How McDonalds Is Taking Over The World

Every 5 hours, somewhere in the world, a new McDonald's pops up. It's been said that McDonald's is one of the very few businesses that will always be profitable and recession-proof. And once you look at the stock, it seems to be true. So how did McDonald's go from selling hot dogs to a multi-billion-dollar mammoth, and how does it plan to take over the world? Well, stick around to find out how.

Welcome to alux.com, the place where future billionaires come to get inspired. Here's a fun fact that might blow your mind: just to create some context here, a survey conducted by Eric Schlasser, the author of the bestselling book Fast Food Nation: The Dark Side of the All-American Meal, found that McDonald's iconic golden arches are recognized by more people than the Holy Cross. Now you might say that's impossible, but let's take a trip back in time to McDonald's early days to understand how we got here in the first place.

A brief history of McDonald's: so the year is 1940, and two enterprising brothers, Richard and Maurice McDonald, unknowingly embarked on a mission to change the world of fast food forever. It all began in sunny San Bernardino, California, where the McDonald brothers opened their first drive-in restaurant, McDonald's Bar-B-Q, which featured a whopping 25-item menu. But soon, they realized that simplifying their offerings was the key to success. Any serious restaurant owner knows this nowadays.

In 1948, Richard and Maurice revolutionized the fast food game with their groundbreaking Speedy Service System. They ditched the car hops, slashed their menu down to just nine items, and focused on perfecting their burgers, fries, and shakes. Soon, that turned into a huge success. Their assembly line of food prep became the gold standard for fast food everywhere, and this nationally attracted the attention of investors.

Now let's fast forward a bit to 1954 when a milkshake machine salesman named Ray Croc entered into the picture. Ray was so impressed with the McDonald Brothers' operation that he convinced them to let him franchise their brand. And the rest, as they say, is history. On April 15th, 1955, Ray Croc opened the first franchised McDonald's in Des Plaines, Illinois. The golden arches were born, and they quickly became the most recognizable symbol of happiness and tasty food.

Under Ray's leadership, the brand expanded rapidly, with the 100th restaurant opening in 1959. The 1960s brought about some of McDonald's most beloved items and characters. In 1961, Ray Croc bought out the McDonald brothers, and in 1963, the iconic mascot Ronald McDonald made his debut. The famous Big Mac, which even today is the most popular item on the menu, was introduced in 1968.

As the 70s and 80s rolled in, McDonald's went international, with locations popping up from London to Tokyo. Soon, the golden arches became a symbol of American culture around the world. And here we are now, today, with McDonald's feeding more than 69 million customers per day. But with great success comes great competition. So how exactly did McDonald's manage to stay ahead of its rivals? Well, the secret answer lies in their business philosophy and their apparent immunity to recessions.

Let's dive down this rabbit hole right here. Things are about to get interesting, so pay attention. At the core of McDonald's business philosophy lies the QSC and V principle. What's that, you ask? Well, it's an acronym for Quality, Service, Cleanliness, and Value. So let's briefly explain each of them.

Quality: McDonald's is committed to using high-quality ingredients for their food, and they pay attention to that above anything else. There are high stakes in the food industry. Fun fact: they use around 3.4 billion pounds of potatoes annually to make their famous fries. Everyone knows they serve the best fries in the fast food industry. Sorry, KFC.

Now, as a result, they partner with trusted suppliers, maintaining strict standards and ensuring a consistent taste across the globe. So, no wonder so many people are choosing to eat at their restaurants every single day.

Service: Speed and efficiency are vital in the fast food world. McDonald's invests heavily in employee training and technology to ensure that customers receive top-notch service with a smile. They're always looking to enhance the customer experience, whether that's through their app, delivery services, or drive-thru innovation.

McDonald's even set a world record in 2017 for the quickest drive-through service, with an average time of just 189.99 seconds. And just as a side note here, it only takes 112 seconds on average for your Big Mac to end up on your plate after ordering it. That's what peak performance looks like!

They've embraced digital technology to improve the customer experience through mobile ordering, self-service kiosks, and even AI-powered drive-throughs. McDonald's is also known for experimenting with store formats, from McCafés to their "Create Your Taste" customizable burger concept. They're always looking for new ways to stay ahead of the curve and maintain their position as an industry leader.

Cleanliness: McDonald's understands the importance of a clean and hygienic environment for both customers and employees. They maintain strict cleanliness protocols in all of their restaurants, from the dining area to the kitchen, making sure you can enjoy your meal in a spotless place.

Interestingly, they have their own Hamburger University, where they train employees in best practices, including maintaining cleanliness and hygiene. Students attending Hamburger University undergo a variety of training methods, such as lectures, seminars, group discussions, and hands-on simulations. Some courses even make use of a fully functional McDonald's restaurant on campus to provide practical training and real-world scenarios.

These courses are also available in multiple languages and utilize state-of-the-art technology to deliver an engaging and effective learning experience. Upon successful completion of their coursework, graduates receive a degree in Hamburgerology, a testament to their expertise in McDonald's operations and management principles. Fun fact: since its inception, Hamburger University has seen over 275,000 graduates who have gone on to apply the knowledge and skills acquired during their training to their roles within the McDonald's organization.

And last but not least, Value: McDonald's strives to offer delicious food at affordable prices. They were one of the first fast food chains to introduce a value menu in the early 1990s, offering a selection of items for just $1 each. Even today, they're still constantly working on their menu, introducing new items and promotions, and ensuring that you get the best bang for your buck.

Another important factor in McDonald's business philosophy is its unwavering focus on customers. They're always looking to understand and cater to the evolving tastes and preferences of their diverse customer base. This has led to unique, religion-specific menu items, like the McArabia in the Middle East, the Maharaja Mac in India, and the Ebi Burger in Japan.

In 2014, McDonald's launched the "Our Food, Your Questions" campaign, which invited customers to ask any questions they had about McDonald's food, ingredients, and sourcing. This transparent initiative aimed to address misconceptions and engage in an open conversation with customers, demonstrating the company's dedication to addressing concerns and building trust. The campaign allowed customers to submit their questions through social media platforms, and McDonald's responded with honest, informative answers.

This initiative fostered a closer relationship with customers and showcased McDonald's willingness to listen, adapt, and improve based on their feedback. The campaign's success further reinforced the brand's focus on customer satisfaction and transparency as key elements in its ongoing relationship with patrons.

But some might say this is too general and simply not enough to compete long-term with other emerging restaurants while still maintaining dominance over the fast food market. And you know you're right. McDonald's has a unique advantage over its competitors: it's simply recession-proof.

Now, this might seem totally counterintuitive, but fast food restaurants have historically performed very well during economic downturns. When money is tight, people tend to cut back on expenses, and dining out is often one of the first things to go out the door. Fast food restaurants like McDonald's offer budget-friendly options, allowing people to still enjoy a meal without breaking the bank.

But this is just one factor. Let's turn our attention to the 2008 financial crisis. Now, this was a time of great economic turmoil, but McDonald's managed to not only survive but thrive. And how did they do it? Well, here are some key factors:

Value Proposition: McDonald's doubled down on their value offerings during the crisis, introducing the dollar menu and other wallet-friendly options. This strategy attracted cash-strapped customers who were still looking for affordable meal solutions.

Global Diversification: With locations in over 100 countries, McDonald's global presence helped to cushion the impact of the recession. Some markets were hit harder than others, but overall, the worldwide reach allowed them to stay afloat.

Adaptability and Innovation: McDonald's didn't just rely on their existing business model; they continued to innovate and adapt, making improvements to their menu, stores, and marketing efforts. For example, they expanded their breakfast and coffee offerings through McCafé, attracting a new segment of customers.

But there's one more detail that makes McDonald's stand out from its competitors, but we'll talk more about that later in the video. For now, let's briefly dissect their business model.

So, the McDonald's business model is built on a combination of franchising, standardization, economies of scale, real estate ownership, menu adaptation, marketing, and convenience. This blend of strategies has helped McDonald's become one of the largest and most successful fast-food chains in the world.

Franchising is another critical component of McDonald's expansion strategy. Over 90% of McDonald's stores are franchised, meaning that independent operators pay fees and royalties to McDonald's in exchange for using their brand, systems, and support. This approach allows McDonald's to grow rapidly with limited capital investment.

Standardization is another key aspect of McDonald's success. The company maintains consistent menu offerings and quality across all locations through a strict standardization of processes, ingredients, and equipment. This ensures customers enjoy a similar experience at any McDonald's, regardless of the location.

Economies of scale allow McDonald's to reduce costs and maintain consistent quality. By leveraging its size, McDonald's negotiates better prices for ingredients, equipment, and supplies. The company also benefits from centralized marketing efforts and supply chain management.

Menu adaptation helps McDonald's cater to regional tastes and preferences while maintaining a unified menu. The company adapts its offerings to suit local markets, attracting a broader customer base and staying relevant in diverse regions. This flexibility sets McDonald's apart from competitors and contributes to its global appeal.

And perhaps most importantly, real estate ownership provides McDonald's with additional revenue streams. It's the most important aspect that makes its stock immune to recessions. The company often owns the land and buildings for its stores and charges rent to franchisees. McDonald's sometimes acts as a landlord to other businesses operating near its locations, further diversifying revenue.

However, in some countries, like China for example, McDonald's real estate ownership model does not work. As we all know, China is a communist country, and this means all the land is owned by the state. Because of this, companies can only obtain land-use rights for a specific period. This restriction made it challenging for McDonald's to own land and buildings outright, limiting its ability to follow its traditional real estate model.

So, what McDonald's decided to do instead was shift toward leasing properties instead of owning them. This approach reduces upfront costs and financial risks associated with property ownership. In some cases, McDonald's also collaborated with local partners who have a better understanding of the real estate market and can help secure prime locations. This is possible because the brand relies on local management teams to take care of these things for them.

Now, one of the crucial aspects of McDonald's business strategy in China is forming strategic partnerships with local companies. These alliances not only help the fast-food giant expand its presence but also provide valuable insights into the Chinese market. In 2017, McDonald's took a significant step by selling a majority stake in its mainland China and Hong Kong businesses to CITIC Limited, a leading Chinese conglomerate, and the Carlyle Group, a renowned global investment firm.

This partnership, known as the Vision 2022 plan, helped McDonald's open 2,000 new restaurants in China by the end of 2022, targeting a total of 4,500 outlets. And they don't plan to stop there. McDonald's announced recently they plan to have the biggest expansion ever. This partnership has been instrumental in accelerating McDonald's growth in China, as both CITIC and Carlyle Group have extensive knowledge of the local market and strong business networks, especially within the communist state.

McDonald's China, the local franchise of the global quick-service restaurant (or QSR) chain, said its business recovery in the first quarter of this year is encouraging it to accelerate its expansion in the country through long-term investments, as well as adopt innovative practices to bring more value to consumers. Late last year, in its fourth-quarter financial report, the company announced it would open a record 900-plus new restaurants in China this year.

Now, market observers said that this could effectively mean that China will see a new McDonald's QSR open every 10 hours on average this year. Globally, McDonald's plans to open around 1,900 new restaurants this year. Crazy, we know, especially when you consider that we're in a global unconfirmed recession. The fact that nearly half of the restaurants will be in China shows the importance McDonald's attaches to the country, its second largest and fastest-growing market. By the end of last year, the company was operating nearly 5,000 restaurants in China, meaning the figure will swell by 18% by the end of this year.

So, by collaborating with these firms, McDonald's basically ensured that they can smoothly navigate the unique challenges and opportunities that the Chinese market presents, such as competition from local fast food chains, varying consumer preferences, and rapidly changing economic conditions.

You know what they say: where there's money to be made, there's also a way. McDonald's has mastered the art of integrating into local cultures because of their flawless business model. This allows them to be literally anywhere on the globe, to the point where there's even a Big Mac index.

And for those who don't know, in simple terms, the Big Mac index is like a measuring stick that helps us to see if money from different countries can buy the same amount of stuff by comparing the price of a McDonald's Big Mac burger in different countries. We can tell if one country's money is worth more or less than another's.

Allow us to explain. Let's say you're in the United States and you want to buy a Big Mac. The burger will cost you $5.50. Now imagine you're traveling all the way to the United Kingdom and you want to buy a Big Mac there. Well, in the UK, the burger costs £4. In this example, the Big Mac index, in a nutshell, becomes a fun way to compare the values of the US dollar and the British pound.

We use the price of the burger in both countries to figure out if one currency is worth more or less than the other. Let's start out by figuring out how many dollars it would take to buy the Big Mac back in the UK. Well, we divide the US price, $5.50, by the UK price, £4, which gives us 1.375. So, according to the Big Mac index, 1 pound should equal $1.37.

Now let's look at another example. Imagine you're in Japan and you want to buy a Big Mac. Well, here the burger costs 550 Yen. We'll compare this to the US price, which is $5.50. So, using the Big Mac index, we want to find out how much Japanese Yen it would take to buy the same Big Mac in the US. So we divide the US price, $5.50, by the Japanese price, 550 Yen, which gives us 0.01. So, according to the Big Mac index, $1 should be equal to 100 Yen.

Easy math—you just learned the first lesson in Forex trading. You're welcome, my friend! So, the Big Mac index is a fun and simple way to see how the value of different currencies can compare using the price of a burger. Props to The Economist for creating this fun tool.

Anyway, as you can see, McDonald's is not only about selling tasty food—it's a complex machine that works smoothly on different fronts. So now, let's just imagine that you want to open a McDonald's franchise. Here's what the entire process would look like and the steps you would need to take.

A McDonald's franchise is like a partnership between you and the McDonald's corporation. You open and operate a McDonald's restaurant while the corporation provides you with the brand, training, and support to make your business successful. The process begins with researching and understanding the McDonald's franchise system. So dive into their website! You read up on articles and even chat with existing franchises to familiarize yourself with the business.

Once you're ready, submit an application on the McDonald's website, providing your personal and financial information. Now, McDonald's has certain requirements, like a net worth of at least $500,000 and $250,000 in liquid assets. Now that might sound like a lot of money, but remember we're talking about one of the biggest brands in the world here. If your application is approved, you'll be invited for interviews with McDonald's representatives who will assess your business acumen, commitment, and compatibility with their brand.

And if all goes well, you'll receive a formal invitation to become a McDonald's franchisee! So, your next step is to undergo a comprehensive training program, which lasts between 12 to 18 months and covers everything from restaurant operations to management skills. This training takes place at various McDonald's locations to give you a well-rounded experience.

Now, with the training under your belt, you'll collaborate with McDonald's to find the perfect location for your restaurant. Their experts in real estate and market research will ensure your chosen site sets you up for success. Then, once your location is secured, you'll work with McDonald's to design and construct your restaurant, following their standardized layouts and equipment packages.

And after construction, you'll assemble and train your team, gearing up for the grand opening of your very own McDonald's restaurant. As you become a part of the global McDonald's gigantic family, you'll serve iconic menu items to your community while benefiting from ongoing support in marketing, training, and operational assistance.

And all of that sounds simple enough on paper, but there are some details that most people overlook. So, in addition to meeting the financial requirements, you'll also need to pay a one-time franchise fee of around $45,000. The total investment for starting a McDonald's restaurant can range from $1 million to $2.3 million, which covers construction, equipment, and the initial inventory.

As a franchisee, you'll also pay ongoing fees, such as a monthly service fee, usually about 4% of your gross sales, and a monthly contribution to the advertising fund—again, about 4% of gross sales. And as mentioned earlier, most McDonald's locations are owned by the corporation, so you will lease the land and the building from them for a term of 20 years.

The rent is typically based on a percentage of your restaurant's sales, and it's important to maintain high-quality service and cleanliness standards, as McDonald's strictly enforces these to ensure brand consistency and positive customer experiences. A single restaurant can cause billions of dollars in lost profit. Remember, competition is fierce, and there's no room for mistakes.

Franchisees are granted an exclusive territory to operate their restaurant from, which protects them from direct competition with other McDonald's locations in your designated area. As we said, the franchise agreement typically lasts about 20 years, after which you may have the option to renew, depending on your performance and adherence to the agreement. If you decide to sell your franchise, you will need McDonald's approval, and the buyer must meet their requirements as well.

So, as you can see, Alexer, besides perfecting its menus and carefully adjusting its prices based on the current economic conditions, during all of these years of growth, McDonald's has perfected its land acquisition and construction process. This guarantees them revenue, regardless of how many burgers they sell. By the time the building is finished and the first fries are cooked, they're already making a profit, and even if the franchise fails, they could always sell the land and the building for a profit.

When it comes to business models like McDonald's, once the snowball gets going, it's hard to stop. Because essentially, they own and set the standard for the market, and that's why Americans are never more than 115 miles away from a McDonald's. This is why many consider McDonald's to be a recession-proof business. No matter how bad the times were or the cultural barriers that stood in the way, McDonald's always found a way to thrive and be insanely profitable. And that's why McDonald's is taking over the world, and their competition can only dare to stay in their way.

And that's all for today, Alexer. This video was tons of fun to make, and we hope you enjoyed watching it as much as we enjoyed making it. We put a lot of working hours into making these videos, so if they helped you to learn something new, make sure to return the favor by tipping us with a like and a share. Your support is highly appreciated as we strive to step up the game and bring you the best, most relevant information out there.

Now, before we end this video, here's a question for those of you who are still watching: the true Alexer out there, would you ever like to own a McDonald's franchise one day? If so, where would you put it? Drop your answer in the comments below. We're always curious how many of you guys would go for that kind of business model. And as always, thanks for watching! If you dare to learn more, hey, check out this video next.