PROJECT REPORT

MCDONALDS

Name of the Institute

: Institute of business and management uet lhr

Group members

: Khurram Hayat
Adnan Madni
Fiza Murtaza
Fatima Zahra
Maryam Rafique

Class

: MBA 3.5

Submitted To

: Sir Imtiaz ul haq

ACKNOWLEDGEMENT
I have taken efforts in this project. However, it would not have been possible
without the kind support and help of many individuals and organizations. I
would like to extend my sincere thanks to all of them.
I thank my God for providing me with everything that I required in completing
this project.
I would like to express my gratitude towards my parents for their kind cooperation and encouragement which helped me in the completion of this project.
I would like to express my special gratitude and thanks to industry persons for
giving me such attention and time.
My thanks and appreciations also go to my classmates in developing the project
and to the people who have willingly helped me out with their abilities.

FAST FOOD RESTAURANT

An INTRODUCTION
A fast food restaurant, also known as a quick service restaurant (QSR) within
the industry itself, is a specific type of restaurant characterized both by
its fast food cuisine and by minimal table service.
Food served in fast food restaurants typically caters to a " meat-sweet diet"
and is offered from a limited menu; is cooked in bulk in advance and kept
hot; is finished and packaged to order; and is usually available ready to take
away, though seating may be provided.
Fast food restaurants are usually part of a restaurant chain or franchise
operation, which provisions standardized ingredients and/or partially
prepared foods and supplies to each restaurant through controlled supply
channels.
Arguably the first fast food restaurants originated in the United
States with A&W in 1916 and White Castle in 1921. Today, Americanfounded fast food chains such as McDonald's and KFC are multinational
corporations with outlets across the globe.
Variations on the fast food restaurant concept include fast casual
restaurants and catering trucks . Fast casual restaurants have higher sit-in
ratios, and customers can sit and have their orders brought to them. Catering
trucks often park just outside worksites and are popular with factory workers.
Some trace the modern history of fast food in America to July 7, 1912, with
the opening of a fast food restaurant called the Automat in New York. The
Automat was a cafeteria with its prepared foods behind small glass windows
and coin-operated slots. Joseph Horn and Frank Hardart had already opened
the first Horn & Hardart Automat in Philadelphia in 1902, but their
Automat at Broadway and 13th Street, in New York City, created a
sensation. Numerous Automat restaurants were built around the country to
deal with the demand. Automats remained extremely popular throughout the
1920s and 1930s. The company also popularized the notion of take-out
food, with their slogan Less work for Mother.
Modern commercial fast food is highly processed and prepared on a large
scale from bulk ingredients using standardized cooking and production

methods and equipment. It is usually rapidly served in cartons or bags or in a

plastic wrapping, in a fashion which reduces operating costs by allowing
rapid product identification and counting, promoting longer holding time,
avoiding transfer of bacteria, and facilitating order fulfilment. In most fast
food operations, menu items are generally made from processed ingredients
prepared at a central supply facilities and then shipped to individual outlets
where they are cooked (usually by grill, microwave, or deep-frying) or
assembled in a short amount of time either in anticipation of upcoming orders
(i.e., "to stock") or in response to actual orders (i.e., "to order"). Following
standard operating procedures, pre-cooked products are monitored for
freshness and disposed of if holding times become excessive. This process
ensures a consistent level of product quality, and is key to delivering the
order quickly to the customer and avoiding labour and equipment costs in the
individual stores.
To make quick service possible and to ensure accuracy and security, many
fast food restaurants have incorporated hospitality point of sale systems . This
makes it possible for kitchen crew people to view orders placed at the front
counter or drive through in real time. Wireless systems allow orders placed at
drive through speakers to be taken by cashiers and cooks. Drive through and
walk through configurations will allow orders to be taken at one register and
paid at another. Modern point of sale systems can operate on computer
networks using a variety of software programs. Sales records can be
generated and remote access to computer reports can be given to corporate
offices, managers, trouble-shooters, and other authorized personnel.

The aim of this project is to conduct a market study on a thriving fast

food restaurant, going deep into its formation, history and growth; then
to analyse the reason that make it so popular.
In this project we will be conducting a market study on the global fast food
giant McDonalds.

MCDONALDS
AN INTRODUCTION
McDonald's Corporation (NYSE: MCD) is the world's largest chain
of hamburger fast food restaurants , serving around 68 million customers daily
in 119 countries.
Headquartered in the United States, the company began in 1940 as a barbecue
restaurant operated by Richard and Maurice McDonald ; in 1948 they
reorganized their business as a hamburger stand using production
line principles. Businessman Ray Kroc joined the company as a franchise
agent in 1955.
Ray Kroc subsequently purchased the chain from the McDonald brothers and
oversaw its worldwide growth.
A McDonald's restaurant is operated either by a franchisee, or an affiliate, or
the corporation itself. The corporation's revenues come from the rent,
royalties and fees paid by the franchisees, as well as sales in companyoperated restaurants.
McDonald's revenues grew 27 percent over the three years ending in 2007 to
$22.8 billion, and 9 percent growth in operating income to $3.9 billion.
McDonald's primarily sells hamburgers , cheese burgers , chicken, French
fries, breakfast items, soft drinks, milkshakes and desserts . In response to
changing consumer tastes, the company has expanded its menu to
include salads, wraps, smoothies and fruits.
In July 2011, McDonald's announced that their largest restaurant in the world
will be built on the 2012 London Olympics site. The restaurant will contain
over 1,500 seats and is half the length of an American Football field. Over
470 staff will be employed serving on average (during the 2012 Olympics)
100,000 portions of fries, 50,000 Big Macs and 30,000 Milkshakes. This

restaurant will overshadow the current largest McDonald's in the world in

Moscow, Russia. In January 2012, the company announced revenue for 2011
reached an all-time high of $27 billion, and that 2400 restaurants would be
updated and 1300 new ones opened worldwide.

HISTORY OF MCDONALDS
The McDonald's restaurant concept was introduced in San Bernardino,
California by Dick and Mac McDonald of Manchester, New Hampshire . It was
modified and expanded by their business partner, Ray Kroc, of Oak Park,
Illinois, who later bought out the business interests of the McDonald brothers
in the concept and went on to found McDonald's Corporation .

Early history
In 1937, Patrick McDonald opened "The Airdrome", an octagonal food stand,
on Huntington Drive in Monrovia, California . In 1940, his two sons, Maurice
and Richard ("Mac" and " Dick"), moved the entire building to 1398 North E
Streets in San Bernardino, California . The restaurant was renamed
"McDonald's Famous Barbeque" and served over forty barbequed items.
In 1953, the McDonald brothers began to franchise their successful
restaurant, starting in Phoenix, Arizona and Downey and California . The
McDonald brothers created Speedee to symbolize the quick and efficient
service system that they had devised. Downey's Speedee is one of only a few
remaining and Downeys restaurant is the oldest operating McDonald's in the
world.
Recognizing the historic and nostalgic value of the intact 1953 structure, the
McDonald's Corporation acquired the store in 1990 and rehabilitated it to a
modern but nearly original condition.
In 1954, Ray Kroc, suggested that they franchise their restaurants throughout
the country. He got the rights to set up McDonald's restaurants throughout the
country, except in a handful of territories in California and Arizona already
licensed by the McDonald brothers.
Kroc's first McDonald's restaurant opened in Des Plaines, Illinois ,
near Chicago, on April 15, 1955, the same day that Kroc incorporated his
company as McDonald's Systems, Inc. (which he would later rename
McDonald's Corporation).

B y 1958, there were 34 restaurants. In 1959, however, Kroc opened 68 new

restaurants, bringing the total to 102 locations.

Phenomenal growth in the 1960s and 1970s

In 1960, the McDonald's advertising campaign "Look for the Golden Arches"
gave sales a big boost In 1962, McDonald's introduced its now world-famous
Golden Arches logo. A year later, the company sold its billionth hamburger
and introduced Ronald McDonald , a red-haired clown with particular appeal
to children.
In the early 1960s, McDonald's really began to take off. In 1961 Kroc bought
out the McDonald brothers for $2.7 million, aiming at making McDonald's the
number one fast-food chain in the country.
In 1965, McDonald's Corporation went public. In 1985, McDonald's
Corporation became one of the 30 companies that make up the Dow Jones
Industrial Average.
McDonald's success in the 1960s was in large part due to the company's
skilful marketing and flexible response to customer demand. In 1968 the now
legendary Big Mac made its debut, and in 1969 McDonald's sold its five
billionth hamburger. Two years later, McDonald's restaurants had reached all
50 states.
In 1968, McDonald's opened its 1,000th restaurant; Kroc became chairman
and remained CEO until 1973.
B y the late 1960s, many of the candy-striped Golden Arches stores had been
modified with enclosed walk-up order areas and limited indoor seating. By
June 1969, "mansard roof" building design featuring indoor seating became
the standard for McDonald's restaurants.
The company pioneered breakfast fast food with the introduction of the Egg
McMuffin in 1972 and five years later McDonald's added a full breakfast line
to the menu.
In 1975, McDonald's opened its first drive-thru window in Sierra Vista,
Arizona. This service gave Americans a fast, convenient way to procure a
quick meal. Drive-thru sales eventually accounted for more than half of
McDonald's systemwide sales.

Surviving the 1980s "Burger Wars"

In the late 1970s, competition from other hamburger chains such as Burger
King and Wendy's began to intensify. A period of aggressive advertising
campaigns and price slashing in the early 1980s became known as the "burger
wars." Burger King suggested to customers: "have it your way"; Wendy's
offered itself as the "fresh alternative". But McDonald's sales and market
share continued to grow.
During the 1980s, McDonald's further diversified its menu to suit changing
consumer tastes. The company introduced the McChicken in 1980. It proved
to be a sales disappointment and was replaced with series of different chicken
sandwiches a year later. Chicken McNuggets were invented in 1979. By the
end of 1983, McDonald's was the second largest retailer of chicken in the
world. In 1985, ready-to-eat salads were introduced to lure more healthconscious consumers. The 1980s were the fastest-paced decade yet.
Efficiency, combined with an expanded menu, continued to draw customers.
McDonald's, already entrenched in the suburbs, began to focus on urban
centres and introduced new architectural styles.
Despite experts' claims that the fast-food industry was saturated, McDonald's
continued to expand. The first generation raised on restaurant food had grown
up. Eating out had become a habit rather than a break in the routine, and
McDonald's relentless marketing continued to improve sales.
McDonald's growth in the United States was mirrored by its stunning growth
abroad. By 1991, 37 percent of system wide sales came from restaurants
outside the United States. McDonald's opened its first foreign restaurant
in British Columbia, Canada, in 1967. By the early 1990s the company had
established itself in 58 foreign countries and operated more than 3,600
restaurants outside the United States, through wholly owned subsidiaries,
joint ventures, and franchise agreements. Its strongest foreign markets
were Japan, Canada, Germany, Great Britain , Australia, and France.
Braille menus were introduced in 1979, and picture menus in 1988.
Experiments were conducted to find new technology and to research new
markets to keep McDonald's in front of its competition. New locations such
as hospitals and military bases were tapped as sites for new restaurants.

1990s: Growing pains

The 10,000th unit was opened in April 1988.It took McDonald's 33 years to
open its first 10,000 restaurants. Incredibly, the company reached the 20,000-

restaurant mark in only eight more years, in mid-1996. By the end of 1997 the
total had surpassed 23,000, and by that time McDonald's was opening 2,000
new restaurants each year, an average of one every five hours.
In 1993, a new region was added to the empire when the first McDonald's in
the Middle opened in Tel Aviv, Israel.
As the company entered new markets, it showed increasing flexibility with
respect to local food preferences and customs. In Israel, for example, the
first kosher McDonald's opened in a Jerusalem suburb in 1995. In Arab
countries, the restaurant chain used " Halal" menus.
McDonald's entered India for the first time in 1996, where it offered a Big
Mac made with lamb called the Maharaja Mac.
Overall, the company derived increasing percentages of its revenue and
income from outside the United States. In 1992 about two-thirds of
systemwide sales came from U.S. McDonald's, but by 1997 that figure was
down to about 51 percent. Similarly, the operating income numbers showed a
reduction from about 60 percent derived from the United States in 1992 to
42.5 percent in 1997.
The company made several notable blunders in the United States in the 1990s.
A seemingly weakened McDonald's was the object of a Burger King offensive
when the rival fast-food maker launched the Big King sandwich, a Big Mac
clone. Meanwhile, internal taste tests revealed that customers preferred the
fare at Wendy's and Burger King.
In response to these difficulties, McDonald's drastically cut back on its U.S.
expansion. Plans to open hundreds of smaller restaurants in Wal-Mart and
gasoline stations were abandoned because test sites did not meet targeted
goals.

Failed turnaround: late 1990s

Following the difficulties of the early and mid-1990s, several moves in 1998
seemed to indicate a reinvigorated McDonald's. Announcements were made
that McDonald's would improve the taste of several sandwiches and introduce
several new menu items.
McDonald's also said that it would overhaul its food preparation s ystem in
every U.S. restaurant. The new just-in-time system, dubbed "Made for You,"

was in development for a number of years and aimed to deliver to customers

"fresher, hotter food"; enable patrons to receive special-order sandwiches (a
perk long offered by rivals Burger King and Wendy's); and allow new menu
items to be more easily introduced thanks to the system's enhanced
flexibility.

Refurbishing and creating a healthier image: Early 2000s

McDonald's was sued in 2001 after it was revealed that for flavoring purposes
a small amount of beef extract was being added to the vegetable oil used to
cook the french fries.
McDonald's soon apologized for any "confusion" that had been caused by its
use of the beef flavouring, and in mid-2002 it reached a settlement in the
litigation, agreeing to donate $10 million to Hindus, vegetarians, and other
affected groups.
McDonald's also had to increasingly battle its public image as a purveyor of
fatty, unhealthy food. McDonald's responded by introducing low-calorie menu
items and switching to a more healthful cooking oil for its French fries.
McDonald's continued to curtail store openings in 2004 and to concentrate on
building business at existing restaurants. McDonald's also aimed to pay down
debt by $400 million to $700 million and to return approximately $1 billion
to shareholders through dividends and share repurchases
With the new "Forever Young" design (adopted in 2006), the first major
redesign since 1969, McDonald's turned a new page for itself. Most of new
and remodelled restaurants feature dining zones with three sections or zones.
Free wifi access points were also granted. Also, harsh colours and hard
plastics have been replaced with custom earth tones and flexible padded
fabric. The McDonald's menu has been tweaked to offer a larger variety of
what the corporation refers to as more healthy food.

2010s
In July 2011, McDonald's announced that their largest restaurant in the world
will be built on the 2012 London Olympics site. The restaurant will contain
over 1,500 seats and is half the length of an American Football field. Over
470 staff will be employed serving on average (during the 2012 Olympics)

100,000 portions of fries, 50,000 Big Macs and 30,000 Milkshakes. This
restaurant will overshadow the current largest McDonald's in the world in
Moscow, Russia. In January 2012, the company announced revenue for 2011
reached an all-time high of $27 billion, and that 2400 restaurants would be
updated and 1300 new ones opened worldwide.

LIST OF PRODUCTS
Burgers
All beef patties are seasoned, consisting primarily of salt and black pepper.
Big Mac : Along with the Quarter Pounder with cheese, this is one of the two
McDonald's signature menu items, introduced in 1967 as a response to the
flagship burger at Big Boy restaurants. Two 1.6-ounce ground beef patties,
special Big Mac sauce, shredded iceberg lettuce, cheese, two gherkin slices,
and re-hydrated onions on a toasted sesame seed bun, with an additional
middle bun separating both beef patties.
Big N' Tasty : The Big N' Tasty consists of a seasoned quarter-pound beef
patty with ketchup, mayonnaise, slivered onions, two dill pickle slices, leaf
lettuce, and one tomato slice on a sesame seed bun.
Quarter Pounder : Along with the Big Mac, this is one of the two
McDonald's signature menu items. 4-ounce of ground beef patty with
ketchup, mustard, slivered onions, two gherkin slices, and two slices of
cheese.
Hamburger and cheeseburger : A 45 g ground beef patty, with ketchup,
mustard, a single dill pickle , re-hydrated onions, on a toasted bun. Also sold
as a double or triple, adding an extra pickle slice for each beef patty added
Double Cheeseburger: It has two 45 g ground beef patties, with ketchup,
mustard, two slices of dill pickle , re-hydrated onions, and two pieces of
cheese on a toasted bun.
McDouble: It similar to a Double Cheeseburger, but with just one slice of
cheese. It was reintroduced as a permanent dollar-menu item in December
2008.
Daily Double: Similar to the double cheeseburger, however the toppings are
different. The Daily Double is made with lettuce, tomato, slivered onions,

and mayonnaise. It also has only one slice of cheese, rather than the two
slices that are on the double cheeseburger.
The Big N' Tasty : It was introduced in 1997 and has beef patty with ketchup,
cheese, mayonnaise with a grill flavouring, diced onions, two pickles, leaf
lettuce, kebab meat and a tomato slice, on a toasted bun. It was devised to
resemble Burger King's Whopper sandwich.
McFeast: A hamburger with lettuce, tomato, and mayonnaise, the McFeast
contains a quarter pounder patty, lettuce, and modified mayonnaise with
lemon juice, ketchup, onion and tomato.

Chicken, Fish, Pork

McChicken : It is a mildly spicy chicken sandwich. Made from ground white
meat chicken, mayonnaise, and shredded lettuce, on a toasted bun. It still
remains one of the biggest sellers, just behind the Big Mac.
Premium chicken sandw iches : The Classic is a rebranding of the Crispy
Chicken and Chicken McGrill sandwiches, with mayonnaise, leaf lettuce, and
a tomato slice. All are served on a whole-grain roll, with either a grilled or
crispy chicken breast.
Southern Style Chicken Sandw ich : A southern-style fried chicken breast
filet, on a steamed bun, dressed with butter and two pickles.
Snack Wrap : McDonald's version of a wrap made with white meat chicken
breast, lettuce, shredded Cheddar cheese and Monterey Jack cheese , and a
sauce, wrapped in a soft flour tortilla. There is also a Mac Snack Wrap which
features the fixings of the Big Mac, but without the bun and wrapped in a
tortilla shell, and uses one half of a piece of quarter meat.
Chicken Fajita : Chicken, cheese, red and green bell peppers, and diced
onions in a flour tortilla. Comes with Picante sauce packets on request, which
is available in mild and spicy.
Chicken McNuggets : Introduced in 1980 as a replacement for the
McChicken, these are small chicken chunks served with dipping sauces
of Barbecue, Sweet n' Sour, Honey, and Hot Mustard. In 2011, 4 new dipping
sauces were introduced and added to the lineup: Sweet Chili, Honey Mustard,
Spicy Buffalo, and Creamy Ranch.

Chicken Selects : McDonald's version of chicken strips. They include choices

of spicy buffalo, creamy ranch, Honey Mustard , and Chipotle barbecue
dipping sauces; sauce selections in the UK are Smokey barbecue, sour
cream and sweet chilli sauce .
Filet-O-Fish : It is a whitefish fillet with tartar sauce and a half slice of
cheese, on a steamed bun.
McRib : It is a sandwich featuring boneless pork with barbecue sauce,
slivered onions, and pickles.
McArabia : There are two versions of the McArabia: Grilled chicken and
grilled kofta (beef with spices). Both are served with lettuce, tomatoes,
onions, and garlic mayonnaise in addition to two small patties of grilled
chicken or kofta, all wrapped in an Arabic style pita bread. The McArabia has
been very well received throughout the Middle East.
Chicken McBites : They are Popcorn chicken breast with "home-style
seasoning. Dipping sauces include ranch, Sweet n' Sour, Tangy BBQ,
Chipotle BBQ, and Honey Mustard.
Fish McBites: Similar to the Chicken McBites, these are small pieces of
flaky whitefish dipped in batter and fried until golden brown, and served with
tartar sauce for dipping.

Salads and side orders

McDonald's first introduced salads to its menu in 1985. The Premium Salads
all are a mixture of iceberg lettuce and a special lettuce assortment,
with cherry tomatoes and different toppings to differentiate them;
additionally all salads can be topped with warm grilled or crispy chicken. All
of its salads are part of McDonald's move towards creating a healthier image.
McDonald's sells French fries as its primary side order. They also sell potato
wedges, a type of French fry that is thick cut and wedge shaped, fried onion
pieces and onion rings.

CORPORATE OVERVIEW
Facts and figures
McDonald's restaurants are found in 119 countries and territories around the
world and serve 58 million customers each day. McDonalds operates over

31,000 restaurants worldwide, employing more than 1.5 million people. The
companies also operate other restaurant brands, such as Piles Caf.
Focusing on its core brand, McDonald's began divesting itself of other chains
it had acquired during the 1990s. The company owned a majority stake
in Chipotle Mexican Grill until October 2006, when McDonald's fully
divested from Chipotle through a stock exchange. Until December 2003, it
also owned Donatos Pizza. On August 27, 2007, McDonald's sold Boston
Market to Sun Capital Partners . Notably, McDonald's has increased
shareholder dividends for 25 consecutive years, making it one of the S&P 500
Dividend Aristocrats.

Types of restaurants
Most standalone McDonald's restaurants offer both counter service and drivethrough service, with indoor and sometimes outdoor seating. Drive-Thru,
Auto-Mac, Pay and Drive, or "McDrive" as it is known in many countries,
often has separate stations for placing, paying for, and picking up orders,
though the latter two steps are frequently combined; it was first introduced in
Arizona in 1975, following the lead of other fast-food chains. The first such
restaurant in Britain opened at Fallowfield , Manchester in 1986.
In some countries, "McDrive" locations near highways offer no counter
service or seating. In contrast, locations in high-density city neighbourhoods
often omit drive-through service. There are also a few locations, located
mostly in downtown districts that offer Walk-Thru service in place of DriveThru.
To accommodate the current trend for high quality coffee and the popularity
of coffee shops in general, McDonald's introduced McCaf, a caf-style
accompaniment to McDonald's restaurants in the style of Starbucks . McCaf
is a concept created by McDonald's Australia, starting with Melbourne in
1993. Today, most McDonald's in Australia have McCafs located within the
existing McDonald's restaurant. In Tasmania, there are McCafs in every
store, with the rest of the states quickly following suit. After upgrading to the
new McCaf look and feel, some Australian stores have noticed up to a 60%
increase in sales. As of the end of 2003 there were over 600 McCafs
worldwide.
Some locations are connected to gas stations/convenience stores , while others
called McExpress have limited seating and/or menu or may be located in
a shopping mall . Other McDonald's are located in Wal-Mart stores. McStop is

a location targeted at truckers and travellers which may have services found
at truck stops.
Since 1997, the only Kosher McDonald's in the world that is not in Israel is
located in the " Abasto de Buenos Aires ", Argentina .

Global operations
McDonald's has become emblematic of globalization, sometimes referred to
as the "McDonaldization" of society.
The Economist newspaper uses the " Big Mac Index": the comparison of a Big
Mac's cost in various world currencies can be used to informally judge these
currencies' purchasing power parity . Norway has the most expensive Big Mac
in the world as of July 2011, while the country with the least expensive Big
Mac is India .
Some observers have suggested that the company should be given credit for
increasing the standard of service in markets that it enters. A group of
anthropologists in a study entitled Golden Arches East looked at the impact
McDonald's had on East Asia, and Hong Kong in particular.
When it opened in Hong Kong in 1975, McDonald's was the first restaurant to
consistently offer clean restrooms, driving customers to demand the same of
other restaurants and institutions.
McDonald's has taken to partnering up with Sinopec, the second largest oil
company in the People's Republic of China, as it takes advantage of the
country's growing use of personal vehicles by opening numerous drive-thru
restaurants.
McDonald's has opened a McDonald's restaurant and McCaf on the
underground premises of the French fine arts museum, the Louvre.
The company stated it will open vegetarian-only restaurants in India by mid2013.

Redesign
In 2006, McDonald's introduced its "Forever Young" brand by redesigning all
of its restaurants, the first major redesign since the 1970s. McDonald's has
invested $1 billion to redesign nearly all of the 14,000 restaurants by 2015.

The goal of the redesign is to be more like a coffee shop, similar to

Starbucks . The design includes wooden tables, faux-leather chairs, and muted
colours; the red is muted to terra cotta, the yellow was turned golden for a
more "sunny" look, and olive and sage green were also added.
To warm up its look, the restaurants have less plastic and more brick and
wood, with modern hanging lights to produce a softer glow.
Many restaurants now feature free Wi-Fi and flat screen TVs. Other upgrades
include double drive-thrus, flat roofs instead of the angled red roofs, and
replacing fibre glass with wood. Also, instead of the familiar golden arches,
the restaurants now feature "semi-swooshes" (half of a golden arch), similar
to the Nike swoosh.

Business model
McDonald's Corporation earns revenue as an investor in properties, a
franchiser of restaurants, and an operator of restaurants. Approximately 15%
of McDonald's restaurants are owned and operated by McDonald's
Corporation directly. The remainder are operated by others through a variety
of franchise agreements and joint ventures.
The McDonald's Corporation's business model is slightly different from that
of most other fast-food chains. In addition to ordinary franchise fees and
marketing fees, which are calculated as a percentage of sales, McDonald's
may also collect rent, which may also be calculated on the basis of sales.
As a condition of many franchise agreements, which vary by contract, age,
country, and location, the Corporation may own or lease the properties on
which McDonald's franchises are located. In most, if not all cases, the
franchisee does not own the location of its restaurants.
The United Kingdom and Ireland business model is different than the U.S, in
that fewer than 30% of restaurants are franchised, with the majority under the
ownership of the company. McDonald's trains its franchisees and others
at Hamburger University in Oak Brook, Illinois.
In other countries, McDonald's restaurants are operated by joint ventures of
McDonald's Corporation and other, local entities or governments.
As a matter of policy, McDonald's does not make direct sales of food or
materials to franchisees, instead organizing the supply of food and materials
to restaurants through approved third party logistics operators.

According to Fast Food Nation by Eric Schlosser , nearly one in eight workers
in the U.S. have at some time been employed by McDonald's. It also states
that McDonald's is the largest private operator of playgrounds in the U.S., as
well as the single largest purchaser of beef, pork, potatoes, and apples. The
selection of meats McDonald's uses varies with the culture of the host
country.

MARKETING MIX
The marketing mix of a company consists of the various elements as
follows which form the core of a companys marketing system and
hence helps to achieve marketing objectives. The marketing mix of
McDonalds is as follows:Product: - McDonalds places considerable emphasis on developing a
menu which customers want. Market research establishes exactly what
this is. However, customers requirements change over time. In order
to meet these changes, McDonalds has introduced new products and
phased out old ones, and will continue to do so. Care is taken not to
adversely affect the sales of one choice by introducing a new choice,
which will cannibalise sales from the existing one (trade off).
McDonalds knows that items on its menu will vary in popularity.
Their ability to generate profits will vary at different points in their
cycle. In India McDonalds has a diversified product range focussing
more on the vegetarian products as most consumers in India are
primarily vegetarian. The happy meal for the children is a great seller
among others.

Price: - The customers perception of value is an important

determinant of the price charged. Customers draw their own mental
picture of what a product is worth. A product is more than a physical
item; it also has psychological connotations for the customer. The
danger of using low price as a marketing tool is that the customer may
feel that quality is being compromised. It is important when deciding
on price to be fully aware of the brand and its integrity.
In India McDonalds classifies its products into 2 categories namely
the branded affordability (BA) and branded core value products
(BCV). The BCV products mainly include the McVeggie and

McChicken burgers that cost Rs 50-60 and the BA products include

McAloo tikki and Chicken McGrill burgers which cost Rs20-30. This
has been done to satisfy consumers which different price perceptions.

Promotion :- The promotions aspect of the marketing mix covers all

types of marketing communications .One of the methods employed is
advertising, Advertising is conducted on TV, radio, in cinema, online,
using poster sites and in the press for example in newspapers and
magazines. Other promotional methods include sales promotions,
point of sale display, merchandising, direct mail, loyalty schemes,
door drops, etc. The skill in marketing communications is to develop a
campaign which uses several of these methods in a way that provides
the most effective results. For example, TV advertising makes people
aware of a food item and press advertising provides more detail. This
may be supported by in-store promotions to get people to try the
product and a collectable promotional device to encourage them to
keep on buying the item.
At McDonalds the prime focus is on targeting children. In happy
meals too which are targeted at children small toys are given along
with the meal. Apart from this, various schemes for winning prices by
way of lucky draws and also scratch cards are given when an order is
placed on the various mean combos.

Place: - Place, as an element of the marketing mix, is not just about

the physical location or distribution points for products. It
encompasses the management of a range of processes involved in
bringing products to the end consumer. McDonalds outlets are very
evenly spread throughout the cities making them very accessible.
Drive in and drive through options make McDonalds products further
convenient to the consumers.

Other than the main four elements mentioned above there are a
few other elements too in the marketing mix, which are as follows:-

People:-The employees in McDonalds have a standard uniform and

McDonalds specially focuses on friendly and prompt service to its
customers from their employees.

Process:-The food manufacturing process at McDonalds is

completely transparent i.e. the whole process is visible to the
customers. In fact, the fast food joint allows its customers to view and
judge the hygienic standards at McDonalds by allowing them to enter
the area where the process takes place. The customers are invited to
check the ingredients used in food.

Physical evidence: - McDonalds focuses on clean and hygienic

interiors of is outlets and at the same time the interiors are attractive
and the fast food joint maintains a proper decorum at its joints.

SWOT ANALYSIS
Strengths
McDonalds holds a very strong brand name worldwide.
They have large partnerships with other companies that provide them with
their desired products; this increases the goodwill of the company.

McDonalds is one of the most reputed firms who are socially responsible.
Loyal employees & management & customer are their biggest strength.

 McDonalds makes sure that cultural & regional barriers are kept in mind
while providing food to different countries.

Clean environment and play areas for children where they can enjoy their
time.

Weakness

The weakness that hits the list of employee turnover rate. Every year many
of their employees are fired out of the restaurant.

McDonalds mostly advertises products and food items that targets

children.

Health conscious people often complain that they do not provide us with
the organic and healthy food. This becomes their weakness when they get
in the complaints.

They also face quality issue at times. This affects the business as they are
running the outlet worldwide, if one franchise gets affected others also get
a bad name.

Opportunities

It can open up online services for their customers so that they can easily
order their desired meals sitting at home.

Discounts given on every food item may help them gain more customers.

They can go for a joint venture with the retailers they work with.

They can introduce healthy hamburgers and healthy drinks for the people
who are health conscious.

In order to be environment friendly, they can use packing material which

can be recycled later or material that does not create pollution.

Threats

Emerging competition of similar outlets is becoming a problem for

McDonalds.

Health issue also becomes a problem when it comes to food.

As it is a multinational food outlet, fluctuations in the currency of other

countries becomes a problem for such companies.

Recession in any country would definitely affect the whole outlet

worldwide.

People facing heart problems and obesity accuse McDonalds for not
providing them with the healthy food.

They have a threat of local food outlets in different countries.

McDonalds is operating in a fully fledged economy where competition is

increasing day by day therefore they should work effectively to overcome
their drawbacks because of the recession.

COMPANYS FINANCIAL INFORMATION

Company Name:

McDonald's Corporation
Ticker Symbol:
MCD
Web Address:
www.mcdonalds.com
CEO:
Mr. Donald Thompson
No. of Employees:
420,000
Common Issue Type: CS
Business Description: McDonald's Corporation franchises and operates
McDonald's restaurants in the food service industry.
The Company and its franchisees purchase food,
packaging, equipment and other goods from numerous
independent suppliers.

Industry

LEISURE - Restaurants

Information:
KEY FIGURES (Latest Twelve Months Day Change
Bid
LTM)
87.18
-0.02 87.06 $
Yesterday's Close
Market Cap (mil)
Shares Outstanding (mil)
Beta
Price

PE Ratio LTM

87,526.7

Market Capitalisation

1,004.0

Latest Shares Outstanding

Earnings pS (EPS)
Dividend pS (DPS)
Dividend Yield
Dividend Payout Ratio
Revenue per Employee
Effective Tax Rate
Float
Float as % of Shares Outstanding
Foreign Sales
Domestic Sales

16.4

Ask

EPS

Open

87.43
DPS

High

Low

Volume

87.43 86.76
P/E

Yield

0.39 5.27 2.53

16.4
3.5
mil
1,004.0 mil
5.27 $
2.53
Balance Sheet (at a glance) in Millions
3.5 %
48 %
64,300 $
31.3 %
1,015.3 mil
99.9 %
18,478 mil
8,528 mil

87,526.7

3658828
52-Wks-Range

102.22 - 83.31

Selling, General & Adm/tive (SG&A) as %

of Revenue

9.10

Research & Devlopment (R&D) as % of

Revenue

0.00

Gross Profit Margin

44.7

EBITDA Margin

35.6

Pre-Tax Profit Margin

29.1

% DIVIDEND INFO
09/20/2012
% Dividend Declared Date
Dividend Ex-Date
11/28/2012
price performance previous 3 years
% Dividend RecordShare
Date
12/02/2012
12/16/2012
% Dividend Pay Date
Dividend Amount
770
% Type of Payment
Cash Payment
% Dividend Rate
3.08
Current Dividend Yield
3.5
%

Assets Turnover

0.8

Return on Assets (ROA)

16.1

Return on Equity (ROE)

39.2

Return on Capital Invested (ROCI)

20.4

Current Ratio

1.0

Leverage Ratio (Assets/Equity)

2.4

Interest Cover

16.6

Total Debt/Equity (Gearing Ratio)

0.96

LT Debt/Total Capital

48.0

Working Capital pS

0.06

Cash pS

2.17

Book-Value pS

13.83

Tangible Book-Value pS

11.10

Cash Flow pS

6.89

Free Cash Flow pS

1.25

5-Y Average Dividend Yield

48.0

5-Y Average Payout Ratio

53.0

%
$
$
$
$
$
$

KEY FIGURES (LTM): Price info

Price/Book Ratio

6.30

Price/Tangible Book Ratio

7.85

Price/Cash Flow

12.6

Price/Free Cash Flow

69.9

P/E as % of Industry Group

42.0

P/E as % of Sector Segment

77.0

Share price performance intraday

%
%

3.1

Payout Ratio

PRICE/VOLUME

High

Low

Close

% Price Chg vs.

Mkt.

% Price Chg

Avg. Daily Vol

Total Vol

1 Week

0.0

101

54,041

66,217

4 Weeks

87.43

83.31

84.74

2.7

101

57,129

856,929

13 Weeks

94.16

83.31

91.02

-4.4

98

61,288

3,554,700

26 Weeks

94.16

83.31

87.75

-0.8

93

59,419

7,189,758

52 Weeks

102.22

83.31

98.03

-11.2

79

59,272

14,521,666

YTD

102.22

83.31

-13.2

77

59,774

13,807,695

Moving Average

5-Days

10-Days

10-Weeks

30-Weeks

200-Days

Beta (60-Mnth)

Beta (36-Mnth)

86.61

86.31

88.25

89.31

91.74

0.39

0.31

GROWTH
RATES
SOLVENCY
Revenue

5-Year
Growh
RATIOS

R of 5-Year
Growth

3.81

77.6

SHORT-TERM SOLVENCY RATIOS

Income
20.17
81.1
(LIQUIDITY)
Dividend
15.36
94.7
Net Working Capital Ratio
Capital Spending
6.97
Current Ratio
R&D
0.00
Quick Ratio (Acid Test)
Normalized Inc.
11.58
Liquidity Ratio (Cash)
Receivables Turnover
Average Collection Period
Working Capital/Equity

3-Year
Growth

NA
NA
NA

6.66
9.78
2.71
1.3
1.0
0.67
21.5
17
6.2

Working Capital pS

0.88

Cash-Flow pS

6.77

Free Cash-Flow pS

2.09

FINANCIAL STRUCTURE RATIOS

Altman's Z-Score Ratio
Financial Leverage Ratio (Assets/Equity)

4.85
2.3

Debt Ratio

56.4

Total Debt/Equity (Gearing Ratio)

0.87

LT Debt/Equity

0.84

LT Debt/Capital Invested

56.9

LT Debt/Total Liabilities

65.2

Interest Cover

17.3

Interest/Capital Invested

1.67

CHANGES

YTD vs.
Last YTD

Curr Qtr vs.

Qtr 1-Yr ago

Annual vs.
Last Annual

10.52

Revenue %

2.1

-0.2

12.2

0.00

Earnings %

-1.4

-3.5

11.3

9.79

EPS %

1.0

-1.4

15.1

EPS $

0.04

-0.02

0.69

10.16

Analysis of Productivity & Improvement at

McDonald Fortress Branch
There are 21 restaurants in 7 major cities of Pakistan.We have done analysis on fortress
branch of McDonalds to find out how their productivity level increased and improved. For
this we have:
Analysed organizational culture
Analysed Systems of McDonald
Productivity identifications
Solution of problems

Identification of System

We have Visited branch, which is located Opposite Khyber Block, Fortress Stadium Lahore,
Pakistan.
We got detail about old system and new one
Purpose was to gather the information about
System /Design Layout
Equipment /Machinery
Time used for process
Labour
for both process

Launching MFY System in Pakistan

First MFY in McDonald fortress stadium branch was launch in 5th May 2011
Productivity and quality of products
The most important stations in McDonald
Service
Production
These departments are directly attached to each other

MFY Working System

Process for service of customer;

P.O.S
(Point of
Sale)

K.V.SKitchen
Video
System
( for
runner)

The people on the service can

Drink drawer

K.V.S
(for
drink
drawer)

Heat
treat

Touch
tower

 Order taker /cashier

Runner

Productivity (in terms of time)

Time is the main factor which have impact for increase or decrease in productivity.

T O TA L
CUSTOM ER
T IM E

90
second
s (fro m

T O TA L
CUSTO M ER
E X P E R IE N C
E T IM E

g re e tin g to
c o m p le tio n
o rd e r )

Equipment for MFY system

3
m in u te s
, 30
seconds

T O TA L L IN E
T IM E
2 m in u te s

K.V.S
(Kitchen
Video
System)

Bun tray cart

Toaster/stea
mer

Prep table

H.L.Z
(Heated
Landing
Zone)

Grill

U.H.C
(Universal
Holding
Cabinet)
Peoples (for Preparing Product)
There are 3 peoples in production at

Initiator

React
accordin
g to the
KVS and
insert
buns in
Toster

Batch
cooker

Assem bler

Prepare
food &
place in
the HLZ

volume

Productivity gain in Time

Now productivity gain in term of time is;

Prepare
the raw
products
such as
frozen
products
chicken

low

Initiator
reaction

Buns
toasting

3-5 sec

Assembler

17-19 sec

35-50 sec

The MFY system can be run

By a single person when low volume and
In rush volume just three peoples Are enough if they are properly trained.

Equipments Zones

Toaster

Prep

Temperature 560 degree

Fahrenheit
Toasting time 17 seconds

Temperature 121-131F

UHC (Universal
Handling Cabinet)

HLZ (Heated
Landing Zone)

Fried product
temperature: 200 degree
Fahrenheit
Grilled product
temperature 185 F

Temperature 165 F

Direct Grill System

 Stations for DGS

Fried products station
Grilled product station
Fish fillet station
Two Toasters for each stations and steamer for fillet station.
Toaster timing was 60 seconds so high as compared to MFY which is 17 seconds.

Direct Grill System

Equipment

Toaster
Dressing tale
Vats/fryer
Toaster
Dressing table
Grill

Steamer
Dressing table
Fryer

Layouts

Fried
Statio
n
Grilled
Statio
n
FishFillet
station

 Layout of Direct grill system

Layout of MFY System

Comparison of layouts

DG
System

MFY System

Comparison

Direct Grill System

Made For You System

Cannot be operated without 6

peoples

Can operate less than three

peoples

Products already prepared

Products
order

Wastage was so high

Wastage is very low

Quality of products is not

good

Quality
of
product
extraordinary high

Products
prepared

to

Products just prepared in 60

seconds

Only bun toasting time was

60 second

Bun toasting time just 17

seconds

Extra
products
prepared

No extra product is prepared

took

time

always

just

prepared

There is no guarantee of fresh

product

100% guarantee
product

Critical to operate

Easy to operate

of

on

is

fresh

Calculations
MFY system have
low energy expense
Low labour (3 people)
More production output
Less costly equipment
As compared to DGS System
Total Productivity of Increase by implementation is about 21.75%

Findings
MFY system increased productivity of production department Because of the Criteria;

Conclusion
McDonald increased 21-25% productivity by replacing DGS with MFY.
MFY system have simple design and low equipment as compared to
DGS.
THE TOP FIVE REASONS WHY MCDONALDS IS SO POPULAR

SERVICE

90 seconds or less from the

time of order to delivery

QUALITY

Fresh food by maintaining high

quality standards

FOOD
PREPARATION

It is consistent and have all

production equipment near of
each other

PEOPLE

Increased job satisfaction for

employee

PROFITABILITY

Reduced costs and increased

customer satisfaction

1. The System
This is the first thing that makes McDonald's so successful, by having an
effective and efficient system in place, which exploits the minimum wage
labour available, in the form of young teenagers who are just looking to make
some cash or pick up fundamental job skills.

2. Convenience
The second reason why McDonald's is so popular is because it's everywhere.
There a McDonald's at every corner of the map, at every major shopping
centre, district, highway, freeway, every place which attracts even, remotely
more than 10 people, will have a McDonald's restaurant not too far from
them. McDonald's is having the best Real Estate locations around the world
which makes it so popular around the globe.

3.

Likability

and

Familiarity

The Golden Arches, the Big M. Ronald McDonald, happiness and

fun; all these are the associations with McDonalds which makes
it so familiar by being so familiar to all age groups and to
everybody.

4. The Menu
McDonald's has one of the most diverse menus, targeting all ages from little
kids to old pensioners, and everyone else in between. There's Big Macs for
the big kids and junior burgers for the little. The menu's versatility is
accentuated when they introduced the "healthy tick" concept, which target
those people who wants to watch what they eat (even though it doesn't make
sense to go to a fast food restaurant to eat healthy).

5. Consistency
The last reason is, McDonald's is so successful because of its
consistency. The expectations that we have about everything
surrounding the store are fulfi lled in almost every store

nationwide, worldwide. So everybody knows what they're

getting into before they come to McDonald's, and by being so
consistent, it has a solid reputation to uphold.

Logo of McDonalds

McDonald's world headquarters, Oakbrook, United States

Ray Kroc- The franchiser of McDonald's

The first McDonalds restaurant opened by Patrick McDonald, in

1937

McDonalds Speedee mascot

Downeys restaurant;
the oldest operating McDonald's in the world.

World-famous Golden Arches logo

The legendary Big Mac

The Chicken McNuggets

The Maharaja Mac which is off ered in India

An exterior view of the world's largest McDonald's restaurant built

on 2012 London Olympics site

The Big Mac

The Big n Tasty

The premium chicken sandwich

The McDonald's Chicken Fajita

McArabia

McDonalds Salads

McDonalds French fries

A map showing every continent with at least

one McDonald's restaurant

A modern McDonalds restaurant in

London