McDonald’s or McDees, as it is endearingly referred to, across the globe, is one of the easily recognizable brands in the world. With over 37,000 restaurants worldwide and serving 68 million customers each day, its golden arches have become a well-known symbol, transcending borders and cultures. The fast food chain is one of the largest restaurant chains in terms of revenue and enjoys the ninth-highest global brand valuation as of 2020.
The success of the chain can be largely attributed to the strategic location of its stores. It is impossible to walk down a street either way and not be greeted by the sight of a McDonald’s beckoning you in. So how does McDonald’s regulate its store location policies and why? Two words – maximum coverage.
Location, location, location
McDonald’s is very specific when it comes to location. The company spends days, if not weeks, in analyzing factors like demographics and traffic patterns to ensure that profits are guaranteed once operations start. So you walking either way down the street and running across a McDonald’s is not fate. It has been placed there after careful calculations and accounting for potential revenue.
However, you will never find two McDonald’s next to each other or across the street from one another. The reason behind this is simple. It defeats the purpose of maximizing coverage if two outlets are placed in close proximity to one another. Let us take an example. Say you own a general store catering to location A in a town. Business is good and you wish to add another store to your operations. Would you rather open it in location A or would you go for say, location B and expand your presence in town? Any sane person would go for the second option. Similarly, McDonald’s has a number of outlets in one township or a city, each catering to distinct zones that don’t overlap.
Here come the neighbors
Going back to our example, your store in location A will have to compete with other similar stores for a share of the customers. Customer preference, location, prices, quality and customer experience will dictate the number of customers that come by your shop. Therefore, it pays to conduct a survey and scrunch the numbers before investing in a store. If your store is located at a prime location, customers will flock over to you. However, you also run the risk of having to compete with a store that has opened a few doors down. This is where your investment in a second store comes to play. Although your store A will have to share customers with the new competitor, store B will compensate the loss.
Hence, McDonald’s always has a number of stores in one city to cater to all possible sections and rake in the most profits. Having said that, the outlets will never be placed randomly just to service a certain niche. McDonald’s pride themselves in their pristine locations and consider the location of each unit as a critical factor in deciding potential success. Consequently, the company keeps a very close eye on where its stores are located.
McDonald’s location policy
Unlike most franchise systems where the franchisee locates a site that meets the franchisor’s standards, McDonald’s does things differently. It acquires the real estate and constructs the outlet for the franchisee. This does away with the problem of finding locations that meet franchise requirements and also allows the franchisor to place the new unit in a location of their choosing. This is particularly important in McDonald’s case as it believes that the location of each of its units is a major element of its success.
