McDonalds

McDonalds

McDonald's Corporation is the world's largest chain of fast food restaurants. Although McDonald's did not invent the hamburger or the fast-food restaurant, their name has become synonymous with both.

Corporate overview

McDonald's Corporation operates more than 30,000 quick-service restaurant businesses under the McDonald's brand, in 121 countries around the world. In addition, the Company operates other restaurant brands, such as Aroma Café, Boston Market, Chipotle Mexican Grill, Donatos Pizza and Pret A Manger. Revenues for 2001 were $14.87 billion, with net income at $1.64 billion.

The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees, supplies and percentage of sales, McDonald's also collects rent. As a condition of the franchise agreement, McDonald's owns the property on which most McDonald's franchises are located. The corporation extracts income from the franchises in the form of rents, which are only partially linked to sales. As Harry J. Sonneborne, one of McDonald's founders put it, "We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent."

History

The first McDonald's restaurant was founded in 1940 by brothers Dick and Mac McDonald in San Bernardino, California. The McDonald's restaurant gained fame after 1948, when the brothers implemented their innovative "Speedee Service System", an assembly-line hamburger construction and self-serve operation.

In 1954, entrepreneur and milkshake-mixer salesman Ray Kroc became interested in the McDonald's restaurant when he learned of its extraordinary capacity. Upon seeing the restaurant in operation, he approached the McDonald brothers with a proposition to open new McDonald's restaurants, with himself as the first franchisee. Kroc worked hard to sell McDonald's. He even attempted to prevail on his wartime acquaintance with Walt Disney, in the failed hope of opening a McDonald's at the soon-to-be-opened Disneyland. Eventually he opened his first restaurant in Des Plaines, Illinois. It was an immediate success.

Kroc's new company was originally named "McDonald's Systems Inc.", and was founded March 2, 1955. In 1960, the company was renamed "McDonald's Corporation".

One of Kroc's marketing insights was his decision to market McDonald's hamburgers to families, and particularly to children. In the early 1960s, a Washington, DC McDonald's franchisee named Oscar Goldstein sponsored a children's show called Bozo's Circus, starring a clown played by Willard Scott. When the show was cancelled, Goldstein hired Scott as McDonald's new mascot, "Ronald McDonald". The character was eventually spread to the rest of the country via an advertising campaign, although it was decided that Scott was too plump for the role.

Under Kroc's agreement with the McDonald brothers, he was responsible for the entire expansion process, while the brothers retained control of the production process and a share of the profits. By 1961, Kroc was frustrated with the arrangment. After some negotiation, the comfortably wealthy McDonald's brothers agreed to sell Kroc the business rights to their operation for $2.7 million, which was borrowed from a number of investors (including Princeton University). The agreement allowed the brothers to keep their original restaurant-- renamed "The Big M"-- which remained open until Kroc drove it out of business by opening a McDonald's across the street. Had the brothers maintained their original agreement, which granted them 0.5% of the chain's annual revenues, they would have been collecting nearly $180 million per year today.

Criticism

As the world's largest fast-food company, McDonald's has been the target of criticism for such alleged problems as exploitation of entry-level workers, ecological damage caused by agricultural production and industrial processing of its products, selling unhealthy (non-nutritious) food, production of packaging waste, exploitative advertising (especially targeted at children), and contributing to suffering and exploitation of livestock.

McDonald's holds the record for being a party to the longest civil trial in British history. In that action, often referred to as the "McLibel" case, the company sued unemployed environmentalists Helen Steel and David Morris for distributing allegedly libelous pamphlets on London streets. Although McDonald's has since won partial victories in British courts, the case has become a source of massive embarrassment to the company. Despite the fact that McDonald's has refused to collect the ₤40,000 awarded to it by the courts, the case remains on appeal to the European Court of Human Rights.

The Company has also been a target of radical environmentalists such as José Bové. In addition, certain outlets in the Middle East have been subject to an increasing number of arson attacks and other acts of violence because the business represents, to the attackers, American business and culture at its worst.