McDonald’s Origin and Background Introduction

McDonald’s Origin and Background Introduction

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McDonald’s Origin and Background Introduction

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McDonald’s Globalization Franchising Strategy

By Past Excellent Student

December X, 201X

Introduction: McDonald’s Origin and Background

“The success of McDonald’s is the business equivalent of the American Dream” (Home, 1). Richard and Maurice McDonald, the founding brothers of McDonald’s, had a vision in their mind from the beginning. At first in 1940, they came up with the idea to completely move their father’s food stand into a completely new building and renamed it from “The Airdrome” to “McDonald’s Bar-B-Que” with twenty-five items listed on the menu.

In October of 1948, after running their restaurant for a few years, they realized that most of their profits were from the hamburgers compared to their other menu items, therefore, they closed down this restaurant to open a more streamline restaurant with a simple menu of hamburgers, cheeseburgers, potato chips, coffee, soft drinks, and apple pie. After a year, they swapped the apple pie and potato chips with milkshakes and French fries.

Eventually after continual improvement, they joined up with Ray Kroc, a seller of Prince Castle brand Multimixer Milkshake Machines, where the McDonald brothers were using eight of his machines, so Kroc went to check out their restaurant.

After visiting, Kroc believed in them and gave them the idea franchise their restaurants throughout the country. They were skeptical at first but eventually agreed with it and McDonald’s first franchise opened in Illinois in 1955. Eventually, Kroc bought out the McDonald brother for 2.7 million dollars and then the fast food restaurant really began to take off. Kroc realized he needed to create an image for the restaurant that would make it stand out compared to others.

The main two aspects that McDonald’s adopted early on that made the chain restaurant stand out is the famous double arch “M” was created along with assigning Ronald McDonald to be the face for the restaurant. Nowadays, it does not matter where you are visiting a McDonalds because it will be a very similar experience regardless of the location. With that being said, that highlights the vision of Ray Kroc, which helps with their strategic approach and their global franchising for continuous success and growth within their fast food chain.

McDonald’s Growth

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There are thousands of McDonald restaurants around the world, and they are still continuing to grow, which makes them one of the top franchising companies in the world. When Kroc purchased McDonalds, he had a real vision of how he wanted it to succeed and he set out to do so. According to the McDonald’s website, Kroc wanted to open 1,000 locations in the United States, and in 1967, he successfully did so. McDonald’s first went global by opening restaurants in Canada and Puerto Rico. According to McDonald’s corporate website, they have more than 36,000 restaurants in over 100 countries. Also from the website, the most recent opening was in Kazakhstan in 2016McDonald’s continual improvements and innovation will help them to continue to grow and branch out to new locations.

One of the main reasons that they are successful at expanding to new locations and cultures is how they focus on local entrepreneurs around the world. By doing this, it helps them to determine how they want to set up each McDonald’s that will best fit that culture but to still keep it similar to the rest of the restaurants around the globe.

The entrepreneur of each franchise is responsible for adapting and adjusting the improvements whether it be the menu, appearance, price, and operations to make sure that restaurant will be successful in that location. “We know the most meaningful way to grow the business and create value for all of our stakeholders is by serving more customers more often.

That’s why we’re focused on giving customers what they really want: hot, delicious food served quickly – with an overall experience and value for their money that meets their rising expectations” (Our Growth Strategy, 2). They have three key pillars that they focus on to continue to grow which are, retain, regain, and convert. McDonald’s will continue to grow with their velocity growth plan to make their chain more up to date with their customer’s requests and needs.

McDonald’s Globalization Strategy and Franchising

Moving an organization to a global market is a big step with many strategic considerations and decision-making skills. When it comes to making a franchise successful, it comes with big ups and downs with trial and error. One has to be willing to take risks to figure out what really works the best for a business and Ray Kroc ended up figuring out just what to do with McDonald’s.

“To achieve this, he chose a unique path: persuading both franchisees and suppliers to buy into his vision, working not for McDonald’s but for themselves, together with McDonald’s. He promoted the slogan, “In business for yourself, but not by yourself” (Our History, 4). Kroc based his philosophy off of the simple principle known as the three-legged barstool. The first leg of the barstool is the franchisees for McDonald’s, the second leg represents McDonald’s suppliers, and lastly, the third makes up the McDonald’s employees.

“One of the main reasons McDonald’s is able to globalize so well is with a franchise business

model that allows its franchisee-members, management and shareholders to share the risks and rewards from the discovery and exploitation of new business opportunities—McDonald’s model has become the norm for other franchise organizations” (Mourdoukoutas, 2). The next way they were able to achieve globalization and continue to do so successfully was due to their ability to adapt and innovate to the new locations. The franchisee managers are able to come up with new and fresh products along with services to address the needs of a widespread and diverse

consumer markets, which are shaped by the demographic region, economy, and the local factors that are focused on in that area.

Globalization for McDonald’s means that they embrace and engage the different cultures while at the same time holding on to a strong enough brand to be immediately identifiable. As mentioned above, when McDonald’s chose to begin franchising, it really opened up a lot of doors for them to pursue, this has allowed them to globalize so well. To become a franchisee of McDonalds, you must require certain qualities needed before you can apply to become an owner of a franchise.

McDonald’s Globalization Effect on Menus

As one would expect when it comes to globalizing a restaurant, it comes with adaptation to different cultures to make it successful there. Since McDonald’s serves food, when it comes to opening a new franchise in a foreign country, they must research into the culture to see what some of the well-known foods are so in return they can come up with a menu that will be enjoyed by that community, but at the same time have some of their signature items on the menu as well. By doing this, that chain restaurant can continue to thrive and succeed. They not only do this to keep that franchise afloat, but they also must look into the cultures to keep respect to their cultural traditions. For example, in India, the Hindu country, they do not believe in eating pork, therefore, no franchise in that country will serve pork due to wanting to respect them and their beliefs. This can greatly impact McDonald’s business strategy because if managers do not do appropriate research for certain local traditions, they could make a disrespectful image and in return would negatively impact McDonald’s reputation.

As mentioned above, although they must change the menu for certain countries, they still try to stay true and represent their famous image of a fast food chain, which is to sell food like the popular burgers and fries. After researching international menus, they were definitely able to customize different burgers for different countries and cultures and keep that “fast food image”. There were many that seemed to really fit each culture but still maintain the burger image which I found really interesting. In Japan they came up with the “Ebi Filet-O Shrimp Burger”, with the name coming from a famous Japanese model who helped promote the release of the new burger, which later became McDonald’s Japan popular burger of choice.

Next in Germany, they created the McNürnburger with the infamous German food which is a bratwurst, they named this burger after a former German soccer star. McDonald’s Cost Rica offers the McPinto Deluxe burger, which includes rice, beans, eggs, plantains, and sour cream to accommodate to the Spanish style of food that is eaten there. After listing some popular burgers in certain areas it is fairly obvious that they keep their name tied into the popular items.

It is a very smart strategy to start the name of popular menu items with the “Mc”. It is a cheap way to advertise their food brand and an easy way for customers to remember where they can go to get it with the simple added prefix.

McDonald’s Global Appearances

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McDonald’s does like to stick with tradition and consistency when it comes to opening up new stores around the world. There are a few main aspects that they try to keep the same for each franchise to advertise their popular brand name to be easily recognized. The most easily recognizable symbol that represents McDonald’s is there use of the golden arches and that is one that they definitely try to keep with each franchise.

They do this because when driving and you look up at different signs that symbol definitely sticks out the most and grabs customer’s attention. Next, they really like their traditional and symbolic color scheme of yellow and red. They do this because Ray Kroc’s vision of keeping each franchise to keep the traditional experience of the original McDonald’s so that they can continue to build their brand name/image. “It doesn’t matter if you’re visiting a McDonald’s in California or Connecticut, America or Australia – you’re going to have a similar experience wherever you are” (Home, 3).

This quote really hits the nail on the head with how consistent Ray Kroc wanted all the franchises to be the same, reiterating the consistency factor that they keep within their chain. By keeping this consistency, it helps the customer’s able to know what to expect from the McDonald’s and it helps with their advertising by keeping similar looks between the McDonald restaurants. One of McDonald’s main goals is to keep their strong brand name and they do this by keeping a distinct appearance for their image along with the obvious fast food service at a cheap price.

McDonald’s likes to keep their name brand looks, but as a company globalizes there will be customization of the appearance to help shape the culture and stand out due to the looks being much different than the rest. One main place that a McDonald’s adapted its looks to fit more into the culture was in Rome. This is perhaps one of their most upgraded restaurants that is filled with marble and mosaics becoming a tourist attraction in of itself. “Located next to the Spanish Steps and entered through a Perugina Baci chocolate shop, the restaurant tries to blend into its very European surroundings, and succeeds” (Pantaleo, 4).

Rome is a very elegant country and the design for this McDonald’s as genius along with the location. This way it is in a central spot to attract a lot of tourists and they also created it as a tourist location by designing it completely different from their typical design. Although McDonald’s typically likes to keep the restaurants consistent and similar in looks, it can be beneficial to have a few locations with a stand out design to attract more customers due to how different it is that what most customers expect it to be, making people more curious.

McDonald’s global franchise strategy helps their popular brand image hold strong against its competitors with the help of this consistent approach. Even through some of these minor adjustments that they make in these unique restaurants, it only helps their image due to the different design in few places making it more attractive. Many other globalized companies will significantly alter their looks to fit into each culture perfectly and not preserving any consistency making it hard for customers to distinguish a legitimate brand image and that is definitely a big advantage for McDonald’s because the similar appearance builds their brand image and allows them to be successful globally.

McDonald’s Global Operations

The operational aspect for McDonald’s as they went global really did not change. They still wanted to focus on the main goal of McDonald’s and that is fast service with cheap prices. It all started from the beginning with the McDonald brother deciding that the food assembly line would be the fastest and most efficient way to serve customers and that is still what is being used today.

This is one factor that does not need to be changed with culture to allow it to be successful. This assembly line service is also a big contributing factor to what allowed them to grow as rapidly as they did because it created their fast service. This really helps with their globalization because there is no need for research and development on a new service system. They can keep this and still be just as successful globally because one of the main concerns for customers is fast service.

The most recent technological development that aided in their fast customer service is the kiosk. This allows the customer to skip the middle man of the cashier and simply type their own order in on the kiosk and is sent directly to the order board through the computer system. As mentioned above, fast service is their main goal to maintain, their system of operation does not need adjusted to be able to continue to globalize due to the simplicity and success of their original and current approach.

McDonald’s Global Pricing

As a company begins to globalize, you can expect the prices to vary between each country due to different availability to certain products. Which relates to McDonald’s because their pricing strategy is based on what is available on the menu and what ingredients are needed for each item listed. They tend to go by their specific strategy called the Big Mac Index to compare their prices.

This pricing method is used because the Big Mac is listed on all menus across the world because this is their famous item that helps to maintain their brand recognition. This is helpful mostly, except in the fact that some of the ingredients are altered in the Big Mac due to different cultures and their beliefs. Every economy in the world is at a different point, the prices will tend to vary and be inconsistent.

The cheapest Big Mac out there today is in Ukraine being priced at $1.67 US dollars. This exemplifies how the Ukraine economy undervalues their currency. The most expensive Big Mac is in Switzerland and it is priced at a whopping $6.82 US dollars. Switzerland has relatively a higher standard of living which makes their economy superior and everything there will seem to be more expensive.

The main reason for carrying prices mostly relates to the availability and access of each ingredient.

If the ingredients are scarce or hard to access in a certain country, then as one can assume that Big Mac will be priced much higher than a country that has an abundance of the certain ingredients and can be accessed very easily. This affects McDonald’s global franchising strategy because they need to consider these different factors to allow them to understand what the average price would be at certain locations around the world. The Big Mac index will never be universal due to the constant changing prices making this a big factor when deciding where to consider a new franchise to pop up.

Conclusion

After researching McDonald’s can start up a new franchise in other countries due to globalization and their different strategies that they go by to globalize. It is safe to say that they will continue to be very successful and will continue to grow and expand to new locations. For them to be successful in a globalized world requires proper planning and decision-making to overcome all the potential negative impacts that they could face.

They are able to come up with the best strategies for each location through their initial strategy, menu, operation system, and pricing as their main factors. Also, with such a strong foundation and success that they have gained from branching out to new foreign areas, they will only continue to learn and improve to reach new areas where they thought they could never make it. The globalization of McDonald’s has impacted them positively by being able to successfully overcome all the obstacles which in return increases their reputation all over the world.

References

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“Home.” Baskin Robbins Franchise Cost & Fee, Baskin Robbins FDD & Franchise Information FranchiseDirect.com, www.franchisedirect.com/information/markettrendsfactsaboutfranchising/thesuccessofmcdonalds/8/1111/.

Mourdoukoutas, Panos. “McDonald’s Winning Strategy, At Home And Abroad.” Forbes, Forbes Magazine, 20 Apr. 2012, www.forbes.com/sites/panosmourdoukoutas/2012/04/20/mcdonalds-winning-strategy-at-home-and-abroad/#585cb80f2a92.

“Our Growth Strategy.” Our People and Communities | McDonald’s, corporate.mcdonalds.com/corpmcd/about-us/our-growth-strategy.html.

“OUR HISTORY.” Our History: Ray Kroc & The McDonald’s Brothers | McDonald’s, www.mcdonalds.com/us/en-us/about-us/our-history.html.

Pantaleo, Rosemary, and TheDailyMeal.com. “10 Coolest McDonald’s around the World.” USA Today, Gannett Satellite Information Network, 3 Mar. 2013, www.usatoday.com/story/travel/destinations/2013/03/02/10-coolest-mcdonalds-around-the-world/1957761/.

McDonald’s Origin and Background Introduction

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