McDonald’s Case: Know how you manage
Brands like McDonald’s are brands that can reach the most people in the world and that everyone in the modern world has eaten at least once. Besides, McDonald’s is a brand that most of the world has probably heard of at least once. McDonald’s, which built an innovative system by making a major change in the food industry, has been dominating the world in the fast-food industry for decades. So, what are the successes and failures in this story?
Before talking about McDonald’s, I think it would be very useful to explain McDonald’s with data. The reason for this is that when we think of fast-food brands in our daily lives, we think of McDonald’s as just another fast-food brand. But when we look at the data, we can see that it is not a big brand but a mega brand. In order to get to know the brand better, I did some research on Statista and came up with many results. Here are some numerical values and McDonald’s!
1) Brand Value: In 2022, the top 10 companies with the highest brand value among all QSRs (Quick Service Restaurants) worldwide is McDonald’s with a brand value of approximately $196.5 billion. It is followed by Starbucks with approximately $61.8 billion. In third place is KFC with approximately $22.3 billion. McDonald’s brand value is more than three times the brand value of Starbucks. This is really an incredible difference. The closest brand selling hamburgers is Burger King with about $7 billion. Of course, brand value is not the only criteria to compare the two brands, but it is an important one. Between McDonald’s and Burger King, which are seen as two giants, it can be understood who is more “giant” by looking at the data.
2) Sales: According to Statista’s leading chain restaurants in the U.S. in terms of sales report for 2021, McDonald’s is again the leader with $45.96 billion worth of sales. Starbucks follows with $24.56 billion. Burger King, on the other hand, was able to make sales worth $10.03 billion in 2021. In order to make a healthy evaluation here, it is necessary to keep in mind that the pandemic was also active in 2021.
3) Restaurant Industry in the U.S.: When it comes to analyzing foodservice and drinking place sales in the U.S. from 1992 to 2022, it is seen that sales are increasing more and more each year. This indicates that the market is getting bigger or reaching more people year by year. From about $200 billion in 1992, sales will reach $1 trillion in 2023. With the world’s population growing and more and more new restaurants opening, it is clear that this sector will continue to grow because people have to eat to live. However, it is also true that as sales increase and more McDonald’s restaurants open, the cost of the companies or restaurants will increase. There will be businesses trying to find new ways to reduce costs. As a result, it’s inevitable that machines will do the basic work. Especially fast-food brands have tried and will try to systematize their work even more with the help of technological improvements. One example of this is McDonald’s. In one of its restaurants in Texas, no human is working. In this place where robots prepare orders, a question mark remained in the minds of consumers. Some customers wonder who will correct the situation in case of a wrong order. Another customer opinion is that this is a very good and effective practice.
From a sociological point of view, the ability of robots to do jobs is a controversial issue. Because people who have jobs can lose their jobs with the development of technology. According to Statista’s research, while the number of people working in the restaurant industry in the U.S. in 2016 was 14.7 million, this number has started to decline. By 2022, it will be 12.5 million. Robots are not the only reason for this, but it can be said that the accelerated development of technology is a serious reason.
Robots don’t get tired, they don’t rest, and they cost much less compared to humans. But looking at business reality, it will be the future. In some of Amazon’s stores, there are no humans working, and the customers can pick up the product they want from the shelf and leave the store. This is because the cameras in the store recognize the customer’s face, identify which product they are buying, and debit the price from their bank account. With technology already so far advanced and these implementations taking place, it seems that sociological implications can only be discussed as a theoretical assessment of the situation.
“The Founder” is a movie about how the McDonald’s brand became popular in the United States. The movie starts with the McDonald brothers running a hamburger restaurant with a system beyond time. Analyzing the market and the customers well, the brothers try to provide the best and fastest service to their customers through trial and error and then a little bit of luck. I really liked the scene where they were designing the shop on a tennis court, practicing how people working in a small shop can work most effectively and not interfere with each other. Then they changed the architectural interior design of the shop accordingly. As a result, what they did was find different methods, systematize a job that maybe everyone else was doing, and present it to the customer. How long each hamburger meat was cooked, how long the fries were fried, the salt content, the number of pickles, and the amount of ketchup in the hamburger were all pre-determined by the McDonald brothers to make the job easy and consistent. One burger was prepared in a fixed way and took a fixed amount of time. While competitors could serve customers in 20–30 minutes, McDonald’s could do it in a few minutes — even seconds — . So, a McDonald’s customer was not only buying a burger but also “time”. While everything was going so well, there was a missing point here, and that was the lack of “boldness” in McDonald’s marketing approach. The McDonald brothers, who were very decisive and did not prefer to take risks, advocated scalability. They thought that the business should grow slowly, that the quality should not deteriorate as it grows, and that the McDonald’s brand should always stand for quality and reliability. I think these are very logical and make sense. Especially when you look at it today, those are the goals that every quality restaurant is trying to achieve. But back then — and it’s true now — it was more profitable to concentrate on what was missing in the market and what the customer wanted. At the time, any restaurant other than McDonald’s might have been slow and perhaps of better quality than the McDonald’s of later times. But McDonald’s came up with quick service first. And I think that was a situation that gradually lowered the quality. After a while, things became so systematic and profit-oriented that most of the products started to be transported frozen. And that also lowered the quality. What I’m trying to say is that customers and the market are always looking more for what they don’t have. People don’t line up for the same thing that everybody else is doing the same. McDonald’s at that time found a countercurrent to the market norm and capitalized on it. It’s like flying upside down against the same wind and getting higher and higher. Today, I think it’s the opposite. People see so many fast-food joints, and there are so many different fast-food experiences from so many different places that McDonald’s business fashion is no longer popular. Because it’s not the 1950s. People now want faster access to the product or service they want, and they want the quality to be maintained at the same rate. In fact, my observation is that people think they can wait ten more minutes and get a better-quality hamburger. This has been McDonald’s biggest mistake over the years. But I’m not sure how accurate it is to call it a mistake; it was a conscious choice. Nowadays, McDonald’s or Burger King is a choice that reminds you your childhood times and the retro taste of hamburgers. Also, relatively cheap option compared to others.
Ray Kroc was the one who showed the McDonald brothers the potential of the brand and “grew” it by opening more restaurants. But according to the movie, he was not interested in high quality. He wanted to sell more products in a more profitable way so that the brand could be operated in more locations. In business, this is actually a choice. Unless you are selling something seriously harmful to health in the food industry, selling more products to more people by lowering the quality is a matter of demand. If there are people who want to buy a product or service, they will buy it. The important point here is that one side wants to prioritize quality and grow in a scalable way, while the other side wants to grow in an uncontrolled and offensive way. Even if the quality doesn’t drop drastically in the early days, once it drops below the standard, it will continue to do so. But these offensive moves can also vary depending on the market situation in the country. The United States has always been seen as the “land of opportunity”. There are always ambitious people here who want to be the best at their job, so if a business like this had grown in a very controlled way, maybe we wouldn’t see a brand like McDonald’s today. Maybe a better and more systematic hamburger shop than McDonald’s at the time is unknown today simply because it didn’t dare to do more. That’s why Kroc, as much as I didn’t like him when I saw the movie, is a big part of why McDonald’s is the big brand it is today. Maintaining standards is always important, but achieving growth while maintaining standards requires organizational success. What Kroc failed to do was run a business of sustainable quality in the long term. Today, if you compare a mid-range steakhouse burger to McDonald’s, McDonald’s quality will be inferior. However, that doesn’t mean that McDonald’s is a bad brand. It means that McDonald’s strategy is different.
The topic of business strategy would be analyzed in a different blog post; I could write a detailed one about it. But to briefly mention, it would not be wrong to call today’s McDonald’s strategy cost leadership. Most brands use this strategy when they want to reduce quality relatively to save costs and find cheaper alternatives to increase sales and profit while reaching more customers. So, instead of targeting a narrower market, business strategy and planning can be applied to a wider market when the cost leadership is the purpose.
After talking a little bit about McDonald’s, the other thing I want to talk about is business. Anybody can cook great food, invent a very effective technological device or software, or have an idea to solve a problem. But if you can’t bring that value to the user with the right marketing tactics, then there’s something wrong (if you don’t want to do that, that’s a choice). You can create more opportunities by hiring people you think will push your company to be more social, make new connections, and drive the business forward. But as in this case, you need to be careful about the rights of the people you empower. Not everyone has good intentions. For this reason, contracts should be prepared with professionalism. In business life, it is very important to listen to someone carefully, to give that person the necessary authority, and to determine the limits of what they can do after they have that authority. Otherwise, it is best to implement a contract where you can be sure that things will work out in a way that is good for you and your company. Having the mentality of a megalodon will scare the sharks around. Manage the sharks well and give them what they deserve because too much will spoil them.
