MCDONALD’S CORPORATIONSWOT ANALYSIS 2017

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ABOUT MCDONALD’SName McDonald’s Corporation

Logo

Industries served Restaurants (McDonald’s, McCafé, McExpress, McStop)

Geographic areas served Worldwide (36,525 restaurants in 119 countries)

Headquarters Oak Brook, Illinois, United States

Current CEO Steve Easterbrook

Revenue US$25.413 billion (2015) decreased 7.4% over US$27.441 billion (2014)

Profit US$4.529 billion (2015) decreased 4.8% over US$4.758 billion (2014)

Employees 420,000 (2016)

Main CompetitorsBurger King Worldwide, Inc., Darden Restaurants, Inc., Doctor's Associates, Inc., Domino’s, Inc., Yum! Brands, Inc., Starbucks Corporation, Wendy’s Company and many other restaurant chains.

McDonald’s Corporation business overview from the company’s financial report:

“The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant menu of quality food and drinks sold at various affordable price points in more than 100 countries.

Types of franchises:• conventional franchise• developmental license• affiliate

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BUSINESS DESCRIPTION (1/3)“ ”

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BUSINESS DESCRIPTION (2/3) “ ” • The Company views itself primarily as a franchisor, with the vast

majority of McDonald’s restaurants (approximately 82%) owned and operated by independent franchisees.

• Franchising enables an individual to own a restaurant business and maintain control over personnel, purchasing, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources.

McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes. In addition, McDonald’s tests new products on an ongoing basis.

McDonald’s menu includes:

• Burgers• Chicken & Sandwiches• Salads & Wraps• Snacks & French Fries• Desserts & Shakes• Beverages

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BUSINESS DESCRIPTION (3/3) “ ”

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STRENGTHS

1. Diversified income streams

S WO T

McDonald’s doesn’t have to

rely on its company-owned restaurants or franchisees to generate the majority of its

revenue.

Figure 1. McDonald’s and its competitors’ revenue breakdown in 2015 (revenue in US$ billions)

CompanyCompany

sales% of total revenue

Revenue from

franchisees

% of total revenue

Total revenue

McDonald’s 16.488 64.9 8.925 35.1 25.413

Yum!

Brands11.145 85 1.960 15 13.105

Burger King 2.169 53.5 1.883 46.5 4.052

Wendy’s 1.438 76.7 0.431 23.3 1.870

Source: The respective companies’ financial reports[1][2][3][4]

McDonald’s income is also much more geographically diversified than its rivals.

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STRENGTHS

CompanyIncome from

the U.S.% of total revenue

Rest of the world

% of total revenue

Total revenue

McDonald’s 8.559 33.7 16.854 66.3 25.413

Yum! Brands 6.909* 52.7 6.196 47.3 13.105

Burger King 0.982 24.2 3.070 75.8 4.052

Wendy’s 1.749 93.5 0.121 6.5 1.870

Figure 2. McDonald’s and its competitors’ geographic revenue breakdown in 2015 (revenue in US$ billions)

Source: The respective companies’ financial reports[1][2][3][4] (Yum! Brands revenues are for China

not for U.S.)

S WO T

1. Inconsistent menus in different countries

• While a localized menu is one of the key strengths of McDonalds, it’s also one of the chain’s weaknesses.

• Due to menu differences between different franchisees and directly-owned restaurants, people can no longer expect the same level of service or menu in each McDonald’s restaurant.

• Often, you can’t order the same deli wrap or a McRib sandwich in every restaurant in your town.

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WEAKNESSESS WO T

5. Growing middle class in China

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IN 2015, MCDONALD’S OPENED MORE THAN 200 RESTAURANTS IN CHINA.

OPPORTUNITIESS WO T

McDonald’s still doesn’t match the

growth of Yum! Brands or Subway

stores in China.

China’s middle class is growing significantly and will account for

70% of China’s 1 billion population.

1. Intensifying competition

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THREATS

McDonald’s Key Rivals

S WO T

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THREATS

Chick-fil-A and Chipotle are growing on average by 12.7% and ~20% annually in

the U.S.

S WO T

• Burger King and Wendy’s are constantly introducing new meals to directly compete with McDonald’s offerings.

• Starbucks is moving away from only selling coffee to becoming a destination for breakfast and lunch.

• U.S. fast food industry grows very slowly, yet some chains expand rapidly, taking market share from McDonald’s.

1. McDonalds (2016). Annual Reports. 2015 Annual Report. Available at: http://www.aboutmcdonalds.com/mcd/investors/financial-information/sec-filings.html Accessed January 8, 2017

2. Yum! Brands (2016). Annual Reports. 2015 Annual Report. Available at: http://www.yum.com/investors/secfilings.asp Accessed January 8, 2017

3. Burger King (2016). Annual Reports. 2015 Annual Report. Available at: http://investor.rbi.com/en/investor-information/sec-filings.aspx Accessed January 8, 2017

4. The Wendy’s Company (2016). SEC Fillings. Annual Fillings. Available at: http://ir.wendys.com/phoenix.zhtml?c=67548&p=irol-sec Accessed January 8, 2017

5. Interbrand (2016). Best Global Brands 2015. Rankings. Available at: http://interbrand.com/best-brands/best-global-brands/2015/ranking/ Accessed January 8, 2017

6. Forbes (2016). The World’s Most Valuable Brands. Available at: http://www.forbes.com/powerful-brands/list/ Accessed January 8, 2017

7. McDonald’s (2016). What makes McDonald’s. Available at: http://www.mcdonalds.co.uk/ukhome/whatmakesmcdonalds/questions/food/menu/why-is-the-mcdonalds-menu-different-in-different-countries.html Accessed January 8, 2017

8. The Moscow Times (2015). For First Time Ever, McDonald's Closes a Restaurant in Russia. Available at: http://www.themoscowtimes.com/business/article/for-first-time-ever-mcdonalds-closes-a-restaurant-in-russia/519066.html Accessed January 8, 2017

9. Patton, L. (2014). Have We Reached Peak Burger? Available at: http://www.businessweek.com/articles/2014-09-04/fast-food-chains-growth-in-u-dot-s-dot-may-have-peaked#p1 Accessed January 8, 2017

10.QSR Magazine (2014). The Drive-Thru Performance Study: Average Service Time. Available at: http://www.qsrmagazine.com/content/drive-thru-performance-study-average-service-time Accessed January 8, 2017

11.Bloomberg (2014). McDonald’s Costly Burgers Send Diners to Fancier Rivals. Available at: http://www.bloomberg.com/news/2014-10-20/mcdonald-s-costly-burgers-send-diners-to-fancier-rivals.html Accessed January 8, 2017

12.Motley Fool (2014). Once Cheap, Always Cheap: Why McDonald's Can't Raise Its Prices. Available at: http://www.fool.com/investing/general/2014/10/19/once-cheap-always-cheap-why-mcdonalds-cant-raise-i.aspx Accessed January 8, 2017 SLIDE | 12

SOURCES (1/2)

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SOURCES (2/2)13.Motley Fool (2014). 5 Reasons McDonald's Is Falling Apart Before Our Eyes. Available at:

http://www.fool.com/investing/general/2014/09/13/5-reasons-mcdonalds-is-falling-apart-before-our-ey.aspx Accessed January 8, 2017

14.ConsumerReports.org (2014). Best and worst fast-food restaurants in America. Available at: http://www.consumerreports.org/cro/magazine/2014/08/best-and-worst-fast-food-restaurants-in-america/index.htm Accessed January 8, 2017

15.Wikipedia (2015). McCafé. Available at: http://en.wikipedia.org/wiki/McCaf%C3%A9 Accessed January 8, 201716.Statista (2015). Food delivery industry in the U.S. - Statistics & Facts. Statistics and facts on the food delivery industry in the

U.S. Available at: http://www.statista.com/topics/1986/food-delivery-industry-in-the-us/ Accessed January 8, 201717.The Guardian (2014). McDonald's will let customers build their own burgers for the first time. Available at:

http://www.theguardian.com/business/2014/dec/08/mcdonalds-build-own-burgers-customers Accessed January 8, 201718.Marketline (2014). Company Profile. McDonald’s Corporation. Accessed January 8, 201719.Basu, E. (2014). Is McDonald's on the Right Track to Turn Around Its U.S. Sales? Available at:

http://www.fool.com/investing/general/2014/10/22/is-mcdonalds-on-the-right-track-to-turn-around-its.aspx Accessed January 8, 2017

20.Linshi, J. (2014). How Chick-fil-A Totally Crushed KFC, Popeyes. Available at: http://time.com/2993472/chick-fil-a-mcdonalds-kfc-growth/ Accessed January 8, 2017

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