Published on July 4, 2016
McDonald’s is the world’s largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries across 36,538 outlets. Founded in the United States in 1940, the company began 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. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth.
A McDonald’s restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The McDonald’s Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as well as sales in company-operated restaurants. According to a 2012 BBC report, McDonald’s is the world’s second largest private employer—behind Walmart—with 1.9 million employees, 1.5 million of whom work for franchises.
McDonald’s primarily sells hamburgers, cheeseburgers, 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, fish, wraps, smoothies and fruit.
Main article: History of McDonald’s
McDonald’s corporate logo used from November 18, 1968 to 2006. It still exists at some restaurants.
The oldest operating McDonald’s restaurant was the third one built, opening in 1953. It is located at 10207 Lakewood Blvd. at Florence Ave. in Downey, California (at 33.9471°N 118.1182°W).
The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald at 1398 North E Street at West 14th Street in San Bernardino, California (at 34.1255°N 117.2946°W). Their introduction of the “Speedee Service System” in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier. The first McDonald’s with the arches opened in Phoenix, Arizona in March 1953. The original mascot of McDonald’s was a man with a chef’s hat on top of a hamburger-shaped head whose name was “Speedee”. By 1967, Speedee was eventually replaced with Ronald McDonald when the company first filed a U.S. trademark on a clown-shaped man having puffed-out costume legs.
On May 4, 1961, McDonald’s first filed for a U.S. trademark on the name “McDonald’s” with the description “Drive-In Restaurant Services”, which continues to be renewed through the end of December 2009. On September 13 that same year, the company filed a logo trademark on an overlapping, double-arched “M” symbol. By September 6, 1962, this M-symbol was temporarily disfavored, when a trademark was filed for a single arch, shaped over many of the early McDonald’s restaurants in the early years. Although the “Golden Arches” logo appeared in various forms, the present version as a letter “M” did not appear until November 18, 1968, when the company applied for a U.S. trademark.
The present corporation dates its founding to the opening of a franchised restaurant by businessman Ray Kroc in Des Plaines, Illinois on April 15, 1955, the ninth McDonald’s restaurant overall; this location was demolished in 1984 after many remodels. Kroc later purchased the McDonald brothers’ equity in the company and led its worldwide expansion, and the company became listed on the public stock markets ten years later. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast-food industry. Kroc and the McDonald brothers all feuded over control of the business, as documented in both Kroc’s autobiography and in the McDonald brothers’ autobiography. The San Bernardino restaurant was demolished in 1976 (1971, according to Juan Pollo) and the site was sold to the Juan Pollo restaurant chain. This area now serves as headquarters for the Juan Pollo chain, as well as a McDonald’s and Route 66 museum. 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.
Facts and figures
By 1993, McDonald’s had sold more than 100 billion hamburgers. The once widespread restaurant signs that boasted the number of sales, such as this one in Harlem, were left at “99 billion” because there was space for only two digits.
The McDonald’s in Northport, Alabama commemorates U.S. President Ronald Reagan’s visit
McDonald’s restaurants are found in 118 countries and territories around the world and serve 68 million customers each day. McDonald’s operates 36,525 restaurants worldwide, employing more than 420,000 people. There are currently a total of 6,444 company-owned locations and 30,081 franchised locations, which includes 21,147 locations franchised to conventional franchisees, 5,529 locations licensed to developmental licensees, and 3,405 locations licensed to foreign affiliates, primarily Japan. The company also operates 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. In October 2012, its monthly sales fell for the first time in nine years. In 2014, its quarterly sales fell for the first time in seventeen years, when its sales dropped for the entirety of 1997.
McDonald’s plans to close 184 restaurants in the United States in 2015, which is 59 more than it plans to open. This is the first time McDonald’s will have a net decrease in the number of locations in the United States since 1970.
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 company currently owns all of its property – valued at an estimated $16 to $18 billion. However, in recent times, there have been calls to spin off the company’s US holdings into a potential real estate investment trust. The company earns a significant portion of its revenue from rental payments from franchisees. These rent payments have risen 26% over the past five years, and currently account for one fifth of the company’s total revenue.The company announced at its investor conference on 10 November 2015 that it would not spin off its property into a real-estate investment trust. The CEO, Steve Easterbrook discussed that pursuing the REIT option would pose too large a risk to the company’s business model.
The United Kingdom and Ireland business model is different from 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 management 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 (2001), nearly one in eight workers in the U.S. have at some time been employed by McDonald’s. Employees are encouraged by McDonald’s Corp. to maintain their health by singing along to their favorite songs in order to relieve stress, attending church services in order to have a lower blood pressure, and taking two vacations annually in order to reduce risk for myocardial infarction.
Fast Food Nation 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 to some extent based on the culture of the host country.