Mcdonald'S Corporation: Company Profile

McDonald's Corporation
Company Profile
Publication Date: 29 Apr 2011
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McDonald's Corporation Datamonitor
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TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 Business Description...........................................................................................5 History...................................................................................................................6 Key Employees.....................................................................................................8 Key Employee Biographies................................................................................10 Major Products and Services............................................................................17 Revenue Analysis...............................................................................................18 SWOT Analysis...................................................................................................19 Top Competitors.................................................................................................25 Company View.....................................................................................................26 Locations and Subsidiaries...............................................................................28
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Company Overview
COMPANY OVERVIEW
McDonald's Corporation (McDonald's or the company) is one of the world's largest foodservice retailing chain. The company is primarily known for its burgers and fries which it sells through more than 32,737 restaurants in 117 countries. It primarily operates in Europe, Asia Pacific, and Americas. The company is headquartered in Oak Brook, Illinois and employs about 400,000 people. The company recorded revenues of $24,074.6 million during the financial year ended December 2010 (FY2010), an increase of 5.8% over 2009. The revenue growth was primarily driven by the positive comparable sales growth. The operating profit of the company was $7,473.1 million in FY2010, an increase of 9.2% over 2009. The net profit was $4,946.3 million in FY2010, an increase of 8.7% over 2009.
KEY FACTS
Head Office McDonald's Corporation One McDonalds Plaza Oak Brook Illinois 60523 USA 1 630 623 3000 1 630 623 5700 http://www.mcdonalds.com
Phone Fax Web Address
Revenue / turnover 24,074.6 (USD Mn) Financial Year End Employees New York Stock Exchange Ticker December 400,000 MCD
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Business Description
BUSINESS DESCRIPTION
McDonald's Corporation (McDonald's or the company) franchises and operates McDonald's branded fast food restaurants all over the world. The company is one of the world's largest food service retailing chain, preparing and serving a range of food products and beverages. As of 2010, the company operated 32,737 restaurants in 117 countries; out of which 6,399 were company-operated and 26,338 were franchised. The franchise agreements include conventional franchise arrangements as well as developmental license agreements and foreign affiliates. Of the total franchises, the company manages 19,279 conventional franchisees, 3,485 developmental licensees and 3,574 affiliates. Under the conventional franchise arrangement, McDonald's owns or secure leases for the land and building while franchisees provide a portion of initial capital outlay in the form of equipments, signs, seating, decor and maintenance. These franchisees, in turn, contribute to the company's revenue through the payment of rent and royalties based upon the percentage of sales. On an average, the conventional franchise arrangements extend for a period of 20 years and represents 70% of total franchised restaurants of the company. Under the developmental license arrangement, licensees provide capital for the entire business, including the real estate interest. For this type of franchises, McDonalds receives an initial fees as well as the royalty based on a percent of sales. The companys largest developmental license arrangement operates more than 1,750 restaurants across 18 countries in Latin American and the Caribbean region. Also, the company owns equity investments in some of the foreign affiliated markets, referred to as affiliates. The company receives a royalty based on a percent of sales in these markets. As of 2010, Japan remains the largest affiliates market with more than 3,300 McDonalds restaurants. The company reports its revenues based on four geographic segments: Europe, the US, APMEA (Asia/Pacific, Middle East and Africa), and other countries and corporate. Other countries and corporate includes Canada and Latin America, as well as corporate activities and certain investments. McDonald's restaurants offer a standardized menu, although there may be geographic variations. McDonald's key product offerings includes hamburgers and cheeseburgers, chicken sandwiches, french fries, wraps, chicken nuggets, salads, desserts, sundaes, soft serve cones, pies, and cookies. It also offers beverages such as milk shakes, soft drinks, coffee, and flavored tea. McDonald's restaurants in the US and many international markets also offer a wide range of breakfast menu. The company's breakfast offerings include muffins, biscuits, hotcakes, and bagel sandwiches. McDonald's markets its products under a wide range of brand names that include Big Mac, Big N' Tasty, Filet-O-Fish, Chicken McNuggets, Mac Snack Wrap, McChicken, McMuffin, McGriddles, and McCafe among others.
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History
HISTORY
The history of McDonald's Corporation (McDonald's or the company) dates back to a hamburger restaurant in California that was opened by two brothers Dick and Mac McDonald under the name of McDonald's Bar-B-Que in 1940. However, the restaurant was shut down for three months in early 1948 for alterations and was re-opened in late 1948 as a self-service-drive-in restaurant. The menu was reduced to nine key items that included hamburger, cheeseburger, soft drinks, milk, coffee, potato chips, and pie. The company introduced French fries to its menu in 1949. Ray Kroc, a distributor of milk shake mixers, opened the first franchised McDonald's restaurant in Des Plaines, Illinois with the permission of the McDonald's brothers in 1955. The number of McDonald's restaurants grew to 100 by 1959 and 500 by 1963. The company went public in 1965 and its shares were listed on the New York Stock Exchange. McDonald's established its first international restaurant in Canada and Puerto Rico in 1967. In 1968, one of the first franchisees, Jim Delligatti, introduced the Big Mac, which became one of the popular branded foods in the world. Herb Peterson, an owner operator, introduced Egg McMuffin as a breakfast item in 1973. The company introduced Happy Meal, which includes a toy, in 1979. In 1981, the company opened restaurants in Spain, Denmark, and Philippines marking the first steps of the company's international growth. By 1983, the company had established presence in over 30 countries with around 7,800 restaurants worldwide. McDonald's introduced freshly tossed salads to its menu in 1987. During the early 1990s, the company expanded its reach in Europe and Russia with opening of a number of restaurants. In 2000, McDonald's bought several other businesses like, The Boston Market, Chipotle Mexican Grill, and Donatos Pizzeria, in an attempt to diversify its operation. In 2001, the company bought a 33% stake in Pret A Manger, a UK sandwich chain which operated over 100 sandwich shops in the UK, as well as outlets in New York City, New York. The company launched a global revitalization plan in 2003, to reassert its operational and marketing leadership. As part of McDonald's reorganization strategy, the company sold its Donatos Pizzeria division back to its founders and also decided to discontinue the development of non-McDonald's brands outside the US during the same year. In 2005, McDonald's Ventures, a wholly-owned subsidiary of McDonald's, invested in Redbox Automated Retail, a leading renter of DVDs through self-service kiosks, with about 800 locations in the US, including ones at McDonald's restaurants and supermarkets. During the same year, DreamWorks Animation and McDonald's entered into a two-year worldwide marketing and promotional relationship. Also in 2005, McDonald's China introduced its first Drive-Thru restaurant.
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History
Disney entered a cross promotional agreement with McDonald's in 2006. The company sold its stake in Chipotle Mexican Grill (Chipotle) through public stock offerings during the same year. McDonald's introduced its new packaging featuring 24 consumers selected from its first online Global Casting Call in 2007. During the same time, McDonald's sold Boston Market Corporation, its non core business unit, to affiliates of Sun Capital Partners, a private investment firm specializing in leveraged buyouts and investments. Further in 2007, McDonald's along with DIC Entertainment Holdings, launched a legal action to recover amounts owed to the company by Cornerstone Overseas Investment Limited, a related company of China Retail Management Limited (CRM), the master toy and apparel licensee for McDonald's McKids line in Asia (excluding Japan and India). McDonald's announced it plans to set up 175 new outlets in China in early 2009. During the same year, the company announced its plans to open 180-190 company-owned restaurants in India by 2015 with an estimated investment of up to INR5,700 million ($131.6 million). Further in 2009, McDonald's and Twentieth Century Fox announced their global partnership. As per the multi-faceted partnership, the company would offer Happy Meal toy collections; and restaurant promotions in thousands of restaurants worldwide. Towards the end of 2009, McDonald's was selected as an official sponsor of the 2010 FIFA World Cup and subsequently unveiled its online games exclusively featured on www.FIFA.com. In June 2010, the company issued a voluntary recall of Shrek Forever After glassware. The product had higher levels of cadmium as compared to the standard level set by Consumer Product Safety Commission (CPSC). The company launched new range of McSpicy products including the hot and snappy McSpicy Chicken Burger, McSpicy Paneer Burger, McSpicy Chicken Wrap and McSpicy Paneer Wrap in India in March 2011. In the same month, the company introduced the McCafe Shakes in three flavors: chocolate, vanilla and strawberry. During April 2011, the company announced its plans to open around 175-200 restaurants in China. In the same month, the company received approval from Office of The Trade Marks Registry on the trademark Mc (1694379).
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Key Employees
KEY EMPLOYEES
Name
James A. Skinner Donald Thompson Andrew J. McKenna Enrique Hernandez Robert A. Eckert Jeanne P. Jackson Richard H. Lenny Walter E. Massey Cary D. McMillan John W. Rogers Roger W. Stone Sheila A. Penrose Susan E. Arnold Miles D. White Jose Armario Timothy J. Fenton Stephen Easterbrook Richard Floersch Peter J. Bensen Janice L. Fields Jim Johannesen Mike Andres Karen King Jeffrey P. Stratton
Job Title
Board
Compensation
9732618 USD 4131360 USD 1009135 USD 250000 USD 250000 USD 230000 USD 230000 USD 240000 USD 230000 USD 230000 USD 230000 USD 225000 USD 230000 USD 230000 USD
Vice Chairman and Chief Executive Executive Board Officer President and Chief Operating Officer Chairman Director Director Director Director Director Director Director Director Director Director Director Group President, McDonald's Canada and Latin America Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Senior Management
President, Asia, Pacific, Middle East Senior Management and Africa President, McDonald's Europe Senior Management
2759091 USD
Executive Vice President and Chief Senior Management Human Resources Officer Executive Vice President and Chief Senior Management Financial Officer President, McDonald's USA, LLC Senior Management 3027442 USD 2153416 USD
Executive Vice President and Chief Senior Management Operations Officer, McDonald's USA Central Division President, McDonald's USA Senior Management
East Division President, McDonald's Senior Management USA Executive Vice President and Senior Management Worldwide Chief Restaurant Officer
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Key Employees
Name
Steve Plotkin Gloria Santona
Job Title
West Division President, McDonalds USA Executive Vice President, General Counsel and Secretary
Board
Senior Management Senior Management
Compensation
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Key Employee Biographies
KEY EMPLOYEE BIOGRAPHIES

James A. Skinner
Board: Executive Board Job Title: Vice Chairman and Chief Executive Officer Since: 2004 Age: 66 Mr. Skinner has been the Vice Chairman and Chief Executive Officer at McDonald's since 2004. Previously, since the beginning of 2003, he was accountable for McDonald's Japan Limited. Before becoming Vice Chairman, Mr. Skinner served as the President and Chief Operating Officer at McDonald's Restaurant Group. Prior to that, he served as the President and Chief Operating Officer at McDonald's. From 1997 to 2001, Mr. Skinner was President of McDonald's Europe. He served as the Executive Vice President and International Relationship Partner for Central Europe, Middle East, Africa, and India from 1995 to 1997. Mr. Skinner joined McDonald's International management team in 1992 as Senior Vice President and Relationship Partner, overseeing McDonald's development in Central Europe, Middle East, Africa, and India. He also held numerous positions in the McDonald's U.S. company, including Director of Field Operations, Market Manager, Regional Vice President and U.S. Senior Vice President and Zone Manager. In addition, Mr. Skinner has twice served as an Advisory Director to McDonald's Corporation's Board of Directors. Currently, Mr. Skinner serves on the boards of Ronald McDonald House Charities, the Walgreen Company, ITW (Illinois Tool Works), and Ctalyst.
Donald Thompson
Board: Executive Board Job Title: President and Chief Operating Officer Since: 2011 Age: 48 Mr. Thompson has been the President and Chief Operating Officer at McDonalds since 2011. He was elected as the President and Chief Operating Officer in 2010 and as a Director in 2011. Mr. Thompson has been with the Company for 20 years and has held various management positions during that time. He has served as the President, McDonald's USA from 2006 to 2010; and Executive Vice President and Chief Operations Officer, McDonald's USA from 2005 to 2006. Mr. Thompson also serves as a Director of Exelon Corporation
Andrew J. McKenna
Board: Non Executive Board Job Title: Chairman
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Since: 2004 Age: 81 Mr. McKenna has been the Chairman at McDonald's since 2004. He also serves as Chairman at Schwarz Supply Source. Besides, Mr. McKenna serves as a Director at Aon Corporation and Skyline Corporation. He has served over the years on many civic, community and philanthropic boards and currently serves as a Trustee at the Museum of Science and Industry and the University of Notre Dame. Mr. McKenna serves as a Director at The American Ireland Fund, the Big Shoulders Fund of the Archdiocese of Chicago, Children's Memorial Hospital of Chicago, The Ireland Economic Advisory Board, the Lyric Opera of Chicago and the United Way of Metropolitan Chicago among others. He is also the Founding Chairman of Chicago Metropolis 2020.
Enrique Hernandez
Board: Non Executive Board Job Title: Director Since: 1996 Age: 55 Mr. Hernandez has been a Director at McDonald's since 1996. He is the Chairman and Chief Executive Officer of Inter-Con Security Systems. Mr. Hernandez also serves as the Chairman at Nordstrom, and as a Director at Chevron and Wells Fargo.
Robert A. Eckert
Board: Non Executive Board Job Title: Director Since: 2003 Age: 56 Mr. Eckert has been a Director at McDonald's since 2003. He has been the Chairman and Chief Executive Officer at Mattel since 2000. From 1997 to 2000, Mr. Eckert served as the President and Chief Executive Officer at Kraft Foods.
Jeanne P. Jackson
Board: Non Executive Board Job Title: Director Since: 1999 Age: 59 Ms. Jackson has been a Director at McDonald's since 1999. She has been the President of Direct to Consumer for NIKE since 2009. Previously, Ms. Jackson served as Chief Executive Officer of Walmart.com, from 2000 to 2002.
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Richard H. Lenny
Board: Non Executive Board Job Title: Director Since: 2005 Age: 59 Mr. Lenny has been a Director at McDonald's since 2005. He has been the Operating Partner of Friedman, Fleischer & Lowe since 2011. Mr. Lenny served as the Chairman, President and Chief Executive Officer at The Hershey Company, from 2002 until his retirement in 2007. He is also a Director at ConAgra Foods and Discover Financial Services.
Walter E. Massey
Board: Non Executive Board Job Title: Director Since: 1998 Age: 73 Dr. Massey has been a Director at McDonald's since 1998. He serves as the President of the School of the Art Institute of Chicago since 2010. Dr. Massey is the President Emeritus of Morehouse College having served as its President from 1995 to 2007.
Cary D. McMillan
Board: Non Executive Board Job Title: Director Since: 2003 Age: 53 Mr. McMillan has been a Director at McDonald's since 2003. He has been the Chief Executive Officer at True Partners Consulting since 2005. From 2001 to 2004, Mr. McMillan was the Chief Executive Officer at Sara Lee Branded Apparel; and from 2000 to 2004, he served as the Executive Vice President at Sara Lee Corporation. Currently, he also serves as a Director at American Eagle Outfitters.
John W. Rogers
Board: Non Executive Board Job Title: Director Since: 2003 Age: 53
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Mr. Rogers has been a Director at McDonald's since 1989. He has been the Chairman and Chief Executive Officer Ariel Investments which he founded in 1983. Presently, Mr. Rogers serves as a Director of Aon Corporation and Exelon Corporation, and a Trustee of Ariel Investment Trust.
Roger W. Stone
Board: Non Executive Board Job Title: Director Since: 1989 Age: 76 Mr. Stone currently serves as a Director at McDonald's. He is the Chairman and Chief Executive Officer of KapStone Paper and Packaging Corporation, formerly Stone Arcade Acquisition Corporation, since 2005. He was the Manager of Stone Kaplan Investments from 2004 to 2007 and Chairman and Chief Executive Officer of Box USA Group from 2000 to 2004. Mr. Stone serves as the Non-executive Chairman of Stone Tan China Acquisition and Stone Tan China Acquisition.
Sheila A. Penrose
Board: Non Executive Board Job Title: Director Since: 2006 Age: 65 Ms. Penrose has been a Director at McDonald's since 2006. She has been the Non-executive Chairman at Jones Lang LaSalle since 2005. From 2000 to 2007, Ms. Penrose was the President at the Penrose Group.
Susan E. Arnold
Board: Non Executive Board Job Title: Director Since: 2008 Age: 57 Ms. Arnold has been a Director at McDonald's since 2008. She previously served as the President, Global Business Units at The Procter & Gamble Company from 2007 until 2009 when she retired from that post. Ms. Arnold currently serves as a Director at The Walt Disney Company.
Miles D. White
Board: Non Executive Board Job Title: Director
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Since: 2009 Age: 56 Mr. White has been a Director at McDonald's since 2009. He has been the Chairman and Chief Executive Officer at Abbott Laboratories since 1999. Mr. White also serves as a Director of Caterpillar.
Jose Armario
Board: Senior Management Job Title: Group President, McDonald's Canada and Latin America Since: 2008 Age: 51 Mr. Armario has been the Group President at McDonald's Canada and Latin America since 2008. He was previously the Senior Vice President and International Relationship Partner of Latin America. Mr. Armario has more than 20 years of broad international experience within the restaurant and retail industries. He joined McDonald's in 1996 and was involved in managing the company's restaurants in Chile.
Timothy J. Fenton
Board: Senior Management Job Title: President, Asia, Pacific, Middle East and Africa Since: 2005 Age: 53 Mr. Fenton has been the President, McDonald's APMEA operations since 2005. Most recently, he served as President, East Division, for McDonald's USA. Previously Mr. Fenton served as the Senior Vice President of Southeast Asia, Middle East and Africa. Prior to that, he was the Vice President and Managing Director at the Middle East Development Company. Mr. Fenton began his career with McDonald's in 1973. In 1990, he was appointed as Director for Asia Pacific and, from 1992 to 1995, he served as Managing Director for McDonald's Poland and Vice President of McDonald's Central Europe North.
Stephen Easterbrook
Board: Senior Management Job Title: President, McDonald's Europe Since: 2010 Age: 43 Mr. Easterbrook has been the President at McDonald's Europe since 2010. Earlier, he served as the Corporate Executive Vice President and Global Chief Brand Officer. From 2006 to 2010, Mr. Easterbrook served as Chief Executive Officer at McDonald's UK.
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Richard Floersch
Board: Senior Management Job Title: Executive Vice President and Chief Human Resources Officer Age: 53 Mr. Floersch serves as the Executive Vice President and Chief Human Resources Officer at McDonald's. He joined McDonald's from Kraft Foods International, where he served as the Senior Vice President of Human Resources since 1998. Prior to Kraft Foods, Mr. Floersch was Vice President of Corporate Compensation at Philip Morris. Before Philip Morris, he was the Vice President, Compensation at Kraft Foods North America.
Peter J. Bensen
Board: Senior Management Job Title: Executive Vice President and Chief Financial Officer Since: 2008 Age: 48 Mr. Benson has been the Executive Vice President and Chief Financial Officer of McDonald's since 2008. He joined McDonald's in 1996 as a Director of financial reporting and subsequently held positions of increasing responsibility. Mr. Benson served as Vice President and Assistant Controller from 2002 to 2007. In 2007, he was appointed Senior Vice President and Corporate Controller. Prior to joining McDonald's, Mr. Benson was a Senior Manager for Ernst & Young in Chicago. He also had assignments in the mergers & acquisitions practice and Midwest Region Accounting & Auditing group.
Janice L. Fields
Board: Senior Management Job Title: President, McDonald's USA, LLC Since: 2010 Age: 55 Ms. Fields has been the President, McDonald's USA, LLC since 2010. Previously, she was the Executive Vice President and Chief Operating Officer. Since beginning her career as a crew member in 1978, Ms. Fields has worked at all levels of the company, from the restaurants to management. She has served as President and Senior Vice President at McDonald's Central Division and as Senior Vice President in the former Southeast Division. Ms. Fields also served as Regional Vice President of the Pittsburgh region. She currently serves on the boards of Monsanto, the Chicago Urban League, and United Cerebral Palsy. Ms. Fields also chairs the advisory board of Catalyst.
Jim Johannesen
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Board: Senior Management Job Title: Executive Vice President and Chief Operations Officer, McDonald's USA Mr. Johannesen currently serves as Executive Vice President and Chief Operating Officer at McDonald's USA. Previously, he was President at McDonald's USA's Central Division. Prior to that role, Mr. Johannesen served as Senior Vice President and Chief Support Officer at McDonald's USA.
Mike Andres
Board: Senior Management Job Title: Central Division President, McDonald's USA Mr. Anders serves as the Central Division President at McDonalds USA. Prior to that, he served as the Vice President and General Manager of the Pacific Sierra Region for McDonalds USA.
Karen King
Board: Senior Management Job Title: East Division President, McDonald's USA Since: 2005 Ms. King has been the East Division President at McDonald's USA since 2005. Prior to that, she served as the Vice President of Strategic Planning and Business Development for McDonalds USA. Previously, Ms. King served as General Manager and Vice President of the Florida Region from 2002 to 2003 and as Regional Manager and Vice President of the Raleigh Region from 1998 to 2001.
Jeffrey P. Stratton
Board: Senior Management Job Title: Executive Vice President and Worldwide Chief Restaurant Officer Since: 2005 Age: 55 Mr. Stratton has been the Executive Vice President and Chief Restaurant Officer at McDonalds since 2005. He previously served as US Executive Vice President, Chief Restaurant Officer from 2004 to 2004. Prior to that time, Mr. Stratton served as Senior Vice President, Chief Restaurant Officer of McDonald's USA from 2002 to 2004. He has been with the Company for 37 years.
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Major Products and Services
MAJOR PRODUCTS AND SERVICES

McDonald's Corporation (McDonald's or the company) is one of the world's largest foodservice retailing chain. The company's key products include the following: Products: Hamburgers Cheeseburgers Chicken sandwiches Chicken nuggets French fries Salads Pies Cookies Egg sandwiches Biscuits Bagel sandwiches Muffins Soft drinks Coffee Flavored tea Milk shakes Desserts and sundaes Brands: Big Mac Big N' Tasty Filet-O-Fish Chicken McNuggets McFlurry McMuffin McGriddles Mac Snack Wrap McChicken McCafe
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Revenue Analysis
REVENUE ANALYSIS
The company recorded revenues of $24,074.6 million during the financial year ended December 2010 (FY2010), an increase of 5.8% over 2009. For FY2010, Europe, the company's largest geographic market, accounted for 39.7% of the total revenues. McDonald's generates revenues through one business division: food services (100% of the total revenues during FY2010). Revenues by Division In FY2010, the food services division recorded revenues of $24,074.6 million, an increase of 5.8% over 2009. Revenues by Geography* Europe, McDonald's largest geographical market, accounted for 39.7% of the total revenues in FY2010. Revenues from Europe reached $9,569.2 million in 2010, an increase of 3.2% over 2009. US accounted for 33.7% of the total revenues in FY2010. Revenues from the US reached $8,111.6 million in 2010, an increase of 2.1% over 2009. APMEA accounted for 21% of the total revenues in FY2010. Revenues from APMEA reached $5,065.5 million in 2010, an increase of 16.8% over 2009. Other countries and corporate accounted for 5.5% of the total revenues in FY2010. Revenues from other countries and corporate reached $1,328.3 million in 2010, an increase of 11.6% over 2009. *Other countries and corporate includes operations in Canada and Latin America, as well as corporate activities.
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SWOT Analysis
SWOT ANALYSIS
McDonald's Corporation (McDonald's or the company) is one of the world's largest foodservice retailing chain. The company is primarily known for its burgers and fries which it sells through more than 32,737 restaurants in 117 countries. McDonald's has a well-established brand that appeals to customers of all age groups and nationalities. Strong brand recognition enables the company to consolidate its market share both through new restaurant openings as well as product extensions. However, rising food prices would have an eventual impact on the companys sales and profitability. Strengths Strong brand value sustains the companys leadership position Diversified geographic presence provides opportunity to gain from economic buoyancy in emerging markets Large scale of operation compared to peers Opportunities Growth of franchisee operated restaurants Positive outlook for out-of-home eating market can boost top line in long run Growing hot drinks market - another favorable trend to drive topline Weaknesses Legal proceedings affect brand image adversely Product failures such as Arch Deluxe
Threats Rise in food prices Intense competition in retail food industry Growing consumer consciousness for healthy food products
Strengths
Strong brand value sustains the companys leadership position McDonald's is one of the well-established global brands. The companys 32,737 restaurants in 117 countries have reinforced the brand identity of McDonalds. Many of its products like Big Mac, McGriddle, McMuffin are iconic fast food brands with strong customer loyalty. McDonald's brand is now almost synonymous to affordable quality fast food products and enjoys remarkably high brand value worldwide. The companys brand equity can be gauged by the fact that on an average the company serves 64 million customers per day. Also, the company consistently ranks in the top ten lists of several brand surveys. For instance, Fortunes 2010 list of Worlds Most Admired Companies ranked McDonalds number one in the food service category and number ten in the overall categories. The robust brand equity has enabled the company to sustain its leadership in the fast food chain industry. The company has increased its global market share, both in developed and emerging
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SWOT Analysis
markets, primarily driven by the McDonalds brand equity. The revenues have also grown consistently and the companys global comparable sales increased by 5% in 2010, eighth consecutive year of same store sales growth. Besides, the strong brand recognition has also helped successful product extensions aimed at capturing new customer base. Some of the launches like McCafe branded coffee products and a full range of breakfast and salads menu have been instant hit with customers. Strong brand recognition hence enables the company to consolidate its market share both through new restaurant openings as well as product extensions. Diversified geographic presence provides opportunity to gain from economic buoyancy in emerging markets McDonald's has a diversified geographic presence. As of FY2010, the company operated in 117 countries in the following geographic segments: the US; Europe; Asia/ Pacific, Middle East, and Africa (APMEA); Latin America and Canada. Revenues from outside the US accounted for about 66.3% of the company's total revenues whereas the US accounted for around 33.7% of the company's total revenues. The aforementioned figures signify that McDonald's does not depend on particular economies to generate it revenues. Also, large scale geographic diversification partially insulates the company from the effect of downturn in particular market. Moreover, this factor also gives the company the opportunity to gain from economic buoyancy in emerging markets. This is visible from the fact that the company's revenues from Asia/Pacific, Middle East and Africa region increased 16.8% in FY2010 as compared to FY2009. Thus, diversified geographic presence reduces the McDonald's business risk and presence in emerging markets enables the company to stabilize its revenue growth. Large scale of operation compared to peers With total revenues of $24,074.6 million from 32,737 restaurants in 117 countries, McDonald's stands higher amongst its peers. Comparatively, Yum! Brands registered $9,783 million in revenues for the fiscal year ended December 2010 from 37,000 restaurant units. While, Burger King recorded $2,502.2 million in revenues for the fiscal year ended June 2010 from 12,174 restaurants. These figures indicate McDonalds high revenue generation capability from its restaurants. On an average, per McDonalds restaurant generated 0.73 million in revenues. Yum! Brands per restaurant revenues stood at 0.26 million and Burger Kings at 0.19 million. In terms of operating margins also, the company enjoys the favorable scale compared to its competitors. For instance, the operating margin of McDonalds for FY2010 stood at 31.04% compared to 18.08% for Yum! Brands and 13.3% for Burger King. Also, the company holds substantial cash to sustain investments in branding and new restaurant openings. For FY2010, cash from operations totaled $6.3 billion and exceeded capital expenditures by $4.2 billion in 2010.
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SWOT Analysis
The company's large scale of operation and economy of scale positions it strongly to further enhance market share based on price advantage. Also, the cash strength allows it to penetrate new markets and customer base as well as launch marketing and branding strategies to promote brand value. Hence, large scale of operations provides exceptional competitive advantages to McDonalds in the intensely competitive fast foods industry.
Weaknesses
Legal proceedings affect brand image adversely McDonald's is party to several litigations across the world. The complaints filed against McDonald's include claims for violation of state consumer fraud acts, unfair competition or deceptive trade practices acts, strict liability, failure to warn, negligence, breach of express and implied warranties, fraud and fraudulent concealment, negligent misrepresentation and concealment, unjust enrichment, and false advertising. Such claims tend to affect the company's brand image and ultimately its profitability. Product failures such as Arch Deluxe McDonald's has had a number of product failures in recent years, few of which include Arch Deluxe, McLean Deluxe, McSoup and McPizza. However, the failure of Arch Deluxe was a major setback for the company as the product was marketed as the burger for grown up consumer, and the idea was to have a burger which wasn't associated with children. McDonald's also advertised the product with images of kids shunning the so called sophisticated product. However, the company has built its reputation and value proposition on convenience rather than sophistication. Moreover, one of the key aspects of the company's brand identity is its children-friendly approach. Hence, the company launched a product which was in complete contrast to its brand identity. In another event, the company had to recall 12 million glassware in 2010 because of high cadmium contents. These glasses were sold as a promotional tie-in to the Shrek movie. The recall was another instance of the companys failure to successfully launch a new product line. Product failures like Arch Deluxe reflect poorly on the companys consumer research and branding strategies. The confusing brand positioning of new launches will subsequently have a negative bearing on the companys overall brand proposition. Also, failure of products due to quality issues has an adverse impact on the brand image of the company. Besides, the product failures also have cost implications in terms of recall expenses and loss of sales, which in turn negatively impacts its revenues and profitability.
Opportunities
Growth of franchisee operated restaurants
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SWOT Analysis
In future, McDonald's is planning to significantly increase its count of franchisee operated restaurants. Over the past few years, the company has made significant progress in enhancing the mix of franchised and company-operated restaurants. As a result of its developmental license strategy and franchising initiatives, the percentage of franchised and affiliated restaurants worldwide increased from 73.7% in FY2006 to 80.4% in FY2010. Under a developmental license, a local entrepreneur owns the business, including control of the real estate, and uses their capital and local knowledge to build the McDonald's Brand and optimize long-term sales and profitability. The company collects a royalty, which varies by market, based on a percentage of sales, but does not invest any capital for new restaurants or reinvestments. The company has successfully used this structure for more than 15 years. The transition of company-operated restaurants to franchisees and developmental license structure is likely to increase the overall profitability of McDonald's. Positive outlook for out-of-home eating market can boost top line in long run After subdued consumer demand during recession, out-of-home eating trend has rebounded. In the US, industry reports suggests that the restaurant industry sales are expected to reach $604 billion and post positive growth of 3.6% year-on-year in 2011; after a three-year period of negative real sales growth. Further, sales at quick-service restaurants are projected to reach $167.7 billion in 2010, reflecting an increase of 3.3% over 2010. Similarly, India and China as well as other emerging markets are also showcasing similar trends. McDonald's operates over 32,000 restaurants worldwide and has invested significantly in marketing campaigns and elevated customer experience by renovating restaurants, offering extended hours and providing services such as free wireless Internet access in its restaurants. Moreover, McDonald's also focuses on product innovation. It recently launched three new premium products such as Angus Third Pounder hamburger and the McCafe specialty coffee menu. Such investments and product innovation leads to increased restaurant traffic and McDonald's can leverage the growing opportunity in the out-of-home market to boost its top line in long run. Growing hot drinks market - another favorable trend to drive topline According to Datamonitor estimates, the global hot drinks market generated total revenues of $68 billion in 2009, representing a compound annual growth rate (CAGR) of 3.7% for the period spanning 2005-2009. The performance of the market is forecast to follow a similar pattern, with an anticipated compounded annual growth rate (CAGR) of 3.7% for the five-year period 2009-2014, which is expected to lead the market to a value of $81.4 billion by the end of 2014. Among the hot drinks, coffee sales are the most lucrative for the global hot drinks market. In 2009, coffee sales generated total revenues of $36.9 billion, equivalent to 54.2% of the market's overall value. As part of its multi-year strategy to take advantage of the significant and growing hot drinks category, McDonald's began rolling-out espresso-based hot and cold specialty coffees.The company expanded its McCafe locations, an upscale area with coffeehouse style ambiance inside an existing McDonald's
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SWOT Analysis
restaurant, to nearly 1,300 outlets. The expected growth in hot drinks category will offer the company opportunities for expanding its revenue base.
Threats
Rise in food prices Inflation has been one of the major concerns for the food service companies during major parts of 2010 and early 2011. Inflationary trends are far bigger concern in Asia where company caters to the price-sensitive customers. According to IMF report on Asia Pacific, headline inflation in Asia has accelerated since October 2010, mainly owing to higher commodity prices. For the region as a whole, headline consumer price index (CPI) inflation accelerated to 4.5% in February 2011, from about 4.25% in October 2010. India, Indonesia, and Vietnam have experienced relatively higher inflation figures. Besides, according to the US Department of Agriculture, the prices will continue to accelerate in the US during the first half of 2011, leading to a 2%-3% rise in food price inflation for the year. Industry reports estimates that McDonald's will have to raise prices by 2% to 3% to offset the higher food costs. Although majority of McDonald revenues and profits are contributed by rents and royalties, however the impact of inflation on the franchise earnings will subsequently affect the companys overall earnings. Since McDonalds brand has gained popularity in emerging markets for its low-priced foods, local franchises cannot pass through the rise in operating costs to these price-sensitive customers. Consequently, rising food prices would have an eventual impact on the companys sales and profitability. Intense competition in retail food industry McDonald's operate in a highly competitive retail food industry. The retail food industry is highly competitive with respect to price and quality of food products, new product development, price, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties. A decline in franchise sales could alter McDonald's intrinsic value. Also, the volatile cost of food, energy, and labor could affect profitability. Moreover, credit lending firms have become more cautious after the recession of FY2008-09 and a tighter credit market could impede franchisees' ability to add new restaurants, perform renovations, or purchase equipment. Such factors could affect McDonald's business and expansion plans adversely. Growing consumer consciousness for healthy food products The fast spreading consciousness for healthy, sugar and salt free meals might influence McDonald's growth plans and profitability. More people are switching to healthier options such as salads, fat-free sandwiches, and home cooked food. In this aspect, McDonald's faces stiff competition from companies
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SWOT Analysis
such as Subway who promote and market themselves as fresh and healthy food products company. Subway is also one of the fastest growing franchises in the world with approximately 34,497 restaurants in 98 countries as of April 2011. It overtook McDonald's in terms of number of restaurants in 2010. The growing number of Subway outlets signifies the growing preference for food chains promoting health and wellness. Since McDonalds products are often criticized for their high calorie value and negative impact on health, the health and wellness trend would have material adverse impact on the companys sales.
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Top Competitors
TOP COMPETITORS
The following companies are the major competitors of McDonald's Corporation
Starbucks Corporation Yum! Brands, Inc Burger King Corporation Wendys/Arbys Group, Inc.
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Company View
COMPANY VIEW
A statement by James A. Skinner, the Vice Chairman and Chief Executive Officer of McDonald's is given below. The statement has been taken from the company's 2010 annual report. We began the year determined to build on our momentum and strengthen our brand around the world. So with the business environment still challenging - and with many others forced to hold their ground - we pushed ahead. We dug for deeper consumer insights, aligned our strategies, and strengthened the pillars of our business, from our menu and restaurants to our value and convenience. The result was another banner year for McDonalds. Global comparable sales increased 5% in 2010 - our eighth consecutive year of same store sales growth. Operating income grew 9% and we continued to gain market share around the world. In addition, we returned $5.1 billion to shareholders through share repurchases and dividends paid, and we provided a 27% return to investors for the year, ranking us third among the companies comprising the Dow Jones Industrial Average. Our success remains global, with all areas of the world contributing significantly to our results. In the U.S., comparable sales increased 3.8%, while guest count growth reached all-time highs. A record number of customers visited our restaurants and drive-thrus across the U.S., even as overall dining-out traffic remained flat. Europe grew comparable sales by 4.4% and also increased guest counts - serving 200 million more customers than the year before. Asia/Pacific, Middle East and Africa continued to make a strong impact to our overall results with higher guest counts and 6% comparable sales growth. We achieved all of this through our Plan to Win, which has served as our strategic blueprint for the past eight years. The plan focuses on the core drivers of our business-People, Products, Place, Price, and Promotion, or the five Ps. I often say the opportunity within each P is enormous - and we intend to go after it. To that end, we continue to focus on the right priorities to keep our brand relevant and meet the evolving needs of our customers. This approach has served us remarkably well and will continue to do so in 2011 and beyond. Our results could not have been achieved without the performance of our highly talented management team. They are focused, aligned, and committed to raising the bar in everything we do. President and Chief Operating Officer Don Thompson and our senior leadership operate with tremendous insight and a keen sense for how to drive continued growth. In addition, our exceptional Board of Directors provides strong corporate governance and knowledgeable perspectives as we continue to deliver shareholder value. Meanwhile, the entire McDonalds System is thriving. Our world-class franchisees continue to invest in their restaurants and their people in order to elevate the entire customer experience, resulting in significant increases in cash flow. Our suppliers perform what I like to call the McDonalds Daily Miracle - providing 32,000 restaurants an assured supply of safe, high-quality products at competitive
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Company View
prices, with ever improving efficiency. Lastly, our highly experienced company employees worked smarter to propel our business forward. With the powerful alignment of our System and the Plan to Win as the foundation, we will continue our winning formula: building on the basics as we further modernize and differentiate the brand. As always, running better restaurants is our number one priority. We will improve operations excellence around the world through new technology, better training, and service enhancements that will make it easier for our managers and crew to quickly and accurately serve the customer. At the same time, our brand is more contemporary and convenient and provides great value with menus that feature all of our iconic favorites - from our Big Mac sandwiches to French fries-along with local offerings and new products that todays consumers want. Whether its McWraps in Europe, Angus Burgers in Australia, or McCaf specialty coffees and smoothies in the U.S., we are strategically enhancing our menu to appeal to more customers more often. We are moving ahead with the reimaging of our restaurant interiors and exteriors to create an even more modern and inviting dining atmosphere. Around the world, we are re-invigorating our restaurants with local and relevant new designs that keep the spirit of our brand alive and delight our guests with a fresh look and contemporary appeal. Of course, we must continue to lead in ways that positively impact the trust in our brand. It starts with delivering a great restaurant experience every time and extends to a host of areas to which we are strongly committed - from charitable giving and supporting the communities we serve, to environmental stewardship and animal welfare. In addition, we provide our customers with a variety of menu options that address balance and choice. We will keep listening to our customers, engaging our stakeholders, and embracing the responsibility that comes with being a socially responsible brand. As McDonalds Chief Executive Officer, I am immensely proud of our performance and confident in our ability to continue our growth. The secret to our success is staying focused on the execution in our restaurants on behalf of our customers. As always, thank you for your investment in McDonalds. I appreciate your support and look forward to sharing further success with you.
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Locations and Subsidiaries
LOCATIONS AND SUBSIDIARIES

Head Office
McDonald's Corporation One McDonalds Plaza Oak Brook Illinois 60523 USA P:1 630 623 3000 F:1 630 623 5700 http://www.mcdonalds.com
Other Locations and Subsidiaries

McDonald's India Hardcastle Restaurants 69 C Ashiana Bhulabhai Desai Road Mumbai 400 026 IND McDonald's Restaurants (Hong Kong) Limited 36/F, Dorset House Taikoo Place 979 King's Road Quarry Bay HKG McDonald's France 1 Rue Gustave Eiffel 78045 Guayancourt Cedex FRA
McDonald's UK 11-59 High Road East Finchley London N2 8AW GBR McDonald's Japan 163-1339 Shinjuku Island Tower 6-5-1 Nishi-Shinjuku Tokyo JPN McDonalds Egypt 10 El Kamel Mohamed Street 11211 Zamalek Cairo EGY
McDonald's Restaurants of Canada Limited McDonald's Place Toronto Ontario M3C 3L4 CAN McDonald's New Zealand 302 Great South Road Greenlane Auckland 1051 NZL
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McDonald's Corporation

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KEY EMPLOYEE BIOGRAPHIES

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MAJOR PRODUCTS AND SERVICES

McDonald's Corporation Datamonitor

McDonald's Corporation Datamonitor

McDonald's Corporation Datamonitor

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Growth of franchisee operated restaurants

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McDonald's Corporation Datamonitor

McDonald's Corporation Datamonitor

McDonald's Corporation Datamonitor

The following companies are the major competitors of McDonald's Corporation

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McDonald's Corporation Datamonitor

McDonald's Corporation Datamonitor

LOCATIONS AND SUBSIDIARIES

Other Locations and Subsidiaries

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