A name that is known to everyone when it comes to fast food is McDonald’s. It is the largest fast-food chain in the world. McDonald’s was started in the year 1940 by two brothers – Richard and Maurice. We all enjoy the food at a McDonald’s outlet near to us. However, have you ever given thought to the business aspect of this famous outlet?
In this article, I will try to provide an in-depth SWOT analysis for McDonald’s.
McDonald’s is famous for its cheeseburgers, hamburgers, and french fries. Apart from this, the menu contains a lot of other options including chicken, fish, and also salads. Behind all this, there is an extreme case study of internal and external factors influencing the business of McDonald’s. Like every company, McDonald’s also has plenty of factors that are either strengthening or weakening it.
Before we move to the SWOT analysis for McDonald’s, here are three quick facts about this food outlet.
- Largest supplier of toys due to “Happy Meal” schemes
- Second largest private employer after Walmart
- The Queen of England Owns a McDonald’s
SWOT Analysis For McDonald’s
I am doing a SWOT analysis for McDonald’s in this article. SWOT is a great business tool and provides a good overview of any business. However, there are other business tools similar to SWOT as well. You can read more about them in our in-depth article here.
As SWOT stands for Strengths, Weaknesses, Opportunities, and Threats – I will break down each aspect in detail.
Strengths Of McDonald’s
1. Exceptional Brand Value
McDonald’s is an exceptionally well-established brand across the globe. It is one of the highest-valued brands of all time. Moreover, if you check the fast food industry, McDonald’s holds the highest position in brand value. One primary reason for its amazing brand value has been its simple yet effective service. McDonald’s has a simple yet effective menu with fast service. This has led to customers preferring McDonald’s over many other fast-food outlets.
The second reason is its catchy and gamily-friendly advertising. If you notice, they have kept everything simple in their marketing efforts. The slogan “I’m Lovin It” is the first and the last they used. Apart from this, they were fast to put “fast in the fast food”. They prepared a process that could allow them to deliver orders in a speedy process without compromising the food quality. They literally valued the term “fast in fast food”.
2. Uniform Taste Across Outlets
The second strength of this outlet is its ability to offer a uniform taste of all food items uniformly across all outlets. Most people have observed and complimented that the fries, burgers, salads, and everything tasted the same irrespective of the outlet location. This is possible because of the complicated and calculated process they undergo while preparing each food item. They have a predefined way of measuring and preparing orders.
Irrespective of the McDonald’s outlet you are eating in – you will most probably get the same taste of a particular food item. They measure all the ingredients and the workers are advised to follow the same measurements across all outlets. The founders wanted to present the same taste in all their food chains as it adds value to the customer experience and provides a great service.
3. Global Presence
The other strength of McDonald’s is its presence in almost all countries.
As of 2024, McDonald’s is present in over 120 countries. If you calculate the number of outlets, the number would be above 40,000 across the globe. Moreover, all the outlets offer a different variety of menu too. In countries like India, you wouldn’t see beef on the menu. For countries in the Middle East, you wouldn’t see pork on their menu.
McDonald’s has the largest chain of outlets in the world for any fast-food chain. Many of them are operated by the company. However, many are franchise-based outlets too. The franchise-based outlets have helped the outlet expand more exponentially as compared to other outlets. It is said that you can go to Google maps and check for a McDonald’s outlet near yourself. It is a high chance that you will find an outlet close to you or at least in your vicinity!
4. Built A Real-Estate Empire Out Of McDonald’s
This strategy of McDonald’s is quite interesting. Many people think and see McDonald’s as a fast-food chain. Yes, it is! However, there is more to this business model. McDonald’s franchise model is a little different from others. Most McDonald’s franchises are built on land owned and operated by McDonald’s. Hence, they are landlords to the franchise owners!
Apart from the revenue from food ordering, McDonald’s is earning a massive chunk of revenue every year from the rent from the land on which any franchise is being operated. This business model has allowed McDonald’s to build a real estate empire apart from just being a fast food chain. Moreover, imagine the number of land properties they own. They have more than 40,000 outlets across the globe. As per the official data on the website of McDonald’s, approximately 93% of the outlets are franchises. Just imagine the rent revenue from these outlets!
Weaknesses Of McDonald’s
1. Reports Of Poor Employee Treatment
For any company to succeed, employee satisfaction becomes a priority. The employees are the main workforce contributing to building the brand on the ground level. When it comes to McDonald’s, there have been reports of poor employee treatment. The employees have reported low wages and a high working hours routine. This creates disruption in the work-life balance and leads to employee dissatisfaction.
Adding to all this, the result is a large employee turnover. The workforce resigns and joins other fast-food outlets. This creates an issue to handle when we consider McDonald’s has the largest number of outlets in the market. The negative experience of any employee leaves a negative impact on the customer as well. This also leads to the deterioration of the brand image.
2. Heavy Reliance On The Franchise Model
Yes, the franchise model is earning quite well for McDonald’s as discussed. However, this has also started to become a weakness for McDonald’s lately. McDonald’s as a company is profitable. They have a huge market share. Even after such huge profits and revenue generation, the company is focused on providing more franchise-based outlets rather than their own operated outlets. Now, this gives a good rental income to the company. But, the downside of such a model is the complications involved in any franchise.
Any complication or negative review of a franchise directly affects the brand image. Any issue with the operations of a franchise leads to complications to the brand value at large. Moreover, when McDonald’s can operate their own outlets, they are more focused on selling its franchise to independent operators. As discussed earlier, approximately 93% of the outlets are franchise outlets. The revenue is good, but just imagine that around 93% of the operations of this brand are in the hands of independent owners.
3. Lack Of New Food Items And Health Concerns
There have been many reports and allegations of the increased popularity of unhealthy food items provided by McDonald’s. Yes, the food they provide is not healthy. Such food items are high in calories with low nutritional values. Most people have been associating the brand image with unhealthy eating habits. If you observe the “Happy Meal” scheme in McDonald’s, it provides a toy along with the meal. This has been criticized to encourage kids to buy such meals with the main intention of getting the free toy object.
Apart from the unhealthy aspect, the brand has been subjected to criticism for not introducing new food items. The food items are more or less in the same category and have been the same in all outlets. One roadblock is the large network of outlets across the globe. Even if they want to launch a new food item, it would require a large amount of operational cost to introduce it in all outlets. This has been a primary reason why McDonald’s has been introducing new food items not frequently.
Opportunities For McDonald’s
1. Introduce Healthy Food Options
As discussed earlier, the entire food menu of McDonald’s is quite unhealthy. Every food item contains a low nutritional value and it becomes related to many health issues for all age groups. If you compare the McDonald’s menu with the menu of some outlets like “Subway”, they offer more healthy offers. This is where these outlets are preferred by many consumers on a daily basis. McDonald’s can leverage its brand value and introduce a set of healthy options as well for its customers.
Considering it has a large network and a remarkable brand image, people would love to try a healthy option offered by McDonald’s. As of now, there are healthy food items in McDonald, but the options are quite limited. It does not attract a healthy customer base to its outlets.
2. Expansion In the Asian Market
Yes, McDonald’s presence in over 120 countries. But the major revenue chunk still comes from the countries, not in Asia. There is a wide scope for McDonald’s to expand their business operations in the Asian market. Despite being the largest food outlet network, the company has been focusing more on western countries. The reason for this has been the early buying capacity of people living in these regions.
However, at this time, people in Asian countries also have a good buying capacity. People are spending at food outlets of different variety a lot. This brings a great opportunity for McDonald’s to expand in Asian countries.
3. Better Employment Policies
The damage done to the brand image of McDonald’s was the worst due to negative feedback from the employees. The employees have given a lot of negative reviews about low wages and poor work-life balance. This has been a weakness for McDonald’s. But at the same time, it is a great opportunity to revamp the entire employee structure. Better employee policies strengthen the entire organization and provide satisfaction to the workers. Employees who are given a productive and peaceful work environment often trust the organization and give their best efforts in every task they are assigned.
Moreover, in recent times, it has been observed many people are leaving not because of poor pay but because of poor work-life balance. This is something that McDonald’s can pay attention to. McDonald’s has been accused of making workers work long hours and having a low employee count for an outlet only to save expense.
Threats To McDonald’s
1. Tough Competition
The biggest threat to any business is always competitors who are performing similarly to the business. In our scenario, there are now many fast-food chains that are offering great food items similar to McDonald’s. This creates tough and stiff competition for McDonald’s. Although McDonald’s has been in the market for generations and has an established name, competition still affects other businesses.
Many other fast food outlets like Chipotle, Wendy’s, KFC, and Burger King are giving tough competition to McDonald’s. Burgers and fries have been the most famous food item from McDonald’s. All the mentioned outlets provide this already. Although their expertise lies in other food items, their burgers and fries are amazingly tasty for consumers. This becomes a productive competition for McDonald’s and a healthy business threat as well
2. Changes In Rental Policies
As I have mentioned, McDonald’s is earning a massive chunk of revenue from its rental payments. All this is because of the franchise land and its rental earnings. However, approximately 93% of the outlets are franchise owned and operated by independent owners. Any change in rental policies in any country where McDonald’s is present poses a serious threat to its revenue generation capacity. Moreover, even the slightest change in renting laws can cause a drastic shift in the revenue and profit margins for McDonald’s.
If McDonald’s can come up with a way to safeguard itself from rental policy changes, it would help them in the long run.
3. Strict Food Regulations
McDonald’s has been using a lot of ingredients that are not allowed in many countries under the aspect of food safety. This has led many countries to ban the operations of McDonald’s entirely in their regions.
As of now, 9 countries have banned McDonald’s: Bermuda, Iran, Macedonia, Yemen, Montenegro, North Korea, Zimbabwe, Bolivia, and Iceland.
Iceland banned McDonald’s due to health concerns as per their food regulation policies. Bolivia had similar reasons to ban or cease the operations of McDonald’s. Zimbabwe couldn’t have a McDonald’s outlet due to the economic crash. Post the crash, MdDonald’s has not tried expanding in the country again. In the scenario of North Korea, the totalitarian regime is averse to American businesses. Hence, the case for McDonald’s in North Korea.
Bottom Line
I have tried to compile all the strengths, weaknesses, opportunities, and threats in this SWOT analysis. I am sure as time passes by, many points and their relevance would change. In such cases, I would try to update the article as much as possible. Meanwhile, like any business, McDonald’s also has its share of areas in which it is strong and areas in which it can improve. Despite all the threats, McDonald’s has still kept itself relevant in the market. McDonald’s earns around $75 million per day in revenue. This is the total revenue that includes profits along with expenses. The number is quite huge for a food chain. And I am sure, McDonald’s gonna grow in the coming times like it has for the past many decades.