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2 NAMES OF MCDONALD'S
BRAND’S COMPETITORS
1. BURGER KING
2. SUBWAY
BURGER KING
THE REAL KING OF BURGERS
• MCDONALD'S LOCATIONS BROUGHT IN MORE THAN $21 BILLION IN 2019.EVEN WITH GROWTH FIGURES SLUMPING
SINCE EARLY 2014, MCDONALD'S SITS ATOP THE FAST-FOOD WORLD.
• BUT THOSE SLUMPING FIGURES SHOULD CONCERN INVESTORS, WHO HAVE NOT REALIZED A GREAT RETURN FOR
SEVERAL YEARS. MCD PERFORMED ADMIRABLY DURING AND IMMEDIATELY AFTER THE GLOBAL RECESSION OF
2008–2009. IT TURNS OUT CHEAP FAST-FOOD IS ESSENTIALLY RECESSION-PROOF, BUT 2014 WAS THE WORST
YEAR FOR THE COMPANY SINCE 2003.
• UNDER RAY KROC, ITS FOUNDING FRANCHISING VISIONARY, MCDONALD'S BECAME THE WORLD'S PREMIER FOOD
BRAND BY SELLING THE RIGHTS TO OPERATE A MCDONALD'S STORE. WITH THIS MODEL, MCD KEEPS OVERHEAD
COSTS DOWN AND LETS LOCAL OWNERS DEAL WITH INDIVIDUAL UNITS. FOOD COSTS REMAIN LOW AND SERVICE
REMAINS FAST FOR A CULTURE INCREASINGLY ON THE GO.
THE COFFEE WARS
• NEXT CAME A NEW FLEET OF COFFEE PRODUCTS FROM BURGER KING TO CHALLENGE THE MCCAFE
MENU. MCDONALD'S MADE WAVES YEARS AGO BY PARTNERING WITH STARBUCKS TO CREATE A
RECYCLABLE-COMPOSTABLE COFFEE CUP. SO BURGER KING TARGETED AND ACQUIRED TIM
HORTONS, INC., THE LEADING CANADIAN COFFEE AND DONUT OUTLET. STOCK PRICES FOR BOTH
COMPANIES SOARED AFTER THE CA$12.5 BILLION DEAL, INCLUDING CA$3 BILLION IN FINANCING
FROM WARREN BUFFETT'S BERKSHIRE HATHAWAY.
• THERE IS NO CONFUSION ABOUT BURGER KING'S VALUE PROPOSITION. IT IS JUST AS GOOD AS
MCDONALD'S WITH THE SAME PRODUCTS, JUST SLIGHTLY MORE UPSCALE AND, SOMETIMES, LOWER
PRICES.
FRANCHISES
• MEANINGFULLY INVESTING IN BURGER KING AND MCDONALD'S USUALLY MEANS BUYING
AND OPERATING A NEW FRANCHISE UNIT. SINCE EACH COMPANY OPERATES ON AN
INTERNATIONAL LEVEL AND NO TWO MARKETS ARE IDENTICAL, THE EASIEST WAY TO
COMPARE FRANCHISING OPTIONS IS TO LOOK AT FRANCHISE DISCLOSURE
DOCUMENTS (FDDS).
• ACCORDING TO THE 2020 FDD FOR MCDONALD'S, THE INITIAL INVESTMENT AMOUNT
FOR A MCDONALD'S FRANCHISE FALLS BETWEEN $1.3 MILLION AND $2.3 MILLION. THE
CORPORATION ALSO CHARGES AN INITIAL FRANCHISE FEE OF $45,000.
• BURGER KING'S FRANCHISES REQUIRE SIMILAR INVESTMENTS. THE 2020 BK FDD
SUGGESTS THAT, EXCLUDING THE COSTS OF REAL ESTATE ACQUISITION AND
IMPROVEMENT, TOTAL INITIAL INVESTMENTS FALL BETWEEN $333,100 AND
$3.4 MILLION, WITH AN INITIAL FRANCHISE FEE OF UP TO $50,000.
SUBWAY
OWNERSHIP STRUCTURE
• THE MOST IMPORTANT GENERAL DIFFERENCE BETWEEN THE TWO COMPANIES IS THAT MCDONALD'S IS A PUBLIC
COMPANY WHILE SUBWAY IS PRIVATELY OWNED. THE COMMON STOCK OF MCDONALD'S IS LISTED ON THE NEW
YORK STOCK EXCHANGE AND IT HAS BEEN INCLUDED IN THE DOW JONES INDUSTRIAL AVERAGE (DJIA) SINCE 1985
DUE TO ITS MARKET CAPITALIZATION AND ITS POSITION IN THE INDUSTRY. IN CONTRAST, SUBWAY IS OWNED AND
OPERATED BY THE PRIVATE COMPANY DOCTORS' ASSOCIATES INCORPORATED.
• THE MCDONALD'S BRAND IS MUCH MORE VALUABLE THAN THAT OF SUBWAY DESPITE BOTH COMPANIES RANKED
AMONG THE WORLD'S MOST VALUABLE BRANDS, ACCORDING TO FORBES, UP TO 2018, WHEN SUBWAY WAS
DROPPED FROM THE LIST. REGULAR, OPEN PUBLICATION OF THE COMPANY'S FINANCIALS IMPROVES ITS ACCESS TO
CAPITAL WHICH, IN TURN, PROVIDES MORE OPPORTUNITIES TO STRENGTHEN THE COMPANY'S BRAND, A KEY
FACTOR BEHIND ITS CONTINUED STRONG FINANCIAL RESULTS. SO, IT SEEMS THAT BRAND VALUE ALONE DOES
NOT EXPLAIN THE DIFFERENCE BETWEEN THE CHAIN SIZE OF THE TWO COMPANIES.
INVESTMENT AND CAPITAL RESOURCES
• FOR ESTABLISHED COMPANIES SUCH AS MCDONALD'S AND SUBWAY, FRANCHISING IS ONE WAY TO EXPAND RAPIDLY
WITH MINIMAL RISK TO THE PARENT COMPANY. BOTH COMPANIES USE FRANCHISING IN THEIR BUSINESS MODELS
BUT TO DIFFERENT EXTENTS. ALL SUBWAY STORES ARE FRANCHISED. THE COMPANY ITSELF DOES NOT OWN ANY
SUBWAY RESTAURANTS. MCDONALD'S OWNS ABOUT 20% OF ITS RESTAURANTS, WITH THE REMAINING 80% OWNED
AND OPERATED BY INDEPENDENT FRANCHISEES.
• EXPERTISE GAINED FROM OPERATING COMPANY-OWNED OUTLETS ENABLES PARENT COMPANIES TO IMPROVE THE
OPERATING STANDARDS OF THE WHOLE FRANCHISE CHAIN. AT THE SAME TIME, THE EXISTENCE OF COMPANY-
OWNED STORES IN MCDONALD'S BUSINESS STRUCTURE PLACES CERTAIN RESTRICTIONS ON ITS EXPANSION
CAPABILITIES. FOR EXAMPLE, A CONVENTIONAL FRANCHISE AGREEMENT SUPPOSES THAT THE PARENT COMPANY
OWNS THE LAND AND THE BUILDING OR SECURES LONG-TERM LEASES FOR ITS RESTAURANTS. THIS REQUIRES
MORE CAPITAL, WHICH CAN LIMIT THE ABILITY FOR EXPANSION AT THE RATE OF OTHER CHAINS, LIKE SUBWAY.
GEOGRAPHIC SEGMENTS
• WHILE THE PRECEDING FACTORS SPEAK TO WHY THE NUMBER OF SUBWAY LOCATIONS EXCEEDS
THAT OF MCDONALD'S, THE DATA REVEALS THAT MCDONALD'S, WITH STORES IN 113 COUNTRIES,
HAS A BROADER GEOGRAPHIC REPRESENTATION THAN SUBWAY, WHICH HAS STORES IN 107
COUNTRIES. IN ADDITION, IN SOME COUNTRIES, THE NUMBER OF MCDONALD'S RESTAURANTS
EXCEEDS THAT OF SUBWAY, PARTICULARLY IN CHINA AND JAPAN AS WELL AS EUROPE AND SOUTH
AMERICA. SUBWAY, IN TURN, DOMINATES IN AUSTRALIA, INDIA, AND THE UNITED KINGDOM AS
WELL AS NORTH AND CENTRAL AMERICA. THE UNITED STATES IS THE SINGLE LARGEST MARKET
SEGMENT FOR BOTH COMPANIES.
THANK YOU…

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McDonald's Top Competitors: Burger King & Subway

  • 1. 2 NAMES OF MCDONALD'S BRAND’S COMPETITORS 1. BURGER KING 2. SUBWAY
  • 2. BURGER KING THE REAL KING OF BURGERS • MCDONALD'S LOCATIONS BROUGHT IN MORE THAN $21 BILLION IN 2019.EVEN WITH GROWTH FIGURES SLUMPING SINCE EARLY 2014, MCDONALD'S SITS ATOP THE FAST-FOOD WORLD. • BUT THOSE SLUMPING FIGURES SHOULD CONCERN INVESTORS, WHO HAVE NOT REALIZED A GREAT RETURN FOR SEVERAL YEARS. MCD PERFORMED ADMIRABLY DURING AND IMMEDIATELY AFTER THE GLOBAL RECESSION OF 2008–2009. IT TURNS OUT CHEAP FAST-FOOD IS ESSENTIALLY RECESSION-PROOF, BUT 2014 WAS THE WORST YEAR FOR THE COMPANY SINCE 2003. • UNDER RAY KROC, ITS FOUNDING FRANCHISING VISIONARY, MCDONALD'S BECAME THE WORLD'S PREMIER FOOD BRAND BY SELLING THE RIGHTS TO OPERATE A MCDONALD'S STORE. WITH THIS MODEL, MCD KEEPS OVERHEAD COSTS DOWN AND LETS LOCAL OWNERS DEAL WITH INDIVIDUAL UNITS. FOOD COSTS REMAIN LOW AND SERVICE REMAINS FAST FOR A CULTURE INCREASINGLY ON THE GO.
  • 3. THE COFFEE WARS • NEXT CAME A NEW FLEET OF COFFEE PRODUCTS FROM BURGER KING TO CHALLENGE THE MCCAFE MENU. MCDONALD'S MADE WAVES YEARS AGO BY PARTNERING WITH STARBUCKS TO CREATE A RECYCLABLE-COMPOSTABLE COFFEE CUP. SO BURGER KING TARGETED AND ACQUIRED TIM HORTONS, INC., THE LEADING CANADIAN COFFEE AND DONUT OUTLET. STOCK PRICES FOR BOTH COMPANIES SOARED AFTER THE CA$12.5 BILLION DEAL, INCLUDING CA$3 BILLION IN FINANCING FROM WARREN BUFFETT'S BERKSHIRE HATHAWAY. • THERE IS NO CONFUSION ABOUT BURGER KING'S VALUE PROPOSITION. IT IS JUST AS GOOD AS MCDONALD'S WITH THE SAME PRODUCTS, JUST SLIGHTLY MORE UPSCALE AND, SOMETIMES, LOWER PRICES.
  • 4. FRANCHISES • MEANINGFULLY INVESTING IN BURGER KING AND MCDONALD'S USUALLY MEANS BUYING AND OPERATING A NEW FRANCHISE UNIT. SINCE EACH COMPANY OPERATES ON AN INTERNATIONAL LEVEL AND NO TWO MARKETS ARE IDENTICAL, THE EASIEST WAY TO COMPARE FRANCHISING OPTIONS IS TO LOOK AT FRANCHISE DISCLOSURE DOCUMENTS (FDDS). • ACCORDING TO THE 2020 FDD FOR MCDONALD'S, THE INITIAL INVESTMENT AMOUNT FOR A MCDONALD'S FRANCHISE FALLS BETWEEN $1.3 MILLION AND $2.3 MILLION. THE CORPORATION ALSO CHARGES AN INITIAL FRANCHISE FEE OF $45,000. • BURGER KING'S FRANCHISES REQUIRE SIMILAR INVESTMENTS. THE 2020 BK FDD SUGGESTS THAT, EXCLUDING THE COSTS OF REAL ESTATE ACQUISITION AND IMPROVEMENT, TOTAL INITIAL INVESTMENTS FALL BETWEEN $333,100 AND $3.4 MILLION, WITH AN INITIAL FRANCHISE FEE OF UP TO $50,000.
  • 5. SUBWAY OWNERSHIP STRUCTURE • THE MOST IMPORTANT GENERAL DIFFERENCE BETWEEN THE TWO COMPANIES IS THAT MCDONALD'S IS A PUBLIC COMPANY WHILE SUBWAY IS PRIVATELY OWNED. THE COMMON STOCK OF MCDONALD'S IS LISTED ON THE NEW YORK STOCK EXCHANGE AND IT HAS BEEN INCLUDED IN THE DOW JONES INDUSTRIAL AVERAGE (DJIA) SINCE 1985 DUE TO ITS MARKET CAPITALIZATION AND ITS POSITION IN THE INDUSTRY. IN CONTRAST, SUBWAY IS OWNED AND OPERATED BY THE PRIVATE COMPANY DOCTORS' ASSOCIATES INCORPORATED. • THE MCDONALD'S BRAND IS MUCH MORE VALUABLE THAN THAT OF SUBWAY DESPITE BOTH COMPANIES RANKED AMONG THE WORLD'S MOST VALUABLE BRANDS, ACCORDING TO FORBES, UP TO 2018, WHEN SUBWAY WAS DROPPED FROM THE LIST. REGULAR, OPEN PUBLICATION OF THE COMPANY'S FINANCIALS IMPROVES ITS ACCESS TO CAPITAL WHICH, IN TURN, PROVIDES MORE OPPORTUNITIES TO STRENGTHEN THE COMPANY'S BRAND, A KEY FACTOR BEHIND ITS CONTINUED STRONG FINANCIAL RESULTS. SO, IT SEEMS THAT BRAND VALUE ALONE DOES NOT EXPLAIN THE DIFFERENCE BETWEEN THE CHAIN SIZE OF THE TWO COMPANIES.
  • 6. INVESTMENT AND CAPITAL RESOURCES • FOR ESTABLISHED COMPANIES SUCH AS MCDONALD'S AND SUBWAY, FRANCHISING IS ONE WAY TO EXPAND RAPIDLY WITH MINIMAL RISK TO THE PARENT COMPANY. BOTH COMPANIES USE FRANCHISING IN THEIR BUSINESS MODELS BUT TO DIFFERENT EXTENTS. ALL SUBWAY STORES ARE FRANCHISED. THE COMPANY ITSELF DOES NOT OWN ANY SUBWAY RESTAURANTS. MCDONALD'S OWNS ABOUT 20% OF ITS RESTAURANTS, WITH THE REMAINING 80% OWNED AND OPERATED BY INDEPENDENT FRANCHISEES. • EXPERTISE GAINED FROM OPERATING COMPANY-OWNED OUTLETS ENABLES PARENT COMPANIES TO IMPROVE THE OPERATING STANDARDS OF THE WHOLE FRANCHISE CHAIN. AT THE SAME TIME, THE EXISTENCE OF COMPANY- OWNED STORES IN MCDONALD'S BUSINESS STRUCTURE PLACES CERTAIN RESTRICTIONS ON ITS EXPANSION CAPABILITIES. FOR EXAMPLE, A CONVENTIONAL FRANCHISE AGREEMENT SUPPOSES THAT THE PARENT COMPANY OWNS THE LAND AND THE BUILDING OR SECURES LONG-TERM LEASES FOR ITS RESTAURANTS. THIS REQUIRES MORE CAPITAL, WHICH CAN LIMIT THE ABILITY FOR EXPANSION AT THE RATE OF OTHER CHAINS, LIKE SUBWAY.
  • 7. GEOGRAPHIC SEGMENTS • WHILE THE PRECEDING FACTORS SPEAK TO WHY THE NUMBER OF SUBWAY LOCATIONS EXCEEDS THAT OF MCDONALD'S, THE DATA REVEALS THAT MCDONALD'S, WITH STORES IN 113 COUNTRIES, HAS A BROADER GEOGRAPHIC REPRESENTATION THAN SUBWAY, WHICH HAS STORES IN 107 COUNTRIES. IN ADDITION, IN SOME COUNTRIES, THE NUMBER OF MCDONALD'S RESTAURANTS EXCEEDS THAT OF SUBWAY, PARTICULARLY IN CHINA AND JAPAN AS WELL AS EUROPE AND SOUTH AMERICA. SUBWAY, IN TURN, DOMINATES IN AUSTRALIA, INDIA, AND THE UNITED KINGDOM AS WELL AS NORTH AND CENTRAL AMERICA. THE UNITED STATES IS THE SINGLE LARGEST MARKET SEGMENT FOR BOTH COMPANIES.
  • 8.