
across relevant restaurants. Directly operating McDonald’s restaurants contributes significantly to our
ability to act as a credible franchisor. Having Company-owned restaurants provides Company personnel
with a venue for restaurant operations training experience. In addition, in our Company-owned and
operated restaurants, and in collaboration with franchisees, we are able to further develop and refine
operating standards, marketing concepts and product and pricing strategies that will ultimately benefit
McDonald’s restaurants
Under a conventional franchise arrangement, the Company generally owns the land and building or
secures a long-term lease for the restaurant location and the franchisee pays for equipment, signs, seating
and décor. The Company believes that ownership of real estate, combined with the co-investment by
franchisees, enables us to achieve restaurant performance levels that are among the highest in the
industry. Franchisees are also responsible for reinvesting capital in their businesses over time. In addition,
to accelerate implementation of certain initiatives, the Company frequently coinvests with franchisees to
fund improvements to their restaurants or their operating systems. These investments, developed with
input from McDonald’s with the aim of improving local business performance, increase the value of our
brand through the development of modernized, more attractive and higher revenue generating restaurants.
The Company’s typical franchise term is 20 years. The Company requires franchisees to meet rigorous
standards and generally does not work with passive investors. The business relationship with franchisees
is designed to ensure consistency and high quality at all McDonald’s restaurants. Conventional
franchisees contribute to the Company’s revenue through the payment of rent and royalties based upon a
percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a
new restaurant or grant of a new franchise. This structure enables McDonald’s to generate significant
levels of cash flow. Under a developmental license arrangement, licensees provide capital for the entire
business, including the real estate interest. The Company generally does not invest any capital under a
developmental license arrangement. The Company receives a royalty based upon a percent of sales as
well as initial fees upon the opening of a new restaurant or grant of a new license. We use the
developmental license ownership structure in over 80 countries with a total of approximately 6,900
restaurants. The largest developmental licensee operates approximately 2,200 restaurants in 19 countries
in Latin America and the Caribbean. Finally, the Company also has an equity investment in a limited
number of foreign affiliated markets, referred to as “affiliates.” In these markets, the Company receives a
royalty based on a percent of sales and records its share of net results in Equity in earnings of
unconsolidated affiliates. In 2017, the Company completed the sale of its businesses in China and Hong
Kong, while retaining a 20% ownership in the entity that now owns the business. There are approximately
5,800 restaurants in foreign affiliated markets, the largest of which are Japan and China, where there are
about 2,900 and 2,600 restaurants, respectively. Supply Chain and Quality Assurance The Company and
its franchisees purchase food, packaging

The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant menu of
quality food and beverages sold at various price points in more than 100 countries. McDonald’s global
system is comprised of both Company-owned and franchised restaurants. McDonald’s franchised
restaurants are owned and operated under one of the following structures - conventional franchise,
developmental license or affiliate. The optimal ownership structure for an individual restaurant, trading
area or market (country) is based on a variety of factors, including the availability of individuals with the
entrepreneurial experience and financial resources, as well as the local legal and regulatory environment
in critical areas such as property ownership and franchising. We continually review our mix of Company-
owned and franchised restaurants to help optimize overall performance, with a goal to be approximately
95% franchised over the long term. The business relationship between McDonald’s and its independent
franchisees is of fundamental importance to overall performance and to the McDonald’s brand. This
business relationship is supported by an agreement that requires adherence to standards and policies
essential to protecting our brand. The Company is primarily a franchisor, with more than 90% of
McDonald's restaurants currently owned and operated by independent franchisees. Franchising enables an
individual to be their own employer and maintain control over all employment related matters, marketing
and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating
system and financial resources. One of the strengths of this model is that the expertise gained from
operating Company-owned restaurants allows McDonald’s to improve the operations and success of all
restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented
across relevant restaurants. Directly operating McDonald’s restaurants contributes significantly to our
ability to act as a credible franchisor. Having Company-owned restaurants provides Company personnel
with a venue for restaurant operations training experience. In addition, in our Company-owned and
operated restaurants, and in collaboration with franchisees, we are able to further develop and refine
operating standards, marketing concepts and product and pricing strategies that will ultimately benefit
McDonald’s restaurants
Under a conventional franchise arrangement, the Company generally owns the land and building or
secures a long-term lease for the restaurant location and the franchisee pays for equipment, signs, seating
and décor. The Company believes that ownership of real estate, combined with the co-investment by
franchisees, enables us to achieve restaurant performance levels that are among the highest in the
industry. Franchisees are also responsible for reinvesting capital in their businesses over time. In addition,
to accelerate implementation of certain initiatives, the Company frequently coinvests with franchisees to
fund improvements to their restaurants or their operating systems. These investments, developed with
input from McDonald’s with the aim of improving local business performance, increase the value of our
brand through the development of modernized, more attractive and higher revenue generating restaurants.
The Company’s typical franchise term is 20 years. The Company requires franchisees to meet rigorous
standards and generally does not work with passive investors. The business relationship with franchisees
is designed to ensure consistency and high quality at all McDonald’s restaurants. Conventional
franchisees contribute to the Company’s revenue through the payment of rent and royalties based upon a
percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a
new restaurant or grant of a new franchise. This structure enables McDonald’s to generate significant
levels of cash flow. Under a developmental license arrangement, licensees provide capital for the entire
business, including the real estate interest. The Company generally does not invest any capital under a
developmental license arrangement. The Company receives a royalty based upon a percent of sales as
well as initial fees upon the opening of a new restaurant or grant of a new license. We use the
developmental license ownership structure in over 80 countries with a total of approximately 6,900
restaurants. The largest developmental licensee operates approximately 2,200 restaurants in 19 countries
in Latin America and the Caribbean. Finally, the Company also has an equity investment in a limited
number of foreign affiliated markets, referred to as “affiliates.” In these markets, the Company receives a
royalty based on a percent of sales and records its share of net results in Equity in earnings of
unconsolidated affiliates. In 2017, the Company completed the sale of its businesses in China and Hong
Kong, while retaining a 20% ownership in the entity that now owns the business. There are approximately
5,800 restaurants in foreign affiliated markets, the largest of which are Japan and China, where there are
about 2,900 and 2,600 restaurants, respectively.

History of McDonald's
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving
more than 58 million customers daily. The business began in 1940, with a restaurant opened by
brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the
"Speedee Service System" in 1948 established the principles of the modern fast-food restaurant
(See bib. page 'History 1').
 The original staff of the McDonald's brothers hamburger restaurant. (Bib. page 'History 2')

The present McDonald's corporation dates its founding to the opening of a franchised restaurant
by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955. Kroc later purchased the McDonald
brothers' equity in the company and led its worldwide expansion (Bib. page 'History 3').

Ray Kroc took over a small scale McD's and turned it into the global phenomenon it is
today (Bib. page 'History 4').

The first McDonald's restaurant opened in Des Plaines Illinois on April 15, 1955. Their first day
sales were $366.12. By 1965 there would be over 700 McD's throughout the United States (Bib.
page 'History 5').
 The first McDonald's, Des Plaines Illinois, 1955 (Bib. page 'History 6')

The original "Ronald McDonald"...terrifying! (Bib. page 'History 7')

In 1967 McDonald's went international with restaurant openings in Canada and Puerto
Rico (Bib. page 'History 8').
Obviously not a picture from the original 1967 McD's...this is what many passengers see at the
San Juan Airport today (Bib. page 'History 9').

McDonald's today:
Number of Global Restaurants:
More than 32,000
Number of Countries:
117
Number of worldwide employees:
1.7 million
Percentage of franchised restaurants around the world:
More than 75%
(Bib. page 'History 10')

With the expansion of McDonald's into many international markets, the company has become a
symbol of globalization and the spread of the 'American way' of life. Its prominence has also
made it a frequent topic of public debates about obesity, corporate ethics and consumer
responsibility.
Romania

India

Japan
 South Africa

??? Where do you think this McD's is???

China
Moscow