Ever wondered why McDonald’s is the champ of the fast food world? Spoiler: It’s not just about the burgers and fries; it’s all about the value chain. McDonald’s shows how adding value at every step gives you a serious edge over your competition. Ready to learn their secrets? Let’s dive in and see how you can use their strategies to boost your small business.
Value Chain Analysis: What the Heck is It?
Value chain analysis is all about finding and refining the steps that take your product from raw materials to your customers’ hands. McDonald’s has nailed this process, and here’s how you can too!
Learn more about this concept here: the comprehensive guide on value chain analysis.
Inbound logistics: The Ingredient Hustle
Inbound logistics is where all the ingredients are sourced and purchased. This ensures that all the needed ingredients are readily available and prevents shortages.
A recent survey by Small Business Trends found that 78% of small business owners believe that supply chain disruptions are a major concern for their business. This insight emphasizes the importance of having multiple suppliers and diversifying sourcing strategies as a way of improving small business operations with value chain analysis.
For McDonald’s, this isn’t magic; it’s strategic planning! They have a bunch of reliable suppliers, whom they have built strong relationships with and are basically on speed dial, constantly sending them fresh patties, squeaky-clean lettuce, enough ketchup, and lots of other ingredients needed for their menus.
Consider this: A small business in the food industry adopted a multi-supplier strategy similar to McDonald’s, reducing production downtime by 50% and increasing revenue by 8%. Talk about hitting the jackpot!
Operations: The Secret Engine Room
The operations of a business include the efforts needed to turn inputs into outputs (finished products). In this step, you are looking to increase the efficiency and productivity of your small business; Basically, it’s where you make magic happen with little effort.
McDonald’s was able to expand and grow by applying this strategy to its operations in 2 ways: franchises and partnerships.
Franchises
McDonald’s operations include over 40,000 company-owned and franchised restaurants as of September 2023. About 95% of these are run by independent local business owners.
Only around 2,000 restaurants globally are owned and operated by McDonald’s itself. The rest? They’re franchises. How cool is that? Local business owners pay to use the McDonald’s name and recipes, leveraging that iconic brand without building it from scratch. Genius, right?
Why does McDonald’s prefer to operate fewer restaurants? Simple. Costs! Imagine overcoming all these hurdles of setting up a new restaurant and still getting paid! That’s why franchising is a great way to expand without shelling out for new locations.
Imagine overcoming all these hurdles of setting up a new restaurant and still getting paid! That is what a franchise does; it’s a great way to expand without shelling out for new locations.
McDonald’s recently launched a mentorship program for small business owners looking to franchise, providing them with resources and support to succeed. This is a win-win situation for the company and the local business owners.
This McDonald’s value chain strategy for efficiency and expansion has helped the company expand rapidly across major cities globally.
Partnerships
A study on small Kenyan flower growers found that value chain analysis was like a magic wand for improving processes, product quality, and traceability. These growers hit the jackpot by accessing lucrative export markets they previously only dreamed of. How did they do it? By forming a super team of collaboration and knowledge-sharing with suppliers, distributors, and even competitors.
McDonald’s has teamed up with the likes of Coca-Cola and other drinks/beverage companies. It gives Coca-Cola sole access to its large customer base, while the drinks company provides drinks and beverages for McDonald’s at cheaper prices through bulk purchases.
In 2022, McDonald’s started offering plant-based burgers in collaboration with Beyond Meat, which has become a significant revenue driver in select markets.
Outbound logistics: Fast Food to Fast Hands
Outbound logistics deals with the delivery of your finished products to customers.
McDonald’s optimized this step by prioritizing fast order fulfillment and deliveries to make the customers happy.
Order fulfillment optimization
Think of it like an assembly line: each crew member has a specific job, which helps get orders out quickly and accurately.
Many McDonald’s outlets have digital screens displaying order queues for the kitchen staff. This allows staff to prioritize and expedite order completion.
Fast deliveries
To achieve fast delivery to its customers, McDonald’s prioritizes drive-thru speed with dedicated lanes, clear signage, and strategically placed menu boards specifically designed for the drive-thru experience.
They often have staff members dedicated to taking orders at the beginning of the drive-thru lane to expedite the process. There are also menu boards specifically for the drive-thru.
Need a visual? Imagine a self-order kiosk here or watch this video of McDonald’s McMuffin Morning.
For online orders, it partners with delivery platforms like DoorDash and Uber Eats to expand its reach and ensure convenience for customers.
There are dedicated delivery staff, separate from in-store operations, for high-volume McDonald’s outlets to ensure faster service times.
Human Resource Management: Top-Notch Training
McDonald’s invests big time in training their crew, from efficient food prep to top-notch customer service. It employs more than 150,0000 individuals as of 2024. The company provides on-the-job training for its staff. It also has various programs that support staff growth.
A 2023 study shows that companies that invest in employee training have 24% higher profit margins than those that don’t. Training helps streamline operations and reduce errors, leading to faster order fulfillment and less waste.
Properly trained employees provide better customer service, increasing customer satisfaction and loyalty. This can translate to increased sales and profitability.
McDonald’s, for example, trains its employees extensively on efficient food preparation and order-handling techniques. This allows them to quickly process high volumes of orders through their streamlined operations.
Through the company’s Archways to Opportunity program, it has awarded more than $20 million in tuition assistance and access to education to more than 10,000 employees.
There is the Allyship through Accountability program, through which the company’s top management members are held accountable for engaging in inclusive behaviors that support talent development and build a strong, diverse succession pipeline.
Training employees is key to the success of every business because the staff are the engine room of the business.
Trained employees = happy customers = increased profitability. Simple!
Technology
McDonald’s has leveraged technology extensively throughout its value chain to drive profitability and efficiency.
In 2023, McDonald’s introduced AI-powered drive-thrus that significantly reduced wait times and improved customer satisfaction.
During the COVID-19 pandemic, McDonald’s rapidly expanded its digital ordering capabilities, resulting in a 30% increase in mobile app usage and online orders.
It has implemented the “Made for You” kitchen system, which only begins cooking food after an order is placed, ensuring freshness. Fancy, huh?
Takeaways: Borrow McDonald’s value chain strategies
- Build strong relationships and diversify Suppliers: Develop strong relationships with multiple suppliers for key ingredients or materials to ensure a steady supply and avoid disruptions. For example, a bakery can source flour from several mills to avoid delays if one supplier faces issues.
- Franchising (if applicable): Consider franchising if your model allows it. It’s a cost-effective expansion. Or get a franchise license to tap into an established brand’s loyal customers.
- Partnerships: Collaborate with other businesses for mutual benefit; this can give you access to new customer bases. Explore co-marketing opportunities or joint ventures. A gym could partner with a local health food store to offer discounts to each other’s customers.
- Optimize your order fulfillment: Implement a production-line approach to order assembly to streamline operations and reduce errors. A small bakery could assign specific tasks (mixing, baking, decorating) to different employees to speed up production.
- Embrace Technology: Look for opportunities to integrate technology into your business. Explore online ordering systems or mobile apps. An online retail store could use software to manage orders, update customers, and track delivery status. Implement some of those tech-savvy solutions, and you’ll be running circles around the competition in no time.
Here’s the thing about McDonald’s success: they understand that it’s not just about the food. It’s about the entire experience. It’s about a well-oiled value chain. By implementing similar strategies in your small business, you can supercharge your operations and watch your customer satisfaction and profits soar.
