🥔 Happy National Potato Day!

It's no coincidence that today we'll discuss the French fry (and fast food) giant, McDonald's. The chain serves over 9 million pounds of French fries alongside its iconic burgers every single day 🍟

We’ll also detail the Burgernomics of McDonald’s, and more, in just 4 minutes to read.

— Weronika

QUOTE OF THE DAY

“It's easy to have principles when you're rich. The important thing is to have principles when you're poor."

— Ray Kroc

BROUGHT TO YOU BY

Assembling IKEA tables got you feelin’ like the Steph Curry of furniture?

The Average Joe will turn you into the Marie Kondo of investing. Organized, calm and ready to conquer the markets.

Their newsletters are the “IKEA instructions for investing” — short, simple and concise — filled with market trends and insights.

But you don’t read IKEA manuals on your spare time and you wouldn’t read financial publications for fun.

Until now…

WHAT ELSE WE’RE INTO

📺 WATCH: Does overpopulation drain Earth's resources too much, or does an aging population threaten economies?

🎧 LISTEN: The art of tax optimization, business buying, tax strategies, cash flow w/ Mitchell Baldridge

📖 READ: A comprehensive guide to homeownership

READER RESPONSE

Last week we asked you: What have you splurged the most on this year?

Here are our favorites:

• "A family vacation in Europe.” — Pavel, Calgary, Canada
  

• “With this inflation, I guess... food...” — Karolis, Lithuania
  

• “Art supplies” — Neil, Macedonia, Ohio
  

• “We took a trip to Japan with our newborn son, so he could meet the grandparents on his mother's side.” — Haakon, Amsterdam, Netherlands
  

• “Replacing vehicles” — Dawn, Flagstaff AZ

Want to see your name and response up in lights?

Next week’s question: Leave your response.

BURGERNOMICS OF McDONALD’S

Fast food king

Even if you're not in the U.S., chances are you've already memorized McDonald’s famous jingle, "Ba Da Ba Ba Bah, I'm loving it!” or seen its famous golden arches.

Today, you can grab McDonald’s classics almost anywhere, with a presence in 118 countries, 150,000 employees, and 40,275 restaurants.

Its competitive moat? No matter where you are, you know what to expect, because the standard menu tastes (almost) the same everywhere.

Economists even use its burgers to demonstrate the idea of purchasing power parity (PPP), comparing the cost of McDonald’s burgers across countries.

Impressively, McDonald’s wields a 43.8% share of the fast-food industry in the U.S., followed by Taco Bell and Subway.

Franchising empire

Yet, McDonald's isn't just a burger-flipping restaurant chain. It’s become, in some ways, a huge real estate company thanks to franchising.

Franchising lets fast food chains expand by outsourcing restaurant operations to individual investors and managers. Ray Kroc purchased McDonald’s in 1961 from the McDonald brothers and improved this concept, growing the business while controlling quality.

McDonald’s soon introduced its real estate strategy. Instead of selling food directly, McDonald’s became the franchisees' landlord.

Thanks to its franchise-heavy model, McDonald’s substantially expanded the number of franchised restaurants and decreased company-operated ones; by 2022, it had 38,169 franchised restaurants and 2,106 owned and operated ones.

Furthermore, McDonald's owns 45% of the land beneath its restaurants and 70% of the associated buildings. The remaining properties are leased, and franchisees make monthly rent payments to McDonald's, either as a fixed amount or a percentage of revenue.

Interestingly, the expense of acquiring an existing franchise hinges on factors such as the location's profitability, renovation requirements, and sales volume.

Franchise costs can easily vary from $1 million to $2 million, given that apart from the location cost, the potential franchisees are required to have a minimum of $500,000 in liquid assets and pay a $45,000 franchise fee.

At the end of the day, McDonald's franchise owners allocate approximately 82% of their store revenue to the company annually.

Digitally savvy

Last year, the chain's app was downloaded 127 million times worldwide, beating Uber, PayPal, and Amazon Prime Video. It's twice the count of Tinder's downloads and nearly four times of its largest rival, Starbucks'.

On top of that, McDonald’s app beats fast food competitors like Taco Bell, Chick-fil-A, and Burger King in growing its monthly active users year-over-year.

Fast food culture

Fast food is so deeply ingrained in the American identity that 83% of American families eat at fast food restaurants at least once a week. Consumers aged 20-39 eat the most fast food on any given day.

While it’s cheap, convenient, and tastes good, this food choice has gained appeal among middle and lower-middle-class families. Rising inflation has rendered grocery shopping costlier, making fast food an affordable alternative.

The CEO of McDonald’s, Chris Kempczinski, recently said: “The chain is performing well with consumers who make less than $100,000 and with those who make under $45,000.”

International business

Apart from the old classics, you can enjoy a McAloo Tikki burger in India, McSpaghetti in Italy, Asian Juicy burgers in Japan, or The Lumberjack Burger in Poland.

You may wonder why you can’t get these “exotic” menu choices at your local franchise in the U.S.

In part, it’s because the U.S. isn’t what drives the company’s sales growth anymore. For years, McDonald’s international business has exceeded its U.S. revenues.

Some of the country’s top-performing markets outside the U.S. include Australia, China, Japan, and European countries like France and Germany.

The key to its global success? Tailoring unique global menus to local customs and preferences.

The localization strategy

The company’s motto when crafting regional menus: “Something that tastes like home but stays true to McDonald’s.”

McDonald's aims to strike a sweet spot by offering familiar and beloved meals alongside diverse local culinary options across its locations. This way, the restaurant caters to different tastes and recognizes a local cuisine’s richness.

For that reason, the food chain offers poutine in Canada, replaces beef with other meats in India, and stuffs its burgers with Kimchi and Gochujang spicy sauce in Korea.

And the next time you’re in France, you might want to try a McCamembert, honoring the famous French cheese.

Dive deeper

Watch this fun Wall Street Journal video to learn more about McDonald’s global menu strategy.

See you next time!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Follow us on Twitter.

Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.

You can also leave your comments/suggestions/feedback anonymously here.

How would you rate today's newsletter?

⭐️⭐️⭐️⭐️⭐️
⭐️⭐️⭐️
⭐️