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McDonald’s: The Untold Story & Amazing Business Model


The restaurant I am going to talk about today is McDonald’s. Every day, countless fast-food restaurants are opened and 90% of them close due to loss. But for the past few years, there is one fast-food restaurant that has had a chance of failing is only 5-10% because its business model is totally different from all other restaurants. I will tell you what is the business model in this blog.

Let’s see how a simple restaurant that sells burgers and fries has opened its own restaurant in more than 100 countries from 1940 to now at 40,000 locations. Which generates billions of dollars in revenue every year. And at the end of the blog, we will also know what are the requirements for buying a McDonald’s franchise. We are all think that this is a fast food business, but in reality it is not a fast food business. Instead, it is a real estate business.

How McDonald’s started?

McDonald’s is a fast food restaurant opened by two brothers Richard and Maurice. They became so famous that they might have dreamed of it. In 1930, they started selling hot dogs in a portable van for the first time. In 10 years, they opened their first restaurant in San Bernardino, California, called McDonald’s Famous Barbecue.

But they got their real fame in 1948 when they introduced the concept of fast food for the first time. Which people liked a lot and it was very popular. People were surprised that how they were able to order in 2 minutes. This fast food was tasty and at the same time, it was saving the valuable time of the customer. As a result, the number of customers increased day by day due to their trust on McDonald’s.

Brief History of McDonald’s

In 1954, When an ordinary salesman named Ray Kroc heard about this McDonald’s restaurant who worked to sold a milkshake machine. He came to their restaurant to see all this with his own eyes. Ray Kroc came there and met with both McDonald’s brothers and appreciated this concept of fast food. Slowly, with their trust, he started working to expand their business. Which means he became a business partner. Ray Kroc was so smart and understood that to expand the business, It will have to open in every city in America. So he opened second restaurant in 1955 in Des Plaines, Illinois.

Time passed and ups and downs came and by the year 1961, McDonald’s opened more than 150 branches. In the last 6 years, Ray Kroc’s vision was getting bigger day by day. Because of this, he kept making changes in McDonald’s. Like adding things like pizza, burritos, etc. to the menu of some locations. When the McDonald’s brothers find out, they start fighting and this kept going on.

McDonald's Food

When Ray Kroc was talking about opening the this restaurant in America then the only answer McDonald brother’s had was NO, which means they never wanted it to be opened in America. There were many reasons for this. One of which was the health condition of Morris McDonald and the problem of not being able to manage his stress. Another reason was that they were scared of losing their invested money in other McDonald’s franchises. But Ray Kroc kept pushing both brothers.

One day McDonald’s brothers finally decided to leave this multi-franchise business and sold their share of the rest of the stores to Ray Kroc and you won’t believe that this was all in 2.7 million dollars. No legal papers were signed in this deal and that’s why they and their families didn’t get any patent or pioneer’s credit.

They started running their own and old restaurant again in 1961 but by bad luck, they were not allowed to keep the name of his restaurant as McDonald’s because the rights were with Ray Kroc. So they changed the name to The Big M. Ray Kroc opened a new restaurant in front of their new restaurant with which their sale dropped a lot then after continuous losses, 6 years later in 1967, they closed their The Big M restaurant. For a while, they fought Ray Kroc through lawyers but because Ray Kroc was very rich, he couldn’t keep their business.

4 years later, Maurice McDonald was killed by a heart attack and Richard McDonald went back to his birthplace, Hampshire and he didn’t do anything new. After that and in the end, In 1998, he was also said to be dead. On the other hand, Ray Kroc was said to be dead in 1984 due to a heart attack. His personal net worth was $600 million at the time. By his death, McDonald’s had opened 7500 franchises worldwide, with annual sales of $8 billion.

Today, America also considers Ray Kroc to be the founder of McDonald’s, not the two brothers who were the sow the seed of McDonald’s. After Ray Kroc’s death, Fred Turner was made CEO of this restaurant. Today, due to a publicly listed company, It’s highest ownership with a 9.2% share is with a company named the Vanguard Group.

Who currently owns McDonalds?

Currently the CEO and President of McDonald’s is Christopher John. This restaurant opened in India for the first time in 1996 and in Pakistan in 1998. Today, there are 14,000 in America, 3,000 in Japan, 25,000 in China, and 160 in India. The count of it’s branches have crossed 40,000 worldwide.

What is the process to buy McDonald’s Franchise?

Now let’s know what is the process of buying a franchise of McDonald’s. The reason of its success is because of its simple and strange franchise model. You may be surprised to know that McDonald’s is less in the food business but it is more in real estate business. Because McDonald’s buys its own land and also makes its own restaurants. McDonald’s also provides the rest of the food and usage equipment to the franchise owner.

McDonald’s Business Model

Before buying any franchise, you have to fulfill several requirements. Among them, the first is getting a degree or training certificate from their own hamburger university. Then pay a non-refundable $45,000. You must have $7,00,000 in liquid or in the form of liquid assets. Later on, you have to pay 4% as a rent and food royalty from the monthly sales.

Mostly, McDonald’s signs a 20-year lease to one franchise owner. Isn’t it amazing business model of McDonald’s. They automatically free land and restaurants. That’s why it has a net worth of $200 billion. Even after paying all this, the franchise owners on average can manage a $100,000 annual profit. This provides employment to 2 lakh people worldwide who pay minimum wages with benefits. It is also the first job for many people in Western countries.

So friends, what moral do you get from McDonald brother’s story? According to you, what mistakes have they made that even after touching the sky, they fell on the ground? What do you think about Ray Kroc? And how do you see this different running business model? Do comment on if you liked this blog. I will be waiting for your valuable comments. Till then keep learning as well improving.

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