McDonald's Corporation (McDonald's) operates and franchises McDonald's restaurants. The Company's restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company's segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. The U.S. segment focuses on offering a platform for authentic ingredients that allows customers to customize their sandwiches. Its High Growth Markets segment includes its operations in markets, such as China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets. The International Lead markets segment includes the Company's operations in various markets, such as Australia, Canada, France, Germany, the United Kingdom and related markets. The Foundational markets and Corporate segment is engaged in operating restaurants and increasing convenience to customers, including through drive-thru and delivery.
Business Analysis of McDonald's
The Restaurants Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how McDonald's compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by McDonald's to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of McDonald's with an interactive chart.
- Revenue Growth: McDonald's reported a revenue growth of -3.1% year-on-year during 2016. Fast Food Restaurants Industry grew at -0.6% in the same period
- COGS share of Revenues: As a percentage of revenue, McDonald's spent 58.6% of its total revenues on COGS. Fast Food Restaurants industry average (COGS share of revenue) in the same period was 63.7%
- R&D share of Revenues: McDonald's R&D share of Revenues details are not available because either company does not share the data or we do not have it
- SG&A share of Revenues: As a percentage of revenue, McDonald's spent 9.7% of its total revenues on Sales, Marketing, and General Administration (SG&A). Fast Food Restaurants industry average SG&A spending in the same period was 11.7%
- Inventory share of Revenues: As a percentage of revenue, McDonald's spent 0.2% of its total revenues on Inventories. Fast Food Restaurants industry average Inventory spending in the same period was 0.6%
- Accounts Payable share of Revenues: As a percentage of revenue, McDonald's invested 3.1% of its total revenues on Accounts Payable (A/P) Fast Food Restaurants industry average Accounts Payable investment in the same period was 4.7%
- Accounts Receivable share of Revenues: As a percentage of revenue, McDonald's invested 6.0% of its total revenues on Accounts Receivable (A/R). Fast Food Restaurants industry average Accounts Receivable investment in the same period was 4.9%
- PP&E share of Revenues: As a percentage of revenue, McDonald's invested 86.3% of its total revenues on Property, Plants, and Equipments (PP&E). Fast Food Restaurants industry average PPE investment in the same period was 53.5%
- Intangibles share of Revenues: As a percentage of revenue, McDonald's invested 9.5% of its total revenues on Intangibles. Fast Food Restaurants industry average Intangibles investment in the same period was 35.4%
- Net Margins: McDonald's Net Margins in the year 2016 were 19.0%. Fast Food Restaurants industry average Net Margins in the same period were 14.2%
Sector and Industry Association of McDonald's
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
McDonald's is associated with Restaurants Sector and Fast Food Restaurants Industry.
Restaurants sector is comprised of the following industries: Fast Food Restaurants; Fast-Casual Restaurants; Casual Dining Restaurants; Fine Dining Restaurants. The definitions for each of the industries is as follows:
- Fast Food Restaurants industry includes fast food restaurants. Fast food restaurants are typically chains like McDonalds and Burger King. Fast food restaurants are also known in the restaurant industry as QSRs or quick-service restaurants.
- Fast-Casual Restaurants industry include restaurants that do not offer full table service, but offer a higher quality of food with fewer frozen or processed ingredients than other fast food restaurants. It is an intermediate concept between fast food and casual dining. The category is exemplified by chains such as Noodles & Company, El Pollo Loco Holdings, Inc., and Chipotle Mexican Grill, Inc.
- Casual Dining Restaurants industry includes restaurants that offer table side service, non-disposable dishes at a moderate price. Menu in these restaurants ranges from Italian to seafood to Mexican food.
- Fine Dining Restaurants industry includes restaurants that are full service restaurants with specific dedicated meal courses. Décor of these restaurants features higher-quality materials.
Industry Ranking of McDonald's
With $24.6 billion revenues, McDonald's ranked number 1 of all the companies in the US Fast Food Restaurants industry. There were a total of 21 public companies in the US Fast Food Restaurants industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Fast Food Restaurants industry by revenues during 2016 were:
- McDonald's ($24.6 billion)
- Yum China Holdings ($6.9 billion)
- Yum Brands ($6.4 billion)
- Restaurant Brands International ($4.1 billion)
- Panera Bread ($2.8 billion)
- Domino's Pizza ($2.5 billion)
- Papa John's International ($1.7 billion)
- Jack In The Box ($1.6 billion)
- Wendy's ($1.4 billion)
- Red Robin Gourmet Burgers ($1.3 billion)
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.