McDonald's Corporation

McDonald's Corporation is the world's largest chain of fast-food restaurants. Although McDonald's did not invent the hamburger or fast food, their name has become nearly synonymous with both.

It has become known as simply McDonald's, or by the colloquialisms the Golden Arches, Mickey D's (American slang), Macca's (Australian slang), Mackey-D's (British Slang).

Table of contents

1 Corporate overview 2 History 3 Challenges 3.1 Criticism 4 See also 5 References 6 External Links

Corporate overview

McDonald's Corporation operates more than 30,000 quick-service restaurant businesses under the McDonald's brand, in 121 countries around the world. In addition, the Company operates other restaurant brands, such as Aroma Café, Boston Market, Chipotle Mexican Grill, Donatos Pizza and Pret A Manger. Revenues for 2001 were US$14.87 billion, with net income at $1.64 billion.

The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees, supplies and percentage of sales, McDonald's also collects rent. As a condition of the franchise agreement, McDonald's owns the property on which most McDonald's franchises are located. The corporation extracts income from the franchises in the form of rents, which are only partially linked to sales. As Harry J. Sonneborne, one of McDonald's founders put it, "We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent."

McDonald's restaurants are mainly one of three varieties:

• Most locations allow guests to order inside, with the option of eating inside the restaurant ("for here"), or doing take out ("to go"). Most locations have Drive-Thru windows; customers drive around the building to different stations, ordering, paying for and picking up their food from their car. Some of these normal locations have terraces at which customers can eat at. These locations are in urban and suburban areas, small towns along highways, at pit-stops along major highways.
• "McDrive" locations, near highways. These locations are simply drive-thrus, to which there is no restaurant area connected. Customers may eat while driving, or in the parking lot.
• Select locations in the heart of cities are essentially set up as drive-thrus, except for pedestrian traffic. These locations offer no seating area.

Specially themed restaurants also exists, such as Rock and Roll McDonald's, 50's themed restaurants. Many newer McDonald's in suburban areas feature large indoor or outdoor playgrounds, called McDonald's Playland.

The yellow "Golden Arches" form the logo of McDonald's, often put on high poles to mark a restaurant. A red and yellow are in the color schemes used most often by the company in advertising.

McDonald's official training facility is Hamburger University in Oak Brook, Illinois.

History

The first McDonald's restaurant was founded in 1940 by brothers Dick and Mac McDonald in San Bernardino, California. The McDonald's restaurant gained fame after 1948, when the brothers implemented their innovative "Speedee Service System", an assembly-line hamburger construction and self-serve operation.

In 1954, entrepreneur and milkshake-mixer salesman Ray Kroc became interested in the McDonald's restaurant when he learned of its extraordinary capacity. Upon seeing the restaurant in operation, he approached the McDonald brothers with a proposition to open new McDonald's restaurants, with himself as the first franchisee. Kroc worked hard to sell McDonald's. He even attempted to prevail on his wartime acquaintance with Walt Disney, in the failed hope of opening a McDonald's at the soon-to-be-opened Disneyland. Eventually he opened his first restaurant in Des Plaines, Illinois. It was an immediate success.

Kroc's new company was originally named "McDonald's Systems Inc.", and was founded March 2, 1955. In 1960, the company was renamed "McDonald's Corporation".

One of Kroc's marketing insights was his decision to market McDonald's hamburgers to families, and particularly to children. In the early 1960s, a Washington, DC McDonald's franchisee named Oscar Goldstein sponsored a children's show called Bozo's Circus, starring a clown played by Willard Scott. When the show was cancelled, Goldstein hired Scott as McDonald's new mascot, "Ronald McDonald". The character was eventually spread to the rest of the country via an advertising campaign, although it was decided that Scott was too plump for the role. An entire cast of McDonaldland characters was developed.

Under Kroc's agreement with the McDonald brothers, he was responsible for the entire expansion process, while the brothers retained control of the production process and a share of the profits. By 1961, Kroc was frustrated with the arrangement. After some negotiation, the comfortably wealthy McDonald's brothers agreed to sell Kroc the business rights to their operation for $2.7 million, which was borrowed from a number of investors (including Princeton University). The agreement allowed the brothers to keep their original restaurant—renamed "The Big M"—which remained open until Kroc drove it out of business by opening a McDonald's just one block north. Had the brothers maintained their original agreement, which granted them 0.5% of the chain's annual revenues, they would have been collecting nearly $180 million per year today. [1]

Since that time, McDonald's has opened restaurants in countries throughout the world. On January 31, 1990 the first McDonald's Restaurant opened in Moscow, Russia. In contrast to the stereotype of McDonalds in the United States in which McDonalds is seen as the purveyor of cheap, inferior, and unhealthy food, in some parts of the world such as Russia and China, McDonald's food is seen as a status symbol and the restaurants are admired for their atmosphere and cleanliness.

The price of the Big Mac hamburger sold by McDonald's has been used by The Economist as an informal measure of purchasing power parity between two currencies, called "Big Mac Index."

The standardization of McDonalds has been emblematic of globalization. Tom Friedman proposed a McDonald's rule which was that no countries with McDonald's would go to war with each other. This "rule" was broken by the American bombing of Serbia.

Challenges

As the largest and most visible Quick Service Restaurant chain, McDonald's is the target for criticism, both fair and unfair. Even though the majority interest in its foreign franchise locations are locally owned, the company is seen as a symbol of American domination of economic resources. Urban legends about the Company and its food abound and it is often the target of unusual lawsuits.

Around 1995, McDonald's starting receiving complaints from franchisers that they were granting too many franchises and stealing business from current stores. In effect, McDonald's was granting so many franchises that they began competing against themselves. For the first time, McDonald's proceeded to conduct market impact studies before granting any further franchises.

Posting its first quarterly loss for the last quarter of 2002, McDonald's faces stiff competition from other fast food restaurants offering higher quality burgers and more variety. According to a 2002 survey in Restaurants and Institutions Magazine, McDonald's ranked 15th in food quality of hamburger chains, behind Burger King and White Castle. According to Technomic, a market research firm, McDonald's share of the market has fallen 3% in the last 5 years and is now at 15.2%. Subway Sandwich now has the largest share of the United States fast food market. [1]

Criticism

As the world's largest fast-food company, McDonald's has been the target of criticism for such alleged problems as exploitation of entry-level workers, ecological damage caused by agricultural production and industrial processing of its products, selling unhealthy (non-nutritious) food, production of packaging waste, exploitative advertising (especially targeted at children), and contributing to suffering and exploitation of livestock.

McDonald's also lost a famous lawsuit in which an elderly woman, Stella Liebeck of Albuquerque, New Mexico, was awarded 2.9 million dollars (later reduced to $640,000) after receiving third degree burns from coffee that was spilled on her after going through a McDonalds drive-thru. The large punitive award was given after the plantiff's lawyers were able to show that McDonald's operating procedure kept coffee far hotter than competitors at scalding temperatures that would very quickly result in third degree burns. It was also demonstrated that the McDonald's had ignored similar cases in which customers had been very severely burned by its coffee. See McDonald's coffee case.

McDonald's holds the record for being a party to the longest civil trial in British history. In that action, often referred to as the "McLibel" case, the company sued unemployed environmentalists Helen Steel and David Morris for distributing allegedly libelous pamphlets on London streets. Although McDonald's has since won partial victories in British courts, the case has become a source of massive embarrassment to the company. Despite the fact that McDonald's has refused to collect the ₤40,000 awarded to it by the courts, the case remains on appeal to the European Court of Human Rights.

McDonald's has also been criticised for its litigious and heavy-handed approach to preserving its image and copyrights - in one case suing a Scottish cafe owner called McDonald for infringement of the name McDonald's, even though the business in question was a family business dating back well over a century.

The company has also been a target of radical environmentalists such as José Bové. McDonald's Restaurants tend to be favourite targets of anti-globalization protesters, during economic summits. In addition, certain outlets in the Middle East have been subject to an increasing number of arson attacks and other acts of violence because the business represents, to the attackers, American business and culture at its worst.

Due to its almost gargantuan position in the world, there are natually many unfounded urban legends that attack it. McDonald's urban legends

See also

• Mayor McCheese
• Fast Food Nation
• George Ritzer's McDonaldization thesis
• McJob
• McDonald's marketing
• McDonald's TV campaigns and slogans

References

• Schlosser, Eric. "Fast Food Nation". Houghton Mifflin: New York. 2001. ISBN 0395977894

External Links

• McDonald's official web site
• McSpotlight provides critical in-depth documentation including full court transcripts of the McLibel case