McDonald's Corporation

McDonald's operates, licenses and services the world's largest chain of fast food restaurants. Founded in 1956 and incorporated in Delaware in 1965, the company has gained an international reputation and sports one of the most famous and recognizable logos in industry today. McDonald's restaurants serve hamburgers, french fries, chicken, fish, specialty sandwiches, beverages and desserts; many stores also serve breakfast. As of the end of 1993, there were more than 9200 units in the United States, and another 4700 units in more than 60 other countries. This research examines the strategy that McDonald's has followed to this point, evaluates the company's current position, and recommends strategic direction for the company's future.

The company owns and operates approximately 20 percent of the restaurants bearing its name; approximately 70 percent are operated by franchisees with the remaining 10 percent operated by affiliates. The company does not sell equipment, food or supplies to franchisees, but does support its operations through intensive advertising and promotional efforts. In recent years, the company has entered into agreements with Mattel, for example, to include toys in meals that are designed for children. The combined draw of the Mattel toys with the general popularity of McDonald's among children serves to increase its draw to this market.

McDonald's also has a reputation for providing a uniform menu with similar quality standards regardless of locat

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although currency fluctuations have had adverse effects from time to time. Overall, the company's stock has performed well, and has a long history of stock splits. During the 1980s, the stock split three for two in 1983, 1984, 1986 and 1987, and two for one in 1989. Another two for one split occurred in mid-1994. Over the past ten years, revenues have increased at an annual rate of 11 percent, compared with earnings which have increased at an annual rate of 13.5 percent. During the past five years, revenues have increased at a rate of 8.5 percent, and earnings at a rate of 12.5 percent. These figures indicate that the company is able to translate increases in revenues to even greater increases in earnings, which suggest that McDonald's operates efficiently under its current strategy. Companies which have higher rates of change for revenue than earnings often need to take remedial steps to rectify the situation. The company's return on equity during the 1980s and early 1990s has been healthy, ranging from a high of 21.8 percent in 1989 to a low of 17 percent in 1993. The company has reduced its long term debt structure so that long term debt as a percentage of capital has fallen from 48.4 percent in 1989 to 32.5 percent

Category: Business - M