Overview

This essay sheds light on how McDonald's became a highly profitable brand and elucidates the importance of brands expanding into new foreign markets through their franchisees. Furthermore, why McDonald's will continue to dominate the fast food industry in the coming years is delinated in this essay. A paradigm of a company that prudently capitalized on the opportunity to expand into foreign markets after struggling to experience more fast food market share growth within the United States beyond 17% is McDonald's. According to Shapiro, in 1991, for the first time, McDonald's opened more restaurants overseas than in the United States: 427 abroad, compared with just 188 in the United States. The company plans to open 450 in foreign countries and 250 in the United States this year, with Latin America and Asia expected to be the fastest-growing areas. 'We made the decision to push the international development a little harder', said James Cantalupo, president and chief executive of McDonald's International. We will increase the pace each year'. Already, the top 10 McDonald's restaurants in sales and profits are on foreign soil. In just two years, more than half of McDonald's profits are expected to come from restaurants overseas. The busiest McDonald's are in Moscow, on the Champs-Elysees in Paris and in central Rome. With far less competition abroad, the average McDonald's overseas does 25 percent more business than its counterpart in the United States. McDonald's has had little choice but to look abroad in the face of slow growth at home. And although domestic sales could well pick up when the recession ends, McDonald's priorities for new outlets have clearly shifted abroad (SHAPIRO, 1992). McDonald's could never have become the global fast food giant that it is today and could have never saturated a myriad of foreign fast food markets if they limited themselves to only competing in the United States fast food market. Expanding into new foreign markets through franchisees have allowed brands to evolve into a multibillion dollar companies and hedge against risks when certain markets slump. Additionally, it is purely profitable for a franchise, such as McDonald's, to expand through the usage of franchisees since it allows them to collect franchisee fees, royalties, and even ongoing monthly service fees from franchisees without incurring the costs of establishing company owned restaurant. The only considerable risk through this franchise business model is the possibility of franchisees not running the business properly which can either tarnish or misrepresent the brand. In conclusion, new McDonald's restaurants will emerge as the brand continues to saturate more untapped fast food markets within foreign countries in the coming years. Having a robust menu selection, unrivaled brand recognition, offering value-based pricing on menu items, providing drive-thru order options, and having expeditious order fulfillment times will attribute to McDonald's continual success in the coming year as a dominant fast food competitor. Ultimately, McDonald's lucrative franchise business model, adaptability, and enticing market campaigns have played a salient role in allowing McDonald's to attain enormous profitability, brand recognition, brand equity, and brand loyalty as a multibillion dollar fast food franchise.

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