More than two-thirds of new restaurants added by McDonald's are outside of the United States

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McDONALD'S

The world's greatest fast-food success story is undoubtedly McDonald's. Back in the 1950s, Ray Kroc was selling soda fountains. He received an order from Mr. McDonald for two soda fountains. Ray Kroc was so interested in finding out why the McDonald brothers' restaurant needed two machines (everyone else ordered one) that he went out to the restaurant. There he saw the now-familiar golden arches and the hamburger restaurant. Ray persuaded the McDonalds to let him franchise their operation. Billions of burgers later, the reason for the success may be summarized as follows: quality, speed, cleanliness, service, and value. This has been achieved by systemizing the production process and by staying close to the original concept — keeping a limited menu, advertising heavily, being innovative with new menu items, maintaining product quality, and being consistent.

McDonald's is the giant of the entire quick-service/fast-food segment with worldwide sales of $31.8 billion. This total is amazing because it is more than the next three megachains combined —  Burger King ($9.01 billion), KFC ($8.2 billion), and Pizza Hut ($7.5 billion). McDonald's even has individual product items that are not the traditional burger -for example, chicken McNuggets and burritos as well as salads and fish, which all aim to broaden customer appeal.

Customer appeal has also been broadened by the introduction of breakfast and by targeting not only kids but also seniors. Innovative menu introductions have helped stimulate an increase in per-store traffic.

In recent years, because traditional markets have become saturated, McDonald's has adopted a strategy of expanding overseas. It is embarking on a rapid expansion in the world's most populous nation, China, developing 300 restaurants by the year 2000. The reason for this expansion in China is a rapidly developing middle class with a growing appetite for Western culture and food. McDonald's is now in eighty-five countries and has a potential audience of 3.2 billion people. Of the company's roughly 18,000 restaurants, some 6,400 are outside of the United States^[1].

It is interesting to note that of the estimated $31.8 billion worldwide sales, about $15 billion are from outside of the United States, and about 50 percent of total profits come from outside of the United States¹. 

             More than two-thirds of new restaurants added by McDonald's are outside of the United

States.

McDonald's also seeks out nontraditional locations in the U.S. market, such as on military bases or smaller-sized units in the high-rent districts.

It is very difficult to obtain a McDonald's franchise in the United States because they have virtually saturated the primary markets. Carl's Jr., a California-based chain of 583 units has a franchising fee of $35,000, with a royalty fee of four percent and an advertising annuity of four percent. It often costs between $800,000 and $1 million to open a major brand fast-food restaurant. Franchises for lesser-known chains are available for less money.

Each of the major hamburger restaurant chains has a unique positioning strategy to attract their target markets. Burger King hamburgers are flame-broiled, Wendy's uses fresh patties.       Fuddruckers is a restaurant chain that describes itself as the «Cadillac of Burgers». Other gourmet burger restaurants may offer larger burgers with more side dishes to choose from, and they generally have decor that would attract the non-teenage market. Some of these restaurants have beer and wine licenses. Some smaller regional chains are succeeding in gaming market share from the big-three burger chains because they provide an excellent burger at a reasonable price. In-N-Out Burger and Rally's are good examples of this. The top ten hamburger chains are listed in Table 1 [1, 215-216]