The Economics of McDonald's

By lyrical (16, M, California, USA)

McDonald's is "the leading global foodservice retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 119 countries each day," says the McDonald's website. Recently, McDonald's announced that its second-quarter earnings jumped 57 percent primarily because of its success in Europe during the World Cup.

McDonald's has been an official sponsor of the FIFA World Cup since 1994 in the United States. It has used the opportunity of the World Cup's widespread attention to utilize different activities to promote and advertise itself. McDonald's finest program is the McDonald's Player Escort Program, which allows children ages six to ten years old to walk onto the field hand-in-hand with some of the best football players in the world. This year, the Player Escort Program was made up of 51 countries, 226 international children, and 1,182 children from the host country of Germany.

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During the World Cup, including the most recent one, McDonald's brought in many promotions and contests. For example, in Germany, more than 10,000 promotional tickets have been given away. In Brazil, sandwiches from countries competing in the World Cup were introduced for a limited time. China was used as an advertising ground for FIFA, with FIFA being publicized on restaurant posters, beverage cups, and television commercials. In Japan, a FIFA World Cup Mini-Match Ball and plush GOLEO VI toys, featuring the Official FIFA World Cup mascot, were promoted. McDonald’s has also given thousands of FIFA World Cup tickets to fans around the world through in-restaurant promotions, media tie-ins and special employee incentives.

"During the second quarter, we generated strong sales and profitability increases across all segments of the business and achieved double-digit consolidated operating income growth," said Chief Executive Officer Jim Skinner. "Europe's 6.3% comparable sales increase was the strongest quarterly result in more than 10 years."

In the United States, which is home to more than 40 percent of its restaurants worldwide, the recently introduced premium coffee led to increased breakfast sales. Happy Meals advertising the animated movie "Cars" also helped increase sales. U.S. comparable sales, which are the sales at all McDonald’s restaurants, gained 4.2 percent even though the new spicy chicken sandwich, which is being pulled from the menu, did not work out.

Here are some of the other highlights: Revenues increased 9% mainly due to the global comparable sales increase of 5.5%. Operating income rose 12%. Earnings per share were $0.67. McDonald’s also repurchased about $800 million, or 23.5 millions shares of its stock.

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