History of McDonald’s
McDonald's is the world's largest restaurant chainby revenue, serving over 69 million customers daily in over 100 countries across 37,855 outlets as of 2018. McDonalds was founded 1940 by Richard and Maurice McDonald. The McDonald brothers joined the food business industry in 1938. Then in 1948, they established their first burger restaurant which was the modern service model of fast food. In 1954, Ray Kroc, a business man, discovered McDonald’s and its potential. He bought the right to franchise McDonald's restaurants across the country. After 1 year, he opened the first franchise restaurant as modern McDonald’s we know today. One of the most significant decisions the company has made is adopting the financial model of owning the land which they build their restaurants on. In 1965, McDonald’s launched its public stock. By the end of the 1990s, McDonald’s opened more then 11,000 restaurants outside U.S, and now, The Golden Archies have more than 37,000 outlets across the globe.
McDonald’s SWOT analysis
McDonald’s has many points of strength and lots of opportunities, but there are some weaknesses and threats which should be considered before investing in the McDonald’s stock.
McDonald’s is the 9thmost valuable brand in the world and the most valuable company in the fast-food industry with a market capitalization of $154 billion. McDonald’s has the best French fries according to an American survey from Statista chart. Also, few people know that McDonald’s has a multi-billion real estate empire. Just think about it. McDonald’s has thousands of greats locations around the world which they establish franchises in, but also owns the land and operates as alandlord to make revenue through rent payments.
Although McDonald's is considered the largest in its field, it is exposed to risks due to its giant network, such as mismanagement, dissatisfaction of workers or low wages, and problems that occur in one of the branches may reflect negatively on the company's name.
One of the most successful selling points of the Golden Arches has been the value meals which boosted their sales like no tomorrow. McDonald’s must put efforts to introduce new, innovative items on their menu to make customers choose them instead of the new fast-food outlets. They should focus more on international expansion rather than expand only in USA. And while fast food industries are struggling to fight the image of junk food, they must play smart toward healthy and customized offerings.
As McDonald’s is focusing on innovation, the investment in technology is still risky because it will slow down the return on investment, and the results of enhancing customer experience may not generate the expected returns. Also, there are fierce competitors in the fast-food industry, such as Chick-Fil-A, which emerged into a strong player in the industry. Not only that, but cultural threat while operating in various countries, constant environmental concerns and new- age fast-food trends are looming on McDonald’s.
Looking into the McDonald’s Stock
McDonald’s stock is not valued too expensively, exhibiting steady growth rate in long term spectrum, and is considered as a good stock to buy for dividend returns.
McDonald’s shows a strong earnings per share (EPS) of 32%, which is solid. Based on estimation for the next 5 years, McDonald’s will show a strong growth in EPS, expected to enlarge 16% per year. The company is very healthy as it outperforms 96% of its industry peers. McDonald’s has been paying dividends for at least 10 years, and their earnings are growing more and faster than its dividend. This makes the dividend growth sustainable.
How does the future look for McDonalds?
McDonald’s believes in committing to the core by continuing to focus on serving delicious burgers, chicken and coffee, which represent the heart of their business. Such core classics are essential drivers for their growth. McDonald’s also plans to maximize their marketing, by investing into modern, culturally relevant approaches to effectively portray the history, food and purpose of its brand.
Another plan of McDonald’s is doubling down on the 3 D's; Digital, Delivery and DriveThru
Digital: McDonald’s forecast that their digital sales will reach $10 billion by the end of the year, as they will launch the MY McDonaldsapplication to offer customers the fast and easy experience they adore.
Delivery: McDonald’s plans to tap into more location, expanding the number of restaurants that offer delivery, to about 28,000 restaurants across the globe.
Drivethru: McDonald’s will maximize the advantages of its strong drive thru presence by testing new concepts and technology to make the customer experience even faster, which is one of McDonald’s most successful selling points.
Sources: McDonalds.com – FoodIndustry.com – TheStreet.com – PR Newswire – Business Strategy Hub – TradingView – MetaTrader 5
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