McDonald's money-making model revealed

When it comes to McDonald's, there are very few people who don't know it.

From October 8, 1980, McDonald's opened its first store in Shenzhen to date, the world-class restaurant giant has opened 3,000 chain stores in China, all over the streets of China's cities.

The golden arches that can be seen from a distance, the uniform red and yellow store decoration, the burger, fries, chicken nuggets, and Coke products sold to the public, McDonald's has y integrated into people's lives with its unique brand image.

But if someone told you that McDonald's doesn't make money selling burgers, fries, and Cokes, would you believe them?

Harry J. Sonneborn, the first president of McDonald's (1959-1967), once told Wall Street investors: We are not a restaurant company, but a real estate company, we simply through the hot burgers to attract the attention of franchisees as a way to get their rent money.

Search McDonald's on Baidu for what it does for a living, and you'll also see a variety of different revenue streams other than selling burgers.

McDonald's money-making model can essentially be categorized into two models: making money through direct operations and making money through franchising. The direct mode of making money, that is, McDonald's restaurant is self-operated, mainly through the sale of products to obtain revenue and profits; franchise mode of making money, that is, McDonald's through the provision of brand authorization, store operations and management, as well as the lease of the store premises to obtain revenue and profits, that is, by earning want to make money to obtain profits. To be more thorough, McDonald's money-making model has the following three aspects

First, to make money by selling physical products such as burgers, fries, beverages, toys, etc.

Second, to make money by licensing the right to use the brand as well as charging fees for the operation and management of the stores;

Third, to make money in the form of leasing out the premises where the stores operate to obtain rent.

An analysis of data from a McDonald's financial report in 2016 shows that for the whole of that year, 50% of its profits came from the contribution of real estate rentals, 40% of its profits came from brand licensing, and only 10% of its profits came from the products it sold in its restaurants.

01

Products to make money , mainly by the main products and ancillary products to achieve, the main products are burgers, fries, drinks, fruit pies, etc., ancillary products have toys, because toys McDonald's was also once considered to be the world's largest total number of stores of the chain of toys.

McDonald's every product behind the hot money, are because of the early in the product development invested a lot of time and money, basically every product development cycle of more than 10 years, but also in exchange for 50 years of life cycle.

2021 today many people will be accustomed to point of McSpicy Chicken Casserole or McSpicy Chicken Wings, the earliest time to market is 1998, the plate of roasted chicken thighs Fort is listed on the market in 2002, these are McDonald's specifically for the Chinese customer R & D and production, to the present the longest time is close to 25 years, the shortest is also close to 20 years. Other products, such as the McFish in 1960, the Big Mac in 1967, the Apple Pie in 1970, the Eggs Full of Points in 1972, and the Happy Paradise in 1979, are all still selling like hotcakes.

Product profits are largely contributed by fries, fruit pies, beverages, and toys, with the burger essentially serving as a big lead-in pop-up that doesn't make much money. Drinks with the use of Coke, Sprite and bottled drinks bought in the supermarket is produced by Coca-Cola, the product itself is not very different, but with McDonald's cups of Coke 8, 9 yuan price is about three times the price of the bottle, which is a very important source of profit.

Nutrition Nibbles, a food survey industry research organization, gave a data show McDonald's sold 3 billion Happy Land packages that year, and toys sold through this package up to 1.5 billion, McDonald's toys are mainly centered around the image of Ronald McDonald, Big Bird Sisters, Milkshake Big Brother, and Burger Burger Four Little Fortunes, and the product designs hand-me-downs, toothbrush holders, and pencil cases.

In recent years began to cooperate with a large number of popular IP, such as "Super Mario", "Thomas the Train", "Love Pets", "Little Yellow Man", "Angry Birds", "HELLO KITTY" and so on these toys not only attracted the children to go to McDonald's to consume, but also caused a large number of collection of hot, so it is not an exaggeration to say that McDonald's is a master of the product management.

02

Franchising to make money , mention franchising, we have to talk about Ray Kroc, this is called the father of McDonald's people.

At the end of the last century, the United States Roosevelt's New Deal began a large number of highway construction, convenient transportation conditions make the number of U.S. people traveling by car to dine has also increased rapidly, directly giving rise to a highway on both sides of the service area of the rapid development of fast food and beverage industry.

Ray Kroc is also in the service area on both sides of the highway to these restaurants to promote milkshake mixers, was McDonald's Brothers at once ordered 8 automated milkshake machine hit, because at that time most of the food and beverage outlets are ordering 1, at once, the amount of 8 units so that Ray Kroc was very surprised to enter the back of the McDonald's kitchen to understand that McDonald's Brothers own research and development of high-speed service system products (production of The McDonald's brothers developed their own product high-speed service system (the production of burgers in the assembly line operation) to understand why the demand is so large, but also keenly aware that this will be a very great cause.

The movie "The Great Entrepreneurs" McDonald's Brothers called their employees to a playground, according to their pre-planned production process, so that each employee focuses on only one of the work, such as some people are responsible for grilling, some people are responsible for adding sides, some people are responsible for specializing in toasted buns, and thus the formation of a fast production line, greatly improving the efficiency of the product, McDonald's Brothers, this rapid assembly line named McDonald's restaurant high-speed service system.

In 1954, Ray Kroc decided to work with McDonald's Brothers to become a franchise agent intermediary for their restaurants, and opened his first McDonald's restaurant in Des Plaines, Illinois, in 1955, and served as a model store for other franchises.

With the QSCV business rules that Ray Kroc established for McDonald's, it allowed him to open a chain of more than 200 stores in just five years.

In addition to the ultimate service QSCV franchise operation manual, Ray Kroc also put forward a famous "three-legged stool theory", he believes that the development and growth of the franchise business can not be separated from McDonald's employees, franchisees, raw materials suppliers **** the same efforts, that is, the expectation that with the franchisees and suppliers The support of McDonald's as the center to form a force to promote the development and progress of each of his restaurants. So you can also often hear McDonald's franchisees say the words: this is your fight, but you are not alone.

It is also because of Ray Kroc's franchise concept, so that more business people want to join this McDonald's business, and up to a few million of the brand authorization franchise fee (McDonald's single-store franchise fee of about 2 million, the direct hit transfer of McDonald's operation for a period of time the franchise fee of roughly 8 million or so) as well as 6% of the McDonald's franchised restaurant revenue as an operating management fee each year (if you Operating McDonald's restaurant turnover is 20 million a year, then you need to McDonald's headquarters to turn over 1.2 million management fees) naturally become an important source of income for McDonald's headquarters.

03

Ray Kroc in 1954 to open the early stages of the McDonald's franchise business, although a very short period of time to attract a lot of franchisees, the company's development is also good and smooth, but at that time and the McDonald's brothers signed to the agreement of the conditions are more demanding, so that most of the profits of Ray Kroc's operation of McDonald's franchises to the McDonald's brothers. The company did not have a lot of money to grow.

It is also at this time, Ray Kroc thought of a solution to the capital problem of the rights of the plan, set up a real estate company, specifically responsible for finding a suitable address for McDonald's store, and locked in the form of long-term lease, and then sublet the store to the franchisee to get the difference in price, the result is the unintentional willows into the shade, the income into the McDonald's profit contribution to the most services. Early McDonald's so operated, more in order to be able to use long-term lease contracts and restaurant equipment in the form of collateral from the bank to obtain funds for the expansion of the business, and with the franchisee to the rent as well as the collection of the brand license fee, operation and management fees to pay off the bank's loan and the cost of the land lease.

And in the actual business process, McDonald's found that by leasing the form of operating space is also very conducive to the control of the franchisee (if you do not listen to the water and electricity cuts), to ensure that Ray Kroc on all franchised McDonald's restaurants in the marketing, supply of raw materials, restaurant operations, and other needs of standardization of a high degree of consistency of the requirements of the final implementation.

With the development of time, the original long-term leased sites have also become a major source of profit, on the one hand, directly-managed stores do not need to bear the pressure of rising rents, on the other hand, the franchisees can charge rising ground rent. 2016-2017 McDonald's in the world after taking the lease and then sublet to the franchisee's number of stores reached 12,262, which accounted for more than the number of all the stores at the time of 40%, bringing in $6.5 billion in rental income alone.

So it makes sense to say that McDonald's is a real estate operation.

04

Product, everything comes from product. No matter how many money-making models McDonald's has, and no matter how much profit each model contributes? The success of McDonald's is still attributed to its products, its burgers, fries, fruit pies, vanilla ice cream, Happy Meal packages have brought popularity, attracted franchisees, and given other money-making opportunities to lay a very solid foundation.

With the product, with the brand to attract consumers, create popularity, the formation of the opportunity to make money, and then attract the attention of the franchisee to invest, McDonald's and take the money earned through the product, through the money earned by the franchisee to continue to research and development of the product, continue to brighten the brand image, and continue to earn money by selling the product, continue to make money through the franchisee, this is a virtuous cycle of how to make money mode, don't Too single cut open to say McDonald's rely on what to make money, because this is a systematic mode of making money, who can not be separated from who!