McDonald’s Corporation is a business behemoth, and it is, quite literally, one of the most recognizable brands worldwide. Simply picturing that yellow “M” is enough to make most people’s mouths water at the thought of a juicy Big Mac or a nice, refreshing Mcflurry.
In 2021, economists valued the global fast-food market at $647.7 billion. By the end of 2028, they predict it will surpass $998 billion, making it one of the biggest industries worldwide.
Ever since the pandemic, I’ve been closely watching how (and if) different economies worldwide are recovering. With regular food prices skyrocketing in many regions (due to the war in Ukraine as well as Covid), I think this number might be larger as more people turn to cheap fast-food options.
McDonald’s, which has the largest market share of any fast-food company with over 21%, is in the perfect position to take advantage of this projected growth.
How did one company become so iconic? How did that upbeat slogan – “I’m lovin’ it” – engrain itself so entirely in our collective consciousness?
It isn’t just successful because the food is addictive and cheap, and the service is fast. If you ask me, there’s something more to it.
As the leading fast food company, Mcdonald’s took the existing franchise business model and supercharged it with simple but unforgettable marketing strategies. The result? A brand that’s recognizable almost anywhere in the world. From Costa Rica to Japan, we can’t get enough.
In this McDonald’s competitors analysis, I will explore how McDonald’s and other fast-food companies have achieved so much success.
The Bottom Line Up Front
McDonald’s is the world’s leading fast-food company, offering a range of cheap products like hamburgers and fries. Though McDonald’s faces competition from companies like Burger King and Yum! Brands, I think the threat of losing market share to a rival is less than the threat of government regulations regarding unhealthy food, meat, and the environment.
In my opinion, McDonald’s should focus on innovation to make its products healthier and more environmentally friendly while delivering the same low price and great taste. Doing so will allow the company to align itself with current societal values.
List of McDonald’s Main Competitors
- Burger King
- Yum Brands (Taco Bell, KFC, Pizza Hut)
McDonald’s Business Strategy
McDonald’s Corporation is a multinational fast-food chain with over 36,000 restaurants, serving more than 70 million customers daily. It’s no small-scale startup, that’s for sure.
The company started life in 1940 as a restaurant in San Bernardino, California, before its founders turned it into a franchise and introduced the iconic Golden Arches logo in 1953. Today, McDonald’s is the largest restaurant by revenue. In 2021, it generated an impressive $23.22 billion, $13 billion of which came from franchised restaurants.
McDonald’s business strategy focuses on making food available to consumers at a competitive price, without the need to sit down at a restaurant. The food can be prepared and consumed very quickly. To make this ambition a global reality, the company uses international market expansion strategies and cost leadership in tandem.
The franchise business model has proved wildly successful for McDonald’s. Under this model, individuals pay the company to use its brand, running their own McDonald’s restaurants.
Crucially, McDonald’s Corporation owns all the land where its restaurants are situated (estimated at $16 to $18 billion). As a result, the company earns significant revenue from franchisee rent, and over 56% of revenue in 2021 came from franchised restaurants.
McDonald’s business strategy consists of four segments:
- The US (which is the company’s biggest market)
- High growth markets (areas with significant potential like China, Russia, Korea, Italy, and the Netherlands)
- Foundational markets & corporate (most of these are highly franchised)
- International lead markets (including Canada, Australia, and France, for example)
I am particularly interested in the franchise model to conduct global business, so I’ve spent much time researching what makes this model successful when it has the scope to go badly wrong.
In the case of McDonald’s, the company’s franchising success can be attributed partly to its strict criteria for franchisees, including liquidity and net worth. When a franchisee opens a new McDonald’s restaurant, they are responsible for everything from paying salaries to ordering supplies; if they do this well, their success guarantees high margins.
McDonald’s growth strategy – The Velocity Growth Plan, which the company launched in 2017 – advocates for a customer-centric approach:
- Converting casual to committed customers by building stronger relationships
- Regaining customers who visit less often by focusing on high-quality food
- Retaining customers by focusing on areas of strength like family occasions
The company updated this strategy in 2020 with Accelerating the Arches, which conveys a refreshed sense of purpose and updated values. There are three pillars of this strategy:
- Maximizing marketing by investing in new approaches to communicate the values of the McDonald’s brand in a culturally appropriate way
- Committing to the core business by capitalizing on customer demand for the familiar
- Doubling down on the 3 Ds: digital, delivery, and drive-thru
I think one of the things that makes McDonald’s stand out the most is the company’s ability to balance uniformity with localized products. The brand and its restaurants are almost identical the world over, and you always know there will be a Big Mac on the menu, but in countries like Thailand, you can get products that are also specific to the area, like samurai pork burgers.
This regionality allows consumers to feel connected to the brand despite being aware of its mass-market status; by feeling as though a company understands and appreciates you, you are more likely to return to it.
McDonald’s Competitors Analysis
McDonald’s competes with the following companies in the fast-food market.
1. Burger King
Burger King is an American multinational chain of hamburger restaurants founded in 1954 with headquarters in Miami, Florida. It is the second largest fast-food hamburger chain, behind McDonald’s.
The company was initially called Insta-Burger King until it faced financial difficulties in 1954 when two Miami-based franchisees bought it and removed “Insta” to create the name we are familiar with today.
Burger King operates over 18,700 restaurants in more than 100 countries, serving 11 million people daily. As well as hamburgers, it also offers a range of food options, including salads, vegetarian burgers, and breakfast items.
While the founder of Burger King took inspiration from McDonald’s, the two companies are distinct competitors with notable strengths and weaknesses.
Nowadays, everyone has a favorite burger brand, and I find it amusing how far dedicated customers will go to defend their fast-food chain of choice. Beyond being amusing, though, this loyalty shows the strength of McDonald’s and Burger King’s marketing strategies.
The “flame-broiler” has always been a central pillar of Burger King’s proposition because it gives the company a notable USP. Unlike most other fast-food companies, Burger King cooks its burgers over an open flame, giving them an authentic taste.
Like McDonald’s, Burger King’s business strategy relies on franchising. The total investment required to set up a restaurant could be as low as $300,000, with a flat fee of $50,000, making Burger King a relatively affordable option compared to others.
In 2010, 3G Capital (a Brazilian investment firm) bought Burger King for $3.3 billion but took the company public again in 2012 while retaining majority ownership. Following this, Burger King focused on cost-cutting, expansion, and marketing, resulting in increased profits.
In 2014, Burger King merged with Tim Horton’s to become Restaurant Brands International.
McDonald’s has been outpacing Burger King for over five years, so the company is working on a new strategy to regain momentum, which will likely prioritize higher ROIs. So far, this has been particularly successful in the UK, where Burger King will open 200 more restaurants thanks to a 68% increase in revenue between 2020 and 2021.
In 2021, Restaurant Brands International made $5.73 billion in revenue.
2. Yum! Brands
Yum! Brands Inc. is an American multinational fast-food corporation founded in 1997 with headquarters in Louisville, Kentucky. You may think you haven’t heard of Yum! before, but chances are, you’ll have eaten at a restaurant of one of the brands it operates:
- Pizza Hut
- Taco Bell
- The Habit Burger Grill
From an outside perspective, you’d probably expect Yum! to have a more significant market share than McDonald’s since it operates many successful brands, but that isn’t the case. Yum! ‘s market share is around 7.86%, just behind McDonald’s.
Regarding revenue, Yum! generated $6.58 billion in 2021 – over $16 billion less than McDonald’s. However, this is still significant, and brands like KFC are almost as well known globally.
Yum! has a similar business strategy to McDonald’s, which involves developing, operating, franchising, and licensing a range of fast-food restaurants. It operates over 43,000 restaurant units in more than 135 countries, around 95% of which are franchised.
It hasn’t always been plain sailing for Yum!. In 2015, the company announced plans to split into two independent companies, one of which would be focused solely on the Chinese market. Yum! ‘s KFC business had been struggling for a while in China, compounded by fears of Avian flu.
On the other hand, Taco Bell has successfully pulled ahead of the other brands – particularly in the US – thanks to its innovative marketing like the #TacoEmojiEngine campaign.
These contrasting results demonstrate how multinational companies are vulnerable to their countries’ changing political, social, and economic climates.
Following the creation of Yum! China, as a separate company, Yum! announced a new digital transformation strategy in 2016 to drive the growth of its three leading brands by increasing franchise ownership and focusing on a more efficient, leaner cost structure.
Yum! completed a $69.1 million acquisition of Australian technology corporation Dragontail Systems in 2021. Dragontail’s platform optimizes and manages the food preparation process; this acquisition demonstrates Yum! ‘s dedication to its digital strategy.
2021 marked Yum! Brands’ strongest growth year to date. The company opened almost 4,200 restaurants in 110 countries, and digital sales reached an all-time high of $22 billion, a 25% increase year on year.
Subway is an American multinational fast-food restaurant franchise founded in 1965 in Bridgeport, Connecticut. Its headquarters are in Milford, Connecticut.
Subway sells delicious submarine sandwiches (can you tell I’m a fan?), salads, wraps, and beverages. Not to mention its world-famous hash browns! Worldwide, there are over 44,000 Subway restaurants in 101 countries.
I was surprised when I learned there are more Subway restaurants than McDonald’s, but there are reasons the former company has managed to scale its business successfully.
First, its restaurants require less square footage than your average McDonald’s and are therefore easier (and more economical) to build. Second, Subway’s offering, though still classed as fast-food, is perceived by the public as being healthier and, thus, a more attractive option for some people. Finally, Subway’s sandwiches are highly customizable.
Subway’s executives know they have struck gold with their business model, so they think they could hit 100,000 locations by 2030.
Subway ensures the success of its franchise restaurants by motivating the people who run them with awards like “franchisee of the year.”
In 2022, the company announced an overhaul of its development strategy with a new focus on scaling up multi-unit franchisees, signing master franchise deals for international growth, a remodeling program to refresh existing locations, and creating new drive-thrus and other non-traditional locations.
Subway has a 28% share of the limited service sandwich market. In 2020, it generated $10.2 billion in revenue. The following year, the company’s domestic sales beat its projections by almost $1.4 billion, earning more than $1.3 billion in digital sales alone. Subway’s digital sales have tripled since 2019.
Chipotle Mexican Grill Inc., known simply as Chipotle, is an American chain of Mexican-inspired fast-food restaurants specializing in burritos, tacos, and bowls made to order. It was founded in 1993 and has headquarters in Newport Beach, California.
Chipotle has over 2,500 locations in the US, Germany, the UK, and France. Unlike the other fast-food companies I’ve discussed, Chipotle doesn’t operate a franchise business model; it owns all of its restaurants.
The company’s core business strategy focuses on combining elements of fine dining with the convenience of fast-food restaurants. This is sometimes known as the “fast casual” business model, and it’s been highly successful for Chipotle; the restaurant chain is valued at $44.8 billion, just behind Mcdonald’s and Starbucks.
Interestingly, the histories of McDonald’s and Chipotle are intertwined. In 1998, McDonald’s invested $50 million in the Mexican chain, accelerating its growth considerably. By 2005, McDonald’s had a 90% stake in Chipotle.
However, the cracks soon started to show. McDonald’s wanted Chipotle to follow a business strategy similar to its own by pursuing drive-thrus and changing its name. Clearly, the two brands had very different approaches to business, so they parted ways, and McDonald’s sold its shares.
Food quality is central to the Chipotle brand, but the company has experienced some problems over the years. Since 2015, numerous food poisoning scandals have occurred, including a salmonella outbreak in Minnesota and E. coli cases in Oregon and Washington. As a result, Chipotle closed 43 stores temporarily.
Nevertheless, Chipotle has overcome these problems and is seeing strong growth yearly. In 2021, the company opened 124 new restaurants and generated $840.4 million in digital sales in the third quarter alone.
Chipotle is embracing digital through its Chipotle Digital Kitchen restaurant. Customers order online or on the app and collect in person.
In 2021, Chipotle generated $7.1 billion in revenue, an increase of 26.1% compared to 2020.
Starbucks Corporation is an American multinational chain of coffee houses with headquarters in Seattle, Washington. It was founded in 1971 and is the world’s largest coffee house chain. Like McDonald’s Golden Arches, the Starbucks logo is instantly recognizable; some would go as far as to call it iconic.
You may not know this (I certainly didn’t), but, like feminism, there are “waves” of coffee culture and the rise of the second wave (which is all about the experience of drinking coffee, rather than the coffee itself) happened thanks to Starbucks. You learn something new every day.
It seems part of Starbucks’ success stems from the company’s ability to bring coffee lovers together in a meaningful way.
Starbucks has over 33,000 stores in 80 countries. 15,444 coffee houses are in the US; of the remaining stores, almost 9,000 are company-operated, and the rest are licensed. Starbucks opts for a chain, rather than a franchise, business model.
It is an indirect competitor of McDonald’s, but a brief comparison is still worthwhile since McDonald’s focuses a significant portion of its marketing on breakfast foods and coffee.
In 2021, Starbucks generated $29.06 billion, opening 538 new stores in the fourth quarter alone. Crucially, Starbucks can generate more revenue and growth than McDonald’s because its products – coffee, sandwiches, drinks, and snacks – are more universally appealing.
McDonald’s has a reputation for producing unhealthy, cheap food, which alienates a portion of the population (especially today, since the trend seems to be toward eating healthy and living clean).
McDonald’s SWOT Analysis
Below is McDonald’s SWOT analysis highlighting the company’s strengths, weaknesses, opportunities, and threats.
- Strong brand recognition globally; it is the 9th most valuable brand
- McDonald’s has a multi-billion dollar real estate empire
- It is the world’s leading quick service restaurant chain
- The brand evokes customer loyalty
- The franchise business model generates high revenue
- McDonald’s has an extensive product range with some region-specific variations
- The company sells food that is quick and cheap to make
- Effective marketing allows McDonald’s to reach its target demographics with impactful campaigns
- Successful implementation of technology to improve business processes
- Business operations can be affected by new regulations and laws in different countries.
- The company’s unhealthy food image means some people will never eat there
- It is vulnerable to supply chain disruption
- It’s challenging to keep track of quality and operations in franchise business models.
- Employee dissatisfaction
- McDonald’s could continue to capitalize on the move toward veganism/vegetarianism by bringing out new products.
- Expansion into developing countries
- The demand for online food delivery is growing rapidly
- Countries are experiencing slow economic growth following the pandemic; many people have to find cheap alternatives to save money
- Many western governments are advocating for people to eat less meat and make healthier choices.
- McDonald’s has come under fire for the unhealthy nature of its products and its contribution to obesity.
- Fast growing competition
McDonald’s Competitors Analysis FAQs
Question: Which company is McDonald’s biggest competitor?
Answer: Though Starbucks earned more revenue in 2021, it is an indirect competitor of McDonald’s. On the other hand, Burger King is McDonald’s biggest direct competitor, and both companies have a similar business proposition.
Question: What is McDonald’s best known for?
Answer: McDonald’s is best known for producing low price hamburgers, particularly its famous Big Mac. Though the food produced by McDonald’s is primarily unhealthy, it’s also delicious and cheap, which is why so many people buy it.
Question: Is McDonald’s a good company to work for?
Answer: McDonald’s is a fast-paced place to work and, at times, it can be tough to keep up with, but most employees are easy to work with and the company is flexible.
McDonald’s is one of the most successful companies in the world, let alone in the fast-food industry. I might not be a fan of the company’s food, but its journey to success is astounding. Yes, McDonald’s faces stiff competition, but Burger King is the only rival company that poses a serious threat regarding market share.
In the next ten years, I suspect McDonald’s will have to adapt considerably to make its product range healthier and more diverse. It won’t surprise me if we see governments increasingly regulating the accessibility of fast food, and this is a challenge McDonald’s will probably have to overcome.
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