When McDonald’s launched in 1961 they made a decision that allowed them to sandbag profits against the ups and downs of flipping burgers and position themselves to explode to over 36,000 locations worldwide. Dick and Mac (founders of McDonald’s) decided not to make money from selling burgers. It might sound strange but Mcdonald’s doesn’t make any money selling it’s burgers. Unlike other franchises instead of selling supplies and charging royalties, McDonald’s bought land and then leased it back to their franchisees.
Even at the bottom of the deepest recession, the bill for the rent steams on in through the letterbox of their franchisees. This genius and subtle adjustment in the structure of McDonald’s franchise makes it one of the best success stories in food, whether you love or hate the golden arches, so what is the secret to creating the next McDonald’s?
Let’s start with what’s staying the same, the brand, the Golden Arches, the Coke bottle, Apple, to today’s digital natives the brand is more important than ever. Today’s generation identifies deeply with the morals, design, and product of a company, it is an extension of themselves. To be the next McDonald’s, it will be just as important to build a brand that can attract a tribe in the digital space as it was in the real world.
The first changed is mobile technology, it’s the same across all industries and everyone knows about it so I won’t go into detail but fast food is no different. From ordering supplies, managing inventory, online ordering and delivery, mobile technology is at the root of the disruption.
Next thing that’s changed is the staffing model, McDonald’s helped to increase margins for franchisee’s by making processes simple and repeatable, so simple that even a dusty eyed, long haired (tied back in a net) teen could do it. This low cost labor was another cornerstone of McDonald’s model but on-demand staffing has changed all of that. Now it’s possible to hire the right staff exactly when you need them and pay them only for the hours worked. Sites like Sidekicker make this process simple, this variable model is the first opportunity for fast food franchises to leverage for fast, flexible expansion.
The last piece of the puzzle, the one that changed the way the whole business model works is the physical restaurant space. It has never before been possible to operate a restaurant without leasing a kitchen. Now with the explosion of mobile ordering and on demand delivery apps we are seeing the top brands making more revenue from online delivery than the majority of bricks and mortar restaurants. These businesses are setting up multiple satellite kitchens just to meet the demand from online orders.
By using kitchen space that isn’t on ‘High st’ but instead in back alleys, behind shops, inside cafe’s or inside sports centers, these digital restaurants can save on rent, they can hire staff at the push of a button exactly when the rush hour hits, they receive hundreds of orders a night without a single person stepping into the restaurant, thier customers receive the food from a brand they know and love without leaving the house. These brands can grow quickly and with very few fixed costs, they will use this strategy to become the next McDonalds.
Still not convinced? Well the world’s largest taxi company doesn’t own any taxies, Uber, and the world’s largest hotel chain doesn’t own any hotels, Airbnb.
In the future, how many restaurants will the world’s largest fast food chain own?