McDonald’s is among the most popular fast food companies in the world. It was founded in the year 1940 in California. From 1 restaurant in that year, McDonald’s today has close to 39,100 locations across more than 120 countries. It is the largest restaurant chain in the world by revenue. McDonald’s network of restaurants is comprised of company-owned as well as franchisee units. Most of the restaurants are run by franchisees while only around 2,700 restaurants are owned by McDonald’s. As the fast-food and restaurant industries evolve, McDonald’s has, in recent times, shifted its focus to digital, delivery, and drive-thru. McDonald’s continues to dominate the industry in which it operates.
What Makes McDonald’s So Strong?
The restaurant business is a competitive one. The intensity of competition is quite high because barriers to entry are low and there are no meaningful switching costs from the customer’s perspective. McDonald’s overcomes these challenges because of its strong brand, a fine-tuned franchise system that drives productivity improvements on a unit-level, and credible economies of scale. McDonald’s has a leading market share in the majority of markets where it operates. McDonald’s also gains from the ceding of market share by smaller independent food joints who face an especially difficult time due to the pandemic. McDonald’s is, in fact, one of the few restaurant chain companies to enjoy consistent success throughout the world.
If you are an investor who is looking to invest in restaurant stocks, then there are a few names to consider. McDonald’s is clearly one of them. Its stock is up 7% in the year 2020. Since the March market crash, McDonald’s has risen by 56%. Domino’s Pizza, another well-known restaurant company, is up 30% for the year 2020. Its stock hasn’t been affected too much during the pandemic and the price has remained relatively range-bound for the last few months.