Becoming: McDonald's

No ordinary burder

“McDonald's revolutionized fast food. They introduced a way to eat food without knives, forks or plates. Most fast foods can be eaten while steering the wheel of a car and the restaurants are usually drive through.”

Eric Schlosser, author of Fast Food Nation[i]

A data brief published by the National Center for Health Statistics in late 2018 showed that between 2013 and 2016, around 37% of US adults consumed fast food on an average day[ii]. The prevalence of fast food in people’s lives, not just in the United States but globally, is to a large part attributable to one fast food business: McDonald’s.

The brand value of the world’s largest fast-food enterprises confirms this. In 2018, McDonald’s had a brand value of approximately US$126 billion. Burger King, which might be considered McDonald’s closest rival in selling hamburgers to the masses, had a brand value of just over US$6.5 billion – a little over 5% of that of McDonald’s[iii].

Most of the fast-food brands among the top 10 have implemented at least some, if not all, of the methods introduced by McDonald’s since it was founded in 1950. In the middle of the 20th century, these methods allowed them to outgrow incumbents. In the 21st century, it’s almost impossible to think of a fast-food company succeeding without them:

McDonald’s created a fast-food system

McDonald’s annual report is remarkable for several reasons, not least because it may be the only annual report that exists which capitalizes the word ‘System.’[iv] Nothing can be spontaneous about how it operates when over 90% of its locations are run by franchisees. Ironically, by far the most capitalist restaurant in the world is also the most centrally-planned.

Customers play their part in this system as much as franchisees and employees. Richard McDonald, one of the company’s co-founders, said: “if we gave people a choice, there would be chaos.”[v] To this end, the menu was initially streamlined to just 9 items. Although the menu subsequently expanded, it’s small enough for most people to remember every available product.

McDonald’s takes a much longer-term horizon than its peers

In 1976, George Cohen, the then President, and CEO of McDonald’s, broached the subject of entering Russia with his restaurant chain. This led to a series of talks over the following 12 years, eventually culminating in an agreement in 1989, leading to the opening of McDonald’s first Russian outlet in 1990.[vi] This kind of long-term planning is unprecedented in any form of retail.

By taking a much longer-term view than any of its competitors, McDonald’s was able to crack a difficult market well in advance. Burger King, by contrast, opened its first restaurant in Russia in 2010.[vii] By the time its closest rival had entered the market, McDonald’s already opened 290 outlets – a numerical advantage which it holds to this day.

It knew what it wanted and worked backward

In the late 1970s, people consumed chicken in the same manner in which they had done so for centuries. Then McDonald’s invented the chicken nugget. As Eric Schlosser notes: “The chicken nugget changed the way Americans ate chicken. The overwhelming majority of chicken sold is as chunks and processed meat as opposed to whole birds.”[viii]

The chicken nugget was the answer to the question: ‘how do we make bite-sized chicken?’ Bringing them to market involved overcoming a range of technical difficulties and even ensuring the price of chicken through sophisticated forward contracts.[ix] The scale of the challenge was exemplified by KFC, which only introduced its first chicken nugget four years later.

[i] See: https://www.cbsnews.com/news/americans-are-obsessed-with-fast-food-the-dark-side-of-the-all-american-meal/


[ii] For further reading, see: https://www.cdc.gov/nchs/products/databriefs/db322.htm


[iii] See: https://www.statista.com/statistics/273057/value-of-the-most-valuable-fast-food-brands-worldwide/


[iv] McDonald’s Corp (2018). 2017 Annual Report.


[v] Love, J.M. (1995). “McDonald’s: Behind the Arches.” Bantam Publishing.


[vi] Love, J.M. (1995). “McDonald’s: Behind the Arches.” Bantam Publishing.


[vii] See: http://interfax.com/newsinf.asp?pg=10&id=793904


[viii] See: https://www.cbsnews.com/news/americans-are-obsessed-with-fast-food-the-dark-side-of-the-all-american-meal/


[ix] For further reading, see: https://www.cnbc.com/2018/05/03/how-ray-dalio-helped-launch-mcdonalds-chicken-mcnugget.html