Founding and Early Years
This section explores the inception of McDonald’s, from a single food stand to a global franchise with Ray Kroc’s influence.
The Original McDonald’s and the McDonald Brothers
The initial story of McDonald’s began with two brothers, Maurice and Richard McDonald.
In the late 1930s, they moved from New Hampshire to California, bringing with them a dream that would change the food industry.
They first operated a food stand called The Airdrome on Route 66 in Monrovia, California, but in 1940, they saw greater potential and moved their establishment to San Bernardino.
There, they transformed their barbecue joint into a streamlined operation focused primarily on hamburgers, naming it McDonald’s. Their innovative Speedee Service System revolutionized the fast-food concept, boasting a simple menu for quick service and a neon-adorned Speedee character symbolizing their efficiency.
Ray Kroc’s Vision and Expansion
Enter Ray Kroc, a Chicago-based Multimixer salesman.
In 1954, fascinated by the McDonald brothers’ success and the potential for nationwide growth, he proposed a franchise model to take their concept across the country.
Kroc opened the first franchise McDonald’s in 1955 in Des Plaines, Illinois, under the newly formed McDonald’s Corporation.
His vision was much larger than what the McDonald brothers had imagined.
It led to an aggressive expansion strategy, eventually making McDonald’s a household name and synonymous with hamburgers.
Under Kroc’s leadership, the franchise quickly became not just a chain of restaurants but a symbol of entrepreneurship and American gastronomy.
Global Growth and Business Model
McDonald’s transformative journey from a local restaurant to a global fast-food colossus is underscored by strategic franchising and consistent branding.
The “Golden Arches” have become synonymous with fast-food, presenting a stable revenue stream and an international symbol of American culture.
Expanding the Golden Arches Worldwide
The McDonald’s brand took root locally in California, along the iconic Route 66, and from there, it sprawled into an extensive web of franchises across the globe.
Ray Kroc, the driving force behind the chain’s franchising model, propelled McDonald’s into the international market, opening the first restaurant outside the US in Canada and Puerto Rico in 1967.
A hallmark expansion was in 1974, when McDonald’s made its foray into the UK market.
The growth continued, and by the 1990s, the Golden Arches had planted flags in new territories, with notable openings in Moscow, India, and parts of Africa.
Today, the McDonald’s Corporation, which is public and trades with the ISIN US5801351017, oversees a vast network of over 38,000 restaurants in over 100 countries, with a keen focus on high-growth markets like China and the Middle East.
The Economics of McDonald’s Success
McDonald’s business model leverages a robust franchising system that has proven successful worldwide.
As of 2022, substantial revenue is generated from franchised outlets, revealing the company’s strategy of transitioning toward a heavily franchised business model, with aims of reaching nearly 95% franchised restaurants.
Franchisees pay not only initial fees but also ongoing royalties and rent, contributing to McDonald’s revenue streams.
One unique asset is McDonald’s ownership of real estate, which includes significant property holdings worldwide.
This model allows control over the franchisees’ locations and contributes to company profits through rents and fees.
McDonald’s also operates Hamburger University in Chicago, a training complex for franchise owners and corporate staff, emphasizing the importance of standardized operations and services, much akin to the consistency of tech giants like Google and Starbucks.
The drive-thru innovation and the ability to customize orders reflect McDonald’s adaptation to tech trends, positioning the fast-food chain favorably against competitors.
The franchised business model also fuels McDonald’s global presence, making the company not just a food service business, but also a global real estate giant.