UNIT 1 McDonald’s Business Model: ．．．．．．．．．．．．．．．．．．．．．．．．．．．．． The Three-legged Stool ．．．．．．．．．．．．．．．．．．．．Script McDonald‘s Corporation (MCD) is one of the leading ．．．．．．fast-food restaurant chains in the world, touching the lives of people every day. As the world‘s largest chain of restaurants, it primarily sells hamburgers, chicken, french fries, milkshakes, soft drinks, etc. The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald. Initially, they just owned a hotdog stand. But after establishing the restaurant they served around 25 items, which were mostly barbecued. It became a popular and profitable teen hangout.
Their introduction of the ―Speed Service System‖ in 1948 established the principles of the modern fast-food restaurant. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc on April 15, 1955.
In effect, Kroc opened his first and the overall ninth restaurant in Chicago, Illinois, and gave birth to McDonald‘s Corporation. In 1958, the restaurant chain sold its 100 millionth hamburger. In 1960, Kroc renamed his company as ―McDonald‘s Corporation‖. In 1961, Kroc convinced the McDonald brothers to sell the business rights to him in the company. Thus he purchased the brothers‘ equity for a
sum of $2.7million and led to its worldwide expansion.
As McDonald‘s expands successfully into many international markets, the company became a symbol of globalization and the spread of the American way of life. Its prominence also made it a frequent subject of public debates about obesity, corporate ethics and consumer responsibility.
Script ．．．．．．Tanya: It‘s the fast food chain with the iconic golden arches that have been spotted all over the world. Yes, we are talking about McDonald‘s. But did you know McDonald‘s, year after year, is voted one of the best places to work? We‘re looking today at this all-American company and what we can learn from its success. We‘re joined by Paul Facella, author of the book, Everything I Know About Business, I Learned At McDonald’s: The Seven Leadership Principles That Drive Breakout Success. Paul was a former McDonald‘s executive who has the behind-the-scenes story on the world‘s most successful restaurant organization. Hi there, Paul. Thanks for joining us.
Paul: Thank you, Tanya. Nice to be here.
Tanya: Now, while you no longer work for McDonald‘s, I understand that the company has had a huge impact on your life. Tell us why you decided to write a book on business lessons that you
learned from a fast food chain.
Paul: Sure. Well, not only myself but literally hundreds of thousands of people that went to the McDonald‘s system and were guided by a lot of the principles. When I left McDonald‘s, I went into consulting and, and one of the surprises I had was many of the organizations, both large and small, was the fact that some of the basic principles, some of the foundations that good organizations need to be successful, weren‘t there. And I was constantly being asked about, ―Well, tell me how you did in McDonald‘s‖. And my thinking was, ―Gee, I‘ll write a book about it and help my client base and I‘ll be able to help them move forward with it.‖ So that was the thinking behind it. ``````
Tanya: Well, we’re gonna get into some of those secrets of success. I wanna start by asking you, you know, obviously a lot of people know McDonald’s for their burgers and Big Macs. But, I’m sure a lot people will be surprised to know that it has one of the highest corporate employee retention rates of any company, I mean people assume, fast food chain, people just want to get in and get out. What makes McDonald’s so successful?
Paul: I think, I think there’s a number of factors, but I think the retention piece is about McDonald’s, when you work, there it’s really about a meritocracy. It is about advancement that is based on
achievement. And from the first crew person moving in all the way up to store manager, all the way up to the present CEO, Jim Skinner, who was a crew person 35 years ago and moved into, after 35 years, moved into the CEO ranks. So it’s always been a progression of opportunity for people, and I think that's one of the great things that keeps folks there. Every CEO has gone through the ranks.
Tanya: Is there any crossover from those who work on the server side to the executive side, or you have to go back to school for that? Paul: Oh, no, all the time, I mean, I started as a 16-year-old crew person. Mike Quinlan, who’s a CEO for 14 years started in the mail room, so there’s plenty of crossover.
Script ．．．．．．Since setting up the first McDonald‘s in China, the Western restaurant chain has been expanding steadily and successfully. So far, other than the home market – the United States – China is the No. 1 growth market for McDonald‘s, with over 1000 restaurants and over 60,000 employees.
China also represents one third of all capital expenditures in the Asia-Pacific, Middle East and Africa region, where the fast-food giant is in 37 markets. According to Skinner, vice-chairman and CEO of this world‘s largest fast-food company, ―We‘ve been steadily growing with China for the past 20 years and are very excited for
what the future holds,‖ he says.
In 1990, McDonald‘s chose Shenzhen, a pioneer Special Economic Zone in Guangdong province bordering Hong Kong, to open its first 500-seat store in the developing market. McDonald‘s quickly won over the local consumers, due to its many attractions like its Ronald McDonald clown, Golden Arches or the yellow ―M‖ logo, Big Mac, the smiling attendants and the quick service. The success of the Shenzhen outlet prompted McDonald‘s to expand its chain nationwide. And McDonald‘s has not stopped from aggressively increasing the number of its outlets in China. The mainland‘s fast-food market is growing at a rate of 16 percent per year. ―We are going to continue our growth at a faster rate in China. China is a huge market with great opportunities for businesses around the world, and it's no different for McDonald‘s,‖ Skinner adds.
Script ．．．．．．Tanya: And in your book, you‘ve broken down some of the keys, the fundamental keys of McDonald‘s success, in terms that can be applied to other companies. So, let‘s go through these one by one. The first you say is honesty and integrity, and this obviously comes at a time when so many people have lost trust in Wall Street. How can we apply this?
Paul: Yeah, I think, it‘s, well, honesty and integrity started very