Reasons for the Enduring Success of McDonald's

In the Sunday, January 11 2009 New York Times Business front page article on McDonald's (MCD), several reasons were laid out for its success: new menu items, longer hours, new buildings, more measured growth, an operationally focused "Plan to Win". It focuses on people, products, place, price and promotion.

Not noted, but also true, is that McDonald's' earnings flow itself is diversified, with company operated stores, franchisee operations and real estate operations (lease / sell) all earnings contributors. McDonald's also pays attention to details. In just walking through the stores, talking to staff and driving McDonalds' markets, a few observations are apparent;

• McDonald's has had its nutritional menu components listed years ago—not fighting it like some industry trade groups do-- but full disclosure, upfront.
• Its menu has every daypart—breakfast, lunch, dinner, AM and PM snack, dinner and late night covered—with both value offerings and premium price points. That's the barbell strategy.
• Its coffee tastes good—beating out the niche coffee operators in my opinion.
• It does not charge ATM fees to use debit cards—unlike some other QSR operators.
• Ergonomics: Ever notice how calmly McDonald's' hourly employees work even during the rush—it's because the equipment layout and menu is right.
• Its marketing got more sophisticated years ago, establishing the place attribute (McDonald's: I'm loving it!) as an experiential factor, beyond just low prices or LTO offers. McDonald's' marketing itself is diversified, with national, regional co-ops and local store marketing pillars.
• The staff is amazingly tenured—you can easily find store general managers with 30 years seniority, unlike many of the churn and burn operators who build their model on turnover.
• The company and franchisees actually work together. Franchisees and the company work together in marketing co-ops, not a top down, take it or leave it mentality.
• Finally, even in the U.S., McDonald's is not found on every corner. It balanced its store development, slowing in the U.S. and ramping up overseas, just at the right time, to avoid oversaturation.

Disclosure: None

Comments

[livesinhiscar:]

If you go to MCD for the "experiential factor", then I think you need to get out more. There is nothing exciting about eating at the average MCD restaurant.

Jan 13 08:39 AM

[Adina Genn:]

McDonald's successs is largely based on a concept called the Three-Legged Stool -- and that is the relationships between the trhee partners in the system: owner/operators, suppliers and corporate staff. Each depends on the others to support the group as a whole in delivering the company's mantra: Quality, Service, Cleanliness and Value, as I learned in co-writing
"Everything I Know About Business I Learned at McDonald's." I now see McDonald's as much more than a place for a quick bite, but rather a place of tremendous opportunity for its workers, at any level.

Jan 14 09:04 AM

[Lotalolly:]

I agree but would also add that MCD is very well positioned to gain market share as our view on food changes to being what we can afford as opposed to what we like to eat. People like to go out to eat but they can't always afford to go out to eat in the fanciest joints.


On Jan 14 09:04 AM Adina Genn wrote:

> McDonald's successs is largely based on a concept called the Three-Legged
> Stool -- and that is the relationships between the trhee partners
> in the system: owner/operators, suppliers and corporate staff. Each
> depends on the others to support the group as a whole in delivering
> the company's mantra: Quality, Service, Cleanliness and Value, as
> I learned in co-writing
> "Everything I Know About Business I Learned at McDonald's." I now
> see McDonald's as much more than a place for a quick bite, but rather
> a place of tremendous opportunity for its workers, at any level.

Mar 10 08:01 AM