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McDonald’s is a big winner on Main Street and Wall Street, as evidenced by the 38,000 store locations in 100 countries, delivering what investors are always looking for — strong top and bottom-line growth.
Moreover, the company’s stock has been on the mend since going public, outperforming major equity averages by a considerable margin. McDonald’s recently reported a 10% jump in third-quarter sales, with growth across all segments.
In addition, U.S. comparable sales for McDonald’s increased more than 6% for the quarter, making it the ninth consecutive quarter of similar sales growth for the region.
“As a global entity, McDonald’s is beholden to the varying economic conditions in all of the markets in which they operate,” said Chelsea Wiater, Portfolio Manager at EFG New Capital, in an email to International Business Times.
“During the third quarter, the company posted positive comps across every market, as consumers worldwide turned increasingly to value (a core competency of McDonald’s) amidst worsening economic conditions.”
What are McDonald’s strengths? Location, branding, and adaptation to new trends.
McDonald’s was the “early mover” in the fast and convenient food services market it created, which allowed the franchise pioneer to buy up the best locations at home and abroad — train and bus stations, airports, and city landmarks. Travel to any destination worldwide, and you are likely around the corner from the Golden Arches.
Then there’s branding. “In rankings of the ‘most-trusted companies, McDonald’s is invariably up near the top,” said Herman Brodie, the founding director of Prospecta Limited and a specialist in behavioral economics.
“Whenever buyers are vulnerable to the products or services of a seller, which is always the case whenever we put things in our bodies, our health is at risk (but the same applies when our money is at risk or our security), trust becomes decisive.”
Location and branding provide the franchise a “captive market,” enduring the many changes they have encountered over the decades they’ve been in business, like the shift in consumer preferences, growing competition, and market saturation.
All they have to do is to adapt their menu and ride one trend after another, like the baby-boomer trend in the 1960s, the growing ranks of young people, and the rising female labor force participation, by offering a quick and inexpensive menu.
Then there’s the riding of the globalization trend as the American way of life was transferred to many countries worldwide in the 1970s and 1980s. In addition, McDonald’s adapted to the social context of each country by franchising to locals.
And there’s McDonald’s broadening its product portfolio these days by offering high-quality coffee, healthy drinks (either through its traditional restaurants or cafés), and all-day breakfast, competing head-to-head with Starbucks and local cafeterias.
Location and branding have turned McDonald’s into an ATM. Nevertheless, the franchise pioneer keeps feeding the machine with cash to develop suitable product offerings to capitalize on the advantages that put it at the head of the game in the first place.
“As the macroeconomic landscape continues to evolve and uncertainties persist, we are operating from a position of competitive strength,” said McDonald’s President and CEO Chris Kempczinski.
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