Golden arches transition

By | Business
Outside of a McDonalds restaurant.Credit@Mike.Mozart.flickr.com

According to a recent press release from McDonalds, the fast-food chain has reported higher sales, revenues and operating income across all business segments in the first quarter of 2016. This includes a sales increase of 6.2 per cent, an operating income increase of 28 per cent and a return of $4.5 billion to shareholders through share repurchases and dividends. Recently, McDonald’s has been making significant changes to their business such as adding new food items to the menu or altering food items. For example, McDonald’s have brought out a range of snack items to appeal to their millennial customer base. They have revamped their quarter pounder by increasing their size and toasting the bun longer. Perhaps the most highly requested change for McDonald’s is the introduction of the all-day breakfast in the United States which offers food items such as the McMuffin, breakfast sandwiches, pancakes and sides. This may have contributed to the increased profits in the first quarter of this year.

McDonald’s began as a small burger restaurant in the 1950s ran by brothers Dick and Mac McDonald in San Bernardino, California. In 1954 Ray Kroc visited the restaurant and was impressed by their efficiency of their operation he pitched his vision of creating McDonald’s restaurants across the United States. A few years later, McDonald’s had sold around 100 million hamburgers. At present, the fast-food chain serves 69 million customers a day around the world and there are around 36,258 restaurants covering 119 countries. Furthermore, they have 420,000 employees and more than 80,000 people have graduated from McDonald’s “Hamburger University” training centre on the outskirts of Chicago3 According to the official McDonald’s website, their business model is a combination of franchisees, suppliers and employees working together towards a common goal of making McDonald’s the world’s leading quick-service restaurant brand.

Franchising may be important for the brand, as the vast majority of McDonald’s restaurants are owned and operated by approximately 5,000 independent, small and medium sized businessmen and women. McDonald’s may be able to operate in parts of the world which are far from the Westernised states of America by paying attention to what customers in places such as China or the Middle East like to eat. Therefore, the menu changes and differing products are offered in each country. For example, in parts of the Middle East the company already offers a McDelivery service, and the menu features food items such as the McArabia, two chicken or beef patties in pita bread with lettuce, tomato, onion and tahini sauce to imitate traditional street food consumed in this part of the world.

McDonalds may face increased competition from the rise in burger restaurants popping up on the high streets around the United Kingdom, such as Five Guys, Handmade Burger Co among other new restaurant chains. However their largest rival may be Burger King, a fast-food chain which offers a similar product to McDonalds. These recent changes may reflect the company’s need to remain globally competitive and evolve as their customer base continues to transform. It may be important for McDonald’s to adapt their business model further in order to meet their business goals. This includes rolling out delivery services in the United Kingdom and utilising technology to make food orders and transactions quicker and more efficient. They have already began doing this, by introducing self-service machines in many restaurants in Europe. As well as this, McDonald’s have added the option on self-service machines for customers to customise their burgers in terms of toppings and sauces offered. This may be in attempt for the customer to personalise their meal and provide more choice. These actions may help McDonald’s move forward in competing against major players such as Burger King and Subway in the future.

Which other fast food chains or restaurants have made radical changes to remain competitive?

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