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CramersPosse Sam Young Jason Linder Alex Vong. Company Profile. First McDonald’s opened 1940 in San Bernardino, CA (Dick and Mac McDonald) “Speedee Service” (1948) set standard for fast food First franchised restaurant opened 1955 => Founding of the McDonald’s Corporation
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Company Profile • First McDonald’s opened 1940 in San Bernardino, CA(Dick and Mac McDonald) • “Speedee Service” (1948) set standard for fast food • First franchised restaurant opened 1955=> Founding of the McDonald’s Corporation • Today:Headquarters: Oak Brook, IL31,000+ locations worldwide>1.5 million employees>$20B annual revenue
Business Overview Franchises the majority of its restaurants Franchises generate revenue for the corporation through rent, commissions, and initial fees Avoids having to invest a significant amount of capital in its restaurants
Business Overview (cont’d) • Three main business strategies: • Predicting and responding to changes in consumer tastes and preferences, demographics and spending patterns. • Adjusts menu accordingly • Maximizing sales at existing restaurants • Remodeling restaurants, increasing kitchen efficiency, streamlining drive-thru ordering • Opening new restaurants • About 1,000 new units planned for 2008 • Total number of restaurants growing at 1%-2% per year
Industry Analysis • Industry: Restaurants; Consumer Discretionary Goods • Food and dining experience • Demand varies with disposable income • Substitute with home-cooking • Sensitivity related to opportunity cost
Technical Analysis Buy signals
Technical Analysis (cont’d) Sell signals Buy signals CramersPosse purchased MCD on 4/28 Perhaps too late…
Strengths • Many locations • International presence • Perpetual demand for fast food • Reliable, quick, efficient, CHEAP • Dollar menu especially popular • Wide variety of foods to appeal to a wide range of consumers
Weaknesses • Serves largely unhealthy food (see Threats) • Dining experience not special • Ubiquity • Convenience food, not pleasant dining experience • Diminishing returns to operating single brand? • New types of restaurants needed?
Opportunities • Spin-off brands • New restaurants offering richer, more satisfying customer experience • Economies of scope advantages? • Healthier products • Compete with Subway and “healthy fast food” alternatives
Threats • Health concerns • Public becoming more health-conscious about food • Bad publicity about McD’s and health • Super Size Me, Fast Food Nation • Competition • Competitors eating into profit margins through promotions and value pricing strategies • Smaller fast food restaurants growing in popularity (e.g., In-N-Out, Sonic)
Recommendation • Recommendation: HoldMcDonald’s has a “tried and true” business model with a strong international presence. It is very solid for those reasons. On the flipside, its maximum growth potential may be limited (extensive, rather than intensive growth).