I was on vacation last week in Montreal and was amazed at just how much busier McDonald's was than Burger King. I was on an extremely busy street at dinner time and McDonald's was absolutely packed and Burger King completely empty.
You can see it in the shares of MCD, which are trading at lofty multiples but shares are up almost 25x since 2003.
What's particularly amazing is that McDonald's is the company that invented American-style fast food and is a no-moat business yet it's won consistently. It's a one of the great triumphs of capitalism of all time and deserves to have volumes written on business strategy.
At some point, the rest of the field will copy McDonald's a try to undercut them but right now, MCD's dominance gives it even more firepower to invest in automation that will further expand margins.
I don't know if there are an abundance of macro lessons here but on the micro scale, management is everything. One of the greatest strengths of McDonald's is its remarkable consistency. Regardless if you're in London, Sydney, or Mumbai, you'll find the same standard of food quality and service. This consistent experience, from the taste of the food to the ambience of the restaurants, helps build consumer trust. When you walk into a McDonald's, you know exactly what to expect, and there's value in that reliability.
Additionally, McDonald's has always prioritized speed and convenience, living up to the name "fast food". Their efficient system, inspired by the assembly line model, ensures orders are prepared quickly, even during peak hours. This is further enhanced by the introduction of digital kiosks and mobile ordering, reducing wait times and making the overall experience more seamless for customers.
McDonald's also understands the importance of marketing to all demographics. Their Happy Meal, for instance, offers more than just a kid-friendly menu—it presents an engaging experience. The inclusion of a toy, often linked to current films or popular trends, adds an element of excitement for children, including mine.
Lastly, McDonald's has always been cognizant of providing value. While there are certainly less expensive options available in the fast food industry, McDonald's strikes a balance between price, portion size, and taste. Their value menu, for instance, provides an affordable range of options that do not compromise on the overall quality of the food.
When you consider these factors, it becomes clear why McDonald's continues to hold a strong position in the fast food market. They offer a consistent, efficient, and engaging experience at a reasonable price point, and that's a compelling proposition for many customers. While it's always important to explore and consider a variety of dining options, McDonald's has built a dominant model.
