BrandKarma: Unheard story of McDonald’s, Its much more than just a Hamburger! [Part-2]

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Can you imagine what if a person who has a persistence & vision and know exactly what to do with it, and he or she is unbeatable, irrespective of problems, hurdle, and even the whole world is one side and they are in the other side they still know how to make their dreams come true.

Imagine a man who is 52 years old, who sells milkshakes to restaurants around the USA built a fast-food empire with 36,000 restaurant’s in 150+ countries with an annual revenue of $24.5 billion USD and all this happen because of one thing perseverance.

Story of Ray Kroc #Under120Seconds

In 1954, a weird miss-order of 8 milkshakes placed to his company made him drive to San Bernardino and he saw something amazing and he never saw such an amazing restaurant in his life.

Ray Kroc with his milkshake machine

There are no drive-through hotels, no need of waiting for hours for orders and orders will be never misplaced, No car hops, self-service, paper disposables, limited menu and lighting fast food delivering system and wonderful taste! He had no words to say for the creative invention and revolutionary process of food procedure system. This got his attention, in meanwhile he ordered a burger, fries and a coke and he tasted a bite of the burger and after tasting the bite he knew that it’s a taste that every American town should have this and this made him eager to speak to the owners.

Passing by a man shook his hand by saying “Hi I am Richard and this is my brother Maurice, we are McDonald brothers” they explained their story of how they all started how they are here by doing what they are doing in a dine with Ray.

Their flawless concept, the taste of food and delivery system doesn’t make him sleep for that whole night and he got a thought! He went to McDonald’s store first thing in the next morning, and he explained his brilliant vision with one word! “Franchise”, Brothers were not at all excited. They said, “we tried in a couple of places it didn’t work“. Ray asked for reasons, they told him we tried to make it in few places but we failed to maintain quality, “Its better have one good store than having 5 average stores” said, brothers.

But this doesn’t disappoint Ray, Ray Kroc partnered with the McDonald brothers on the franchise model thought. Ray takes 1.9 percent of the gross sales, of which the McDonald brothers got 0.5 percent. The brothers wished to maintain only a small number of restaurants, which conflicted with Kroc’s goals. He wants to expand it to all around America.

He later became the head of McDonald corporation. He found out an interesting way of revenue model, that got him capital for his future expansion.

The story of Arches:

In the midway of the deal, Ray observed an eye-catching design hanging in a wall at McDonald brothers office, they explained ray about how they came up with that,  “In 1952, we decided that we needed a new building to house their hamburger restaurant in San Bernardino, California. We wanted this building to have an entirely new design which would achieve two goals: even greater efficiency, and an eye-catching appearance. Ray loved that idea and started selling the opportunity to franchise with this McDonald’s store with Golden Arches.  Ray always tells “The Golden Arches are the symbol of McDonald’s, the global fast-food restaurant chain in the USA”

In 1960, the McDonald’s advertising campaign “Look for the Golden Arches” gave sales a big boost. Ray believed that advertising was an investment that would, in the end, come back many times over and advertising has always played a key role in the development of the McDonald’s.

A turning point of McDonald’s revenue:

There was no doubt that, franchising model can expand quickly and efficiently by using the money of small investors. But, Instead of making money by selling supplies to franchisees or demanding huge royalties the McDonald’s Corporation became the landlord to its franchisees. This happened because, at a moment even with hundreds of stores are running successfully in the market, the investment capital and the working capital became equal which means there are no reserves left for innovation of any other related activates, this made Ray almost bankrupt and lose his house on mortgage.

In the mean, while Harry Sonneborn, CFO of an Icecream company consulted Ray, he looked the past sale records and related ledgers, after a clear look on the company financial situation, he told Ray, “You are sitting in a gold mine. You are not in the burger business; you are in a real estate business.

Because of that, today McDonald’s makes its money on real estate through two methods: Its real estate subsidiary will buy & sell hot properties while also collecting rents on each of its franchised locations. Ray named it as Franchise Reality estate.

During the 2008 recession, McDonald’s leaned heavily on this facet of their business as they capitalized on an anemic property market – buying up more of the land and buildings where it operates. The company owns about 45% of the land and 70% of the buildings at their 36,000+ locations (the rest is leased).

Increased no of stores & Franchise model:

Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the real estate and its location was the most significant factor in the success of each franchise. Basically, the person that bought the franchise was also paying for, buying, and the land under the franchise for Ray Kroc’s organization. McDonald’s today is the largest single owner of real estate in the world, owning even more than the Catholic Church. Today, McDonald’s owns some of the most valuable intersections and street corners in America, as well as in other parts of the world. McDonald’s has over 35,000 stores all around the world in 150+ countries.

Ronald McDonald:

Ronald McDonald is a clown character used as the primary mascot of the McDonald’s fast-food restaurant chain. The smile is known around the world,” Ronald McDonald is second only to Santa Claus in terms of recognition. “According to one survey, 96% of all schoolchildren in the United States of America recognize Ronald”. Since 2003, McDonald land has been largely phased out, and Ronald is instead shown interacting with normal children in their everyday lives.

World’s largest distributor of toys:         

McDonald’s is the largest distributor of toys in the world, and by far 20% of all sales at McDonald’s include a toy, with one being passed out with each Happy Meal the company sells. They tie up with Hollywood action movies for their movie promotion with McDonald’s, Batman, Minions, Spiderman are few most distributed toys. The number of customers purchased Happy Meals just to get the toys and threw the food away. Initial Disney/Pixar movies promoted by McDonald’s included A Bug’s Life, Monsters, Inc., Finding Nemo and The Incredibles. Perhaps the most important marketing move came in the later months of 1997 when McDonald’s named DDB Needham as its new lead ad agency.

Remembering some iconic ads and Campaigns:
Turnover and financial facts:
  1. McDonald’s employs 1.8 million people, more than the population of Philadelphia (1.5 million).
  2. McDonald’s spent $808 Million on advertising in 2013, accounting for 1% of the $500billion global advertising market.
  3. According to company estimates, 1 in 8 workers in the US has been hired by McDonald’s.
  4. McDonald’s is the world largest distributor of toys, with one including in 20% of sales.
  5.  McDonald’s has over 35,000 locations more than Burger King (14,000), Wendy’s (6,500), Taco Bell(6,200), and Arby’s (3,400) combined.
  6. McDonald’s worldwide revenue is $ 24.26 billion USD which is approximately  1,65,000Crores.
Things you didn’t know about the company!

  • Until December 2003, Mcdonalds also owned Donatos Pizza.

  • Morgan Spurlock’s 2004 documentary film Super-Size Me claimed that McDonald’s food was contributing to the increase of obesity in society and that the company was failing to provide nutritional information about its food for its customers. Six weeks after the film premiered, McDonald’s announced that it was eliminating the super-size option, and was creating the adult Happy Meal.

  • The Queen of England owns a McDonald’s near Buckingham Palace.

  • McNuggets come in four official shapes: bell, bone, boot, and ball.

  •  Forever McDonald On 30 October 2009, the day before McDonald’s closed its doors in Iceland, Hjörtur Smárason went and bought a burger. He didn’t want to eat it—no, instead he wanted to preserve it. He kept the burger and fries in its original bag and stored it on a garage shelf. Three years later, he checks on his meal only to find that it looked exactly the same as the day he bought it. you can watch it live from here.

  • The Big Mac index, also known as Big Mac PPP, is a survey done by The Economist magazine that is used to measure the purchasing power parity (PPP) between nations, using the price of a Big Mac as the benchmark.

Bonus: Downey is a city located in southeast Los Angeles County, California, United States It is also the home of the oldest still operational McDonald’s restaurant in the world.

The real reason behind their success: 

There is always a debate between two sides of the coin which is most effective, on one side two brothers who kept their life learnings and made a revolutionary system of food delivery from 30 mins to 30 seconds and on the other side a man who was a milkshake seller kept all his blood, sweat and tears in one idea which doesn’t even belong to him, McDonald’s to every American, and kept his house on mortgage. Who do you think is the right person to handle the business. When you can answer this question you will understand what a real entrepreneurship will be.

– Sai Nikhil Dintakurthi

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