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Understanding the Mcdonalds Business Model

With over $60 billion in revenues annually, McDonald’s is the leading business in the global fast food industry. With over 36,000 restaurants around the world, it is estimated that the QSR chain has served over 100 billion hamburgers since its founding. The first McDonald’s served everything from tamales to peanut butter and jelly sandwiches. Looking at the McDonald’s business model today, it is clear to see that the model has definitely changed.

The McDonald’s business model is a franchising business model that focuses on providing a high quality value proposition to each customer. Here is a closer look at what makes up the full canvas of what makes his QSR giant tick.

1. They Have Developed Key Customer Segments.

McDonald’s might be a global business with high levels of brand saturation, but they still have four primary customer segments that they focus upon: families, seniors, business professionals, and teens. With low prices included in the value proposition to encourage spending, the message that this QSR chain sends out is clear: get more food at a lower price by eating here. Some people eat at McDonald’s a lot. These folks are a subsegment that the chain calls their “heavy users.”

2. They Have Internalized Their Strategic Partners.

8 out of 10 McDonald’s restaurants are franchises. It takes a lot of wealth to qualify for a new McDonald’s franchise – over $750,000. In return, however, the McDonald’s business model has turned these franchisees into their primary strategic business partners. By forming a chain of distribution through their franchises and promoting a consistent message, the products that are received by a customer are consistent at every restaurant so that expectations are met on every visit.

This structure also allows McDonald’s to be able to focus on key geographical segments to meet consumer needs. There are specific products at certain McDonald’s franchises that are not sold throughout the rest of the restaurant chain. In Wisconsin, for example, you might be able to find a McBrat. In India, you’ll find zero beef products.

3. They Have Placed a Focus on Sustainability.

Although McDonald’s generally makes the news in negative ways, there are some very positive things that they are doing right now that should be publicized as well. The McDonald’s business model is seeking to create 100% sustainability in certain products that are sold by the year 2020. By 2016, they plan to be purchasing certified sustainable beef. Coffee, fish, and palm oil have the goal of being sourced responsibly. They even plan to be serving double the amount of fruits and vegetables by the end of the decade compared to today’s numbers.

Corporate responsibility doesn’t just focus on the food. McDonald’s is also looking to cut out sodium and fat from their food products. They’ve set a goal of increasing the energy efficiency of their corporate-owned restaurants by at least 20% and are encouraging their franchises to do the same. There is even the goal to increase recycling by 50% and transition to packaging that is 100% fiber based.

4. They Are Community Orientated.

There are five pillars to the McDonald’s business model: people, products, place, price, and promotion. All of these pillars have one thing in common: they must be community orientated to work. Since the goal of this corporation is to become the favorite place to eat for each of their customer segments, the business model must be able to have their priorities aligned with the community needs of each location – even when the restaurant is independently owned.

In theory, this allows McDonald’s to be able to evolve as the community evolves. The response, however, has been slow. Premium, fast casual dining options are exploding in growth while same store sales for McDonald’s are struggling. Customers have asked for better food products and they’re willing to pay a little more to have them. The sustainability that McDonald’s is implementing will help the chain get there eventually, but it might be too little, too late.

5. They Allow Everyone to Share.

Risk is distributed evenly in the McDonald’s business model. The corporation, the shareholders, and the franchises all have something at stake and this requires everyone to work together to make the whole thing work. That’s why some may call this business model the “tripod model of business” because the three components all support each other so that the entire entity is able to stand on its own.

The McDonald’s business model is simple in design so that consistent results may be achieved. If they can improve their sustainability and the efficiency of their menu, then this brand will likely stay on top for years to come.

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