One world, One Burger - McDonalds

AKNOWLEDGEMENT

I HA E G!EAT "LEA#$!E IN "!E#ENTING M% "!O&E'T ENTITLED M' DONALD I TAKE THI# AN O""O!T$NIT% TO E("!E## M% DEE"E#T G!ATIT$DE ) INE"TNE## TO ALL THO#E WHO 'ONT!IB$TED INDI!E'TL% THEI! TIME ) A##I#TED ME IN M% "!O&E'T* I WO$LD LIKE TO THANK M% "!O&E'T G$IDE#, ALL THE +A'$LT% MEMBE!#* +O! THI# A""!O AL ) AL#O +O! HE! AL$ABLE G$IDAN'E ) #$""O!T IN 'OM"LETING M% "!O&E'T O+ M' DONALD* LA#T B$T NOT THE LEA#T I WO$LD LIKE TO E("!E## M% #IN'E!E THANK# TO THO#E WHO DI!E'TL% ) INDI!E'TL% HEL"ED IN THI# "!O&E'T* AL$ABLE

#! NO*
,*

"A!TI'$LA!#
INT!OD$'TION
'HA"TE! ,

"AGE NO*
-./

0*

,1.,2

'OM"AN% "!O+ILE
3* 'HA"TE! 0 ,/.04

ANALI%#I# ON M'DONALD# A# A #MALL #'ALE 'O!"O!ATION IN THE BEGINNING

'HA"TE! 3 4* 05.31

ANALI%#I# ON M'DONALD# 'O!"O!ATION AT INTE!NATIONAL LE EL*

'HA"TE! 4

5*

ANALI%#I# ON M'DONALD# ON "!OD$TI IT% ) 6$ALIT%*

3,.35

'HA"TE! 5 7*

ANALI%#I# ON M'DONALD# AD E!TI#EMENT AND "$BILE !ELATION#*

'HA"TE! 7

37.4,

-*

ANALI%#I# ON AL$ATION O+ TA( O+ M'DONALD# 'O!"O!ATION*

'HA"TE! -

40.4-

42.5,

2*

ANALI%#I# ON M'DONALD# IM"O!T. E("O!T*

INT!OD$'TION
Although the realm of accounting and finance has often been viewed as dull bean counting, in todays modern and competitive business environment, the finance department should be at the heart of any company, encompassing a variety of functions that go beyond its traditional financial reporting role !hile it is still a priority for accountants to ensure a companys financial statutory accounts meet legal re"uirements, dynamic companies such as #c$onalds have shifted the focus of their accounting and finance function to additionally include the evaluation of past performance and appraisal of future opportunities, helping to ensure the %ompany ma&imises its strategic capabilities #c$onalds 'estaurants () *imited, a wholly owned subsidiary of the ( + parent company, opened its first () restaurant in !oolwich in ,-.4 /here are now ,,200 restaurants operating in the () which, despite representing only 41 of the total number of #c$onalds restaurants worldwide, contribute .1 of global profits, ma2ing the () a very important financial mar2et for #c$onalds shareholders

#c$onalds understands the value of an integrated accounting and finance function, e&tending from the restaurant floor up to the board of directors 4ach individual #c$onalds restaurant is structured as an independent business, with restaurant management responsible for its financial performance, supported by the centralised Accounting 5 6inance department

DE"A!TMENT #T!$'T$!E ) +$N'TION

#c$onalds 6inance $epartment has two 2ey areas of responsibility7 financial reporting and management accounting Although each of these functions has different priorities, wor2ing together ensures the best financial position for the company now and for the future

HOW

DOE#

M'DONALD#

MAKE

"!O+IT8
#c$onalds has two sources of profit7 8 +ales made by company-owned restaurants 8 'ental and royalty income from franchised restaurants

!E#TA$!ANT #ALE#
#c$onalds retains all of the profit earned by company-owned restaurants An e&ample 9rofit 5 *oss +tatement for a restaurant is shown left and highlights how food and labour constitute a restaurants largest costs :n addition to variable costs, which increase or decrease depending on the level of sales, #c$onalds also incurs costs that are largely fi&ed, for e&ample utilities and advertising, which need to be paid for even before the restaurant ma2es any sales :ncreasing sales and controlling costs are fundamental to ensuring the profit of each restaurant is either maintained or increased

'HA"TE!9.,

'OM"AN% "!O+ILE
#c$onalds is a leader in convenient foods and beverages, with revenues of about <23 billion and over i 3 million employees serving the customers world wide /he company consists of the snac2 business of =everages and 6oods 9epsi%o brands are available in nearly ,,5 countries having more than 24,500 restaurants in the world providing 24 hour service >aving about , billon customers to be served all over the world #c$onaldss success is the result of superior products, high standards of performance, distinctive competitive strategies and the high integrity of our people #c$onalds is continuing to e&pand and introduce new alternative beverages in the mar2et Appro&imately ;51 of #c$onalds restaurant businesses worldwide are owned and operated by franchisees All franchisees are independent, full-time operators #c$onalds was named 4ntrepreneurs ?umber-one franchise for ,--. @ur mission is to be the worldAs premier consumer 9roducts %ompany focused on convenient foods and beverages
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!e see2 to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate And in everything we do, we strive for honesty, fairness and integrity you could now Boin our team Creater variety and "uality choices surprise and delight customers with the food and beverage they desire #c$onalds corp is currently one of the most successful consumer products company in the world with annual revenues e&ceeding <23 million and has more than , 3 million employees #c$onalds products are recogniDed and are most respected all around the globe %urrently, its divisions operate in all over the world in beverages, snac2 foods, and restaurants of performance, mar2eting strategies, /he corporations increasing success has been based on high standards competitiveness, determination, commitment, and the personal and professional integrity of their people, products and business practices #c$onalds believes their success depends upon the "uality and value of their products by providing a safe, whole some, economically efficient and a healthy environment for their
,0

customersE and by providing a fair return to their investors while maintaining the highest standards of integrity

HI#TO!% O+ McDONALD#*
The McDonald's History - 1954 to 1955
Raymond Albert Kroc 1902-19 4! A "alesman Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of a five-spindled milk shake maker called the Multimixer. Hearing about the McDonald's hamburger stand in alifornia running eight Multimixers at a time! he packed up his car and headed "est. #t $as %&'(. He $as ') years old. Dic# and Mac McDonald's Resta$rant! "an %ernardino! &ali'ornia Ray Kroc had never seen so many people served so *uickly $hen he pulled up to take a look. +ei,ing the day! he pitched the idea of opening up several restaurants to the brothers Dick and Mac McDonald! convinced that he could sell eight of his Multimixers to each and every one. -"ho could $e get to open them for us.- Dick McDonald said. -"ell!- Kroc ans$ered! -$hat about me.-

,,

(here it all be)an! Des *laines! +llinois Ray Kroc opened the Des /laines restaurant in %&''. 0irst day's revenues-1233.%)4 5o longer a functioning restaurant! the Des /laines building is no$ a museum containing McDonald's memorabilia and artifacts! including the Multimixer4

The McDonald's History - 195, to 19,Ray Kroc At (or# -#f you've got time to lean! you've got time to clean!Ray Kroc preached to his troops. Heeding his o$n $ords! here the hairman of the 6oard cleans the parking lot of the first McDonald's franchise in Des /laines! #llinois.

Ronald McDonald! +n Any .an)$a)e He Means /0$n1/ -7he smile kno$n around the $orld!- #n his first 78 appearance in %&32 the happy clo$n $as portrayed by none other than "illard +cott.

,2

0red T$rner And Ray Kroc! Architects 2' A Dream Here Ray Kroc 9right: and 0red 7urner study the design $hich $ould replace the red and $hite tile buildings that had become landmarks throughout the ;.+. alled Kroc's first -grill man extraordinaire!- 7urner is today +enior hairman of the 6oard.

The McDonald's History - 19,5 to 193McDonald's &omes To (all "treet #n %&3' McDonald's $ent public $ith the company's first offering on the stock exchange. < hundred shares of stock costing 1)!)'= dollars that day $ould have multiplied into >(!23= shares today! $orth approximately 12.2 million on December 2%! )==3. #n %&?' McDonald's $as added to the 2=-company Do$ @ones #ndustrial <verage.

A %i) +dea &alled /%i) Mac/ -#ntroduced system$ide in %&3?! the 6ig Mac $as the brainchild of @im Delligatti! one of Ray Kroc's earliest franchisees! $ho by the late %&3=s operated a do,en stores in /ittsburgh.The 4)) McM$''in

,3

#ntroduced in %&>2! the Agg McMuffin $as developed by o$ner operator Herb /eterson.

The 0irst Ronald McDonald Ho$se in *hiladel5hia! *A #n %&>( 0red Hill of the /hiladelphia Aagles teamed up $ith McDonald's to create Ronald McDonald House. Here the families of critically ill children have a place to call home $hile they're a$ay from home as the young patients undergo treatment for their conditions.

The Ha55y Meal +ince %&>& the Happy Meal has been making kids visits that much more special. lubs the $orld over collect Happy Meals toys and boxes.

The 0$t$re %e)ins 6o7 McDonald's Axpress for a $orld that can't slo$ do$n4. McDonald's is popping up in more nontraditional locations like <moco and hevron stations! $ith full menu offerings and dining room seating! Bust like you'll find in a traditional McDonald's.

+A'T# ) +IG$!E#
,4

, 3million
!es:auran: e;<lo=ees #=s:e; w>de ded>ca:ed :o ser?>ng our cus:o;ers

540million
#nac@ Wra<s were sold >n 011-

24,500
!es:auran:s around :Ae world oBBer eC:ended or 04.Aour ser?>ce

,billion
More cus:o;ers were ser?ed >n 011- :Aan >n 0117

,,5
'oun:r>es <ar:>c><a:ed >n one oB McDonalds ;os: successBul <ro;o:>ons e?er D Our :>e.>n w>:A Drea;Wor@s #Ar>e@ :Ae TA>rdE

'HA"TE!9.0
,5

ANALI%#I# ON M'DONALD# A# A #MALL #'ALE 'O!"O!ATION IN THE BEGINNING*

#c$onalds is one of the leading restaurant chains in the world, touching the lives of people everyday /he long Bourney of the burger brand started in ,-40, when two brothers, $ic2 and #ac #c$onald opened the first #c$onalds restaurant in +an =ernardino, %alifornia :nitially, they owned a hotdog stand, but after establishing the restaurant they served around 25 items, which were mostly barbe"ued :t became a popular and profitable teen hangout :n ,-4;, the brothers closed and reopened the restaurant to sell only hamburgers, mil2sha2es and 6rench fries As per the information of the #c$onalds history, the maBor revenue came from hamburgers, which were sold at a nominal price of ,5 cents /he restaurant gradually became famous and the #c$onald brothers begin franchising their restaurant in the year ,-53 /he first franchise was ta2en by ?eil 6o& and under itE the second #c $onalds restaurant was opened in 6resno, %alifornia :t was the first to introduce the Colden
,3

Arch design /he third and fourth restaurants were opened in +aginaw, #ichigan and $owney, %alifornia, respectively

/he business began in ,-40, with a restaurant opened by siblings $ic2 and #ac #c$onald in +an =ernardino, %alifornia /heir introduction of the F+peedee +ervice +ystemF in ,-4; established the principles of the modern fast-food restaurant /he original mascot of #c$onaldAs was a man with a chefAs hat on top of a hamburger shaped head whose name was F+peedee F +peedee was eventually replaced with 'onald #c$onald in ,-33 /he present corporation dates its founding to the opening of a franchised restaurant by 'ay )roc, in $es 9laines, :llinois on April ,5, ,-55 , the ninth #c$onaldAs restaurant overall )roc later purchased the #c$onald brothersA e"uity in the company and led its worldwide e&pansion and the company became listed on the public stoc2 mar2ets in ,-35 )roc was also noted for aggressive business practices, compelling the #c$onaldAs brothers to leave the fast food industry /he #c$onaldAs brothers and )roc feuded over control of the business, as documented in both )rocAs autobiography and in the #c$onald brothers

,.

autobiography /he site of the #c$onald brothersA original restaurant is now a monument !ith the e&pansion of #c$onaldAs into many international mar2ets, the company has become a symbol of globaliDation and the spread of the American way of life :ts prominence has also made it a fre"uent topic of public debates about obesity, corporate ethics and consumer responsibility #%$@?A*$A+ :ndia 9vt *td G#:9*H, the wholly-owned subsidiary of the (+-based fast-food giant, #c$onaldAs %orporation, is li2ely to put on hold its earlier declared e&pansion plan of opening ;0 restaurants in :ndia by 2003

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#c$onalds has ,32 restaurants in :ndia of which .- are in ?orth 5 4ast :ndia and 53 in !est 5 +outh :ndia

-/ res:auran:s >n Nor:A ) Eas: Ind>a9 w>:A

33 >n DelA>

00 >n $::ar "radesA I ?oida G5H, ChaDiabad G4H, #athura G,H G>ighway and $rive /hruH, )anpur G2H, #eerut G2H, *uc2now G4H, Agra G,H, Allahabad G,H, Jaranasi G2H ,, >n Har=ana - 6aridabad G3H, #anesar G,H G>ighway and $rive /hruH, Curgaon G5H, )arnal G,H G>ighway and $rive - /hruH, 9anipat G,H - >n "unFaG - %handigarh G2H, *udhiana G2H, $oraha G,H G>ighway and $rive - /hruH, Kalandhar G,H, 9atarsi G,H G>ighway and $rive /hruH 3 >n !aFas:Aan . Kaipur G3H , >n $::arancAal - $ehradun G,H , >n Wes: Bengal I )ol2ata G,H , >n H>;acAal "radesA- Kabli G,H

53 !es:auran:s >n Wes: ) #ou:A Ind>a7 30 >n MaAarasA:ra I #umbai G23H, 9une G;H, ?asi2 G,H

- >n GuFara: I Ahmedabad G4H, Jadodara G2H, +urat G,H - >n Karna:a@a I =angaloreG.H 4 >n AndAra "radesA I >yderabad G4H, 3 >n MadA=a "radesA I :ndore G3H
,-

,//7

/he first #c$onaldAs restaurant opened on @ct ,3, at =asant *o2, Jasant Jihar, ?ew $elhi :t was also the first #c$onaldAs restaurant in the world not serving beef on its menu /he first $rive - /hru restaurant at ?oida G(9H /he first disabled friendly store at ?oida G(9H

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,/// 0111 011, 0110

/he first #all location restaurant at Ansal 9laDa G?ew $elhiH /he first highway restaurant at #athura G(9H /he first thematic restaurant at %onnaught 9lace G?ew $elhiH /he first restaurant in a food court at 3%As, *aBpat ?agar G?ew $elhiH /he first restaurant at the $elhi #etro +tation at :nter +tate =us /erminus /he first annual fundraiser in association with @'=:+ and $r +hroffAs %harity 4ye >ospital G$elhiH

0113 0113. 14 0114 0117

/he first $essert )ios2 - 6aridabad G>aryanaH :ndigenous products li2e #cAloo /i22i, #cJeggie and 9iDDa #c9uff e&ported to #iddle 4ast countries #c$onaldAs $elivery +ervice G#c$elivery/# H introduced in ?ew $elhi #c$elivery on =icycles flagged off at %handni %how2 G$elhiHanother first initiative by #c$onaldAs :ndia ,00th #c$onaldAs 'estaurant in :ndia ,0 Lear Anniversary

011-

/he first 'estaurant opened in the 4astern 'egion at 9ar2 +treet, )ol2ata G!est =engalH /he first 'estaurant opened at Airport G$omestic Airport, ?ew $elhiH

'HA"TE!9.3
20

ANALI%#I# ON M'DONALD# 'O!"O!ATION AT INTE!NATIONAL LE EL*

#c$onaldAs :nternational through its wholly owned subsidiary #c$onaldAs :ndia entered into two KJs, one with %onnaught 9laDa 'estaurants 9vt *td in the ?orthern 5 4astern region and another with >ard %astle 'estaurants 9vt *td in the !estern 5 +outhern region #c$onaldAs restaurants are found in ,,- countries and territories around the world and serve nearly 4. million customers each day #c$onaldAs operates over 3,,000 restaurants worldwide, employing more than , 5 million people /he company also operates other restaurant brands, such as 9iles %afM, and has a minority sta2e in 9ret a #anger /he company owned a maBority sta2e in %hipotle #e&ican Crill until completing its divestment in @ctober 2003 (ntil $ecember 2003, it also owned $onatos 9iDDa @n August 2., 200., #c$onaldAs sold =oston #ar2et to +un %apital 9artners

2,

#ost standalone #c$onaldAs restaurants offer both counter service and drive-through service, with indoor and sometimes outdoor seating $rive-/hru, Auto-#ac, 9ay and $rive, or #c$rive as it is 2nown in many countries, often has separate stations for placing, paying for, and pic2ing up orders, though the latter two steps are fre"uently combinedE it was first introduced in AriDona in ,-.5, following the lead of other fastfood chains :n some countries F#c$riveF locations near highways offer no counter service or seating :n contrast, locations in high-density city neighborhoods often omit drivethrough service /here are also a few locations, located mostly in downtown districts, that offer !al2-/hru service in place of $rive-/hru 4specially themed restaurants also e&ist, such as the F+olid Cold #c$onaldAs,F a ,-50s roc2-and-roll themed restaurant :n Jictoria, =ritish %olumbia, there is also a #c$onaldAs with a 24 carat G,001H gold chandelier and similar light fi&tures 4ach #c$onaldAs restaurant is operated by a franchisee, an affiliate, or the corporation itself /he corporationsA revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants #c$onaldAs revenues grew 2.1 over the three years ending in 200. to <22 ; billion, and -1 growth in operating income to <3 - billion
22

6ull year 200; highlights included7

Clobal comparable sales increase of 3 -1, including ( + 4 01, 4urope ; 51, and AsiaN9acific, #iddle 4ast and Africa - 01 Crowth in #c$onalds combined operating margin of 320 basis points to 2. 41, after adBusting for the impact of the 200. *atin America transaction @perating income increases in the ( + ;1, 4urope 231 G,.1 in constant currenciesH and AsiaN9acific, #iddle 4ast and Africa 331 G2;1 in constant currenciesH 4arnings per share from continuing operations of <3 .3, an increase of ,31 G,41 in constant currenciesH, after adBusting for the impact of the 200. *atin America transaction

'eturn of <5 ; billion to shareholders through shares repurchased and dividends paid, including a 331 increase in the "uarterly cash dividend to <0 50 per share for the fourth "uarter I bringing our current annual dividend rate to <2 00 per share :ndividual franchise arrangements generally include a lease and a license and provide for payment of initial fees, as well as continuing rent and royalties to the %ompany based upon a percent of sales with minimum rent payments that parallel the
23

%ompanys underlying leases and escalations Gon properties that are leasedH #c$onalds franchisees are granted the right to operate a restaurant using the #c$onalds +ystem and, in most cases, the use of a restaurant facility, generally for a period of 20 years 6ranchisees pay related occupancy costs including property ta&es, insurance and maintenance :n addition, in certain mar2ets outside the ( + , franchisees pay a refundable, non interest-bearing security deposit 6oreign affiliates and developmental licensees pay a royalty to the %ompany based upon a percent of sales, as well as initial fees /he results of operations of restaurant businesses purchased and sold in transactions with franchisees, affiliates and others were not material to the consolidated financial statements for periods prior to purchase and sale

24

McDonaldHs Ind>aII 'ul:urall= #ens>:>?e

#c$onaldAs worldwide is well 2nown for the high degree of respect for the local customs and culture #c$onalds has developed a menu especially for :ndia with vegetarian selections to suit :ndian tastes and preferences )eeping in line with this, McDonaldHs does no: oBBer an= GeeB or <or@ >:e;s >n Ind>a :n the last decade it has introduced some vegetarian and nonvegetarian products with local flavours that have appealed to the :ndian palate /here have been continuous efforts to enhance variety in the menu by developing more such products #c$onaldAs has also re-engineered its operations repeatedly in its ,, years in :ndia to address the special re"uirements of a vegetarian menu Jegetable products are ,001 vegetarian, i e

/hey are prepared separately, using dedicated e"uipment and utensils @nly pure vegetarian oil is used as a coo2ing medium %heese and sauces are completely vegetarian and egg less +eparation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, coo2ing and serving

'HA"TE!9.4
25

ANALI%#I# ON M'DONALD# ON "!OD$TI IT% ) 6$ALIT%*

/he site of the first #c$onaldAs to be franchised by 'ay )roc is now a museum in $es 9laines, :llinois /he building is a reproduction of the original, which was the ninth #c$onaldAs restaurant /o accommodate the current trend for high "uality coffee and the popularity of coffee shops in general, #c$onaldAs introduced #c%afMs /he #c%afM concept is a cafM-style accompaniment to #c$onaldAs restaurants #c%afM is a concept of #c$onaldAs Australia, starting with #elbourne in ,--3 /oday, most #c$onaldAs in Australia have #c%afMs located within the e&isting #c$onaldAs restaurant :n /asmania there are #c%afMs in every store, with the rest of the states "uic2ly following suit After upgrading to the new #c%afM loo2 and feel, some Australian stores have noticed up to a 301 increase in sales As of the end of 2003 there were over 300 #c%afMs worldwide +ome locations are connected to gas stationsNconvenience stores, while others called #c$onaldAs
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4&press have limited seating andNor menu or may be located in a shopping mall @ther #c$onaldAs are located in !al-#art stores #c+top is a location targeted at truc2ers and travelers which may have services found at truc2 stops #c$onaldAs announced on #ay 22, 200; that, in the ( + and %anada, it will be introducing coo2ing oil for its 6rench fries that contain no trans fats /he company will use canola-based oil with corn and soy oils by yearAs end for its ba2ed items, pies and coo2ies :n a bid to tap into growing consumer interest in the provenance of food, the fast-food chain recently switched its supplier of both coffee beans and mil2 () chief e&ecutive +teve 4asterbroo2 said7 F=ritish consumers are increasingly interested in the "uality, sourcing and ethics of the food and drin2 they buyF #c$onaldAs coffee is now brewed from beans ta2en from stoc2s that have been certified by the 'ainforest Alliance, a conservation group +imilarly, mil2 supplies used for its hot drin2s and mil2sha2es have been switched to organic sources which could account for 51 of the ()As organic mil2 output /he company has also e&panded the #c$onaldAs menu in recent decades to include alternative meal options, such as salads and snac2 wraps, in order to capitaliDe on growing consumer interest in health and wellness #c$onaldAs predominantly sells hamburgers, various types of chic2en sandwiches and products, 6rench fries, soft drin2s, brea2fast items, and desserts :n most
2.

mar2ets, #c$onaldAs offers salads and vegetarian items, wraps and other localiDed fare /his local deviation from the standard menu is a characteristic for which the chain is particularly 2nown, and one which is employed either to continue by regional food taboos Gsuch as the religious prohibition of beef consumption in :ndiaH or to ma2e available foods with which the regional mar2et is more familiar Gsuch as the sale of #c 'ice in :ndonesiaH /here have been continuous efforts to enhance variety in the menu by developing more such products #c$onaldAs has also re-engineered its operations repeatedly in its ,, years in :ndia to address the special re"uirements of a vegetarian menu Jegetable products are ,001 vegetarian, /hey are prepared separately, using dedicated e"uipment and utensils @nly pure vegetarian oil is used as a coo2ing medium %heese and sauces are completely vegetarian and egg less +eparation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, coo2ing and serving

2;

Mos: !es<ec:ed 'o;<an=H Bor Bour consecu:>?e =ears, 0113.011- >n :Ae +ood #er?>ces sec:or, G= Bus>nessworld Mos: Wan:ed Brand oB :Ae %earH Award 0113 ) 0114 G= +rancA>s>ng Hold>ngs Ind>a L:d* !e:a>ler oB :Ae %earH Award Bor ca:er>ng ser?>ces, 0114.0117 a: :Ae I;ages !e:a>l Awards* TAe HMos: "reBerred +as: +ood Ou:le:H 0117 ) 011- G= AwaaJ 'onsu;er Award, Aos:ed G= 'NB'* #:ar !e:a>ler . TAe 'onsu;er Wa=, +ood #er?>ces !e:a>lerH oB :Ae %ear 0117 ) 011-, G= +rancA>se Ind>a

A;>:= 'or<ora:e ECcellence AwardH.>n 011- ) 0112

#c$onaldAs :ndia - A decade of "uality service 6or its unparalleled benchmar2s established in the O+' sector #c$onalds :ndia has been bestowed with many prestigious awards /o name a few7

'HA"TE!9.5
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ANALI%#I# ON M'DONALD# AD E!TI#EMENT AND "$BILE !ELATION#

@ver the years, #c$onaldAs has developed /J advertising campaigns that have become, li2e #c$onaldAs, a part of our lives and culture #c$onaldAs commercials have focused not only on product, but rather on the overall #c$onaldAs e&perience, portraying warmth and a real slice of every day life /his FimageF or FreputationF advertising has become a trademar2 of the company and created many memorable television moments and themes, including7#c$onaldAs is Lour )ind of 9lace G,-3.H Lou $eserve a =rea2 /oday G,-.,H !e $o it All for Lou G,-.5H /woallbeefpattiesspecialsaucelettucecheesepic2lesonionsonasesa meseedbun G,-.5H Lou, LouAre /he @ne G,-.3H ?obody %an $o :t *i2e #c$onaldAs %an G,-.-H 'enewed7 Lou $eserve a =rea2 /oday G,-;0 5 ,-;,H ?obody #a2es Lour $ay *i2e #c$onaldAs %an G,-;,H #c$onaldAs and Lou G,-;3H
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:tAs a Cood /ime for the Creat /aste of #c$onaldAs G,-;4H Cood /ime, Creat /aste, /hatAs !hy /his is #y 9lace G,-;;H 6ood, 6ol2s and 6un G,--0H #c$onaldAs /oday G,--,H !hat Lou !ant is !hat Lou Cet G,--2H >ave you >ad your =rea2 /odayP G,--5H #y #c$onaldAs G,--.H $id +omebody +ay #c$onaldAs G,--.H !e *ove to +ee Lou +mile G2000H /hereAs a little #c$onaldAs in 4veryone G200,H - %anada @nly :m lovinA it G2003H #c$onaldAs has for decades maintained an e&tensive advertising campaign :n addition to the usual media Gtelevision, radio, and newspaperH, the company ma2es significant use of billboardsGoutdoors, on which large advertisements or notices are posted H and signage, sponsors sporting events from ranging from *ittle *eague to the @lympic Cames, and ma2es coolers of orange drin2 with their logo available for local events of all 2inds ?onetheless, television has always played a central role in the companyAs advertising strategy

EM"LO%EE BENE+IT "LAN#

3,

/he %ompanys 9rofit +haring and +avings 9lan for ( + based employees includes a 40,G2H feature, a leveraged employee stoc2 ownership G4+@9H feature, and a discretionary employer profit sharing match /he 40,G2H feature allows participants to ma2e pre-ta& contributions that are partly matched from shares released under the 4+@9 /he 9rofit +haring and +avings 9lan also provides for a discretionary employer profit sharing match at the end of the year for those eligible participants who have contributed to the 40,G2H feature All contributions and related earnings can be invested in several investment alternatives as well as #c$onalds common stoc2 in accordance with each participants elections 9articipants contributions to the 40,G2H feature and the discretionary employer match are limited to 201 investment in #c$onalds common stoc2 /he %ompany also maintains certain supplemental benefit t plans that allow participants to GiH ma2e ta&-deferred contributions and GiiH receive %ompany-provided allocations that cannot be made under the 9rofit +haring and +avings 9lan because of :nternal 'evenue +ervice limitations /he investment alternatives and returns are based on certain mar2et-rate investment alternatives under the 9rofit +haring and +avings 9lan /otal liabilities were <4,5 3 million at $ecember 3,, 200. and <3.; 3 million at $ecember 3,, 2003 and were included in other long32

term liabilities in the %onsolidated balance sheet /he %ompany has entered into derivative contracts to hedge mar2et-driven changes in certain of the liabilities At $ecember 3,, 200., derivatives with a fair value of <,00 ; million inde&ed to the %ompanys stoc2 as well as an investment totalling <;2 0 million inde&ed to certain mar2et indices were included in miscellaneous other assets in the %onsolidated balance sheet All changes in liabilities for these non"ualified plans and in the fair value of the derivatives are recorded in selling, general 5 administrative e&penses %hanges in fair value of the derivatives inde&ed to the %ompanys stoc2 are recorded in the income statement because the contracts provide the counterparty with a choice to settle in cash or shares /otal ( + costs for the 9rofit +haring and +avings 9lan, including non"ualified benefits and related hedging activities, were Gin millionsH7 200.I<5. 3E 2003I<30 ,E 2005I<5; 0 %ertain subsidiaries outside the ( + also offer profit sharing, stoc2 purchase or other similar benefit plans /otal plan costs outside the ( + were Gin millionsH7 200.I<32 .E 2003I<3- ;E 2005I<54 , /he total combined liabilities for international retirement plans were <,2- 4 million and <,-. 3 million at $ecember 3,, 200. and 2003, respectively, primarily in %anada and the ( ) @ther postretirement benefits and post-employment benefits were immaterial
33

!EA#ON TO WO!K WITH M'DONALD#

+as:.:rac@ 'areer "rogress>on %oung , Energe:>c ) +leC>Gle En?>ron;en: ECcellen: learn>ng "o:en:>al D>gn>:= oB LaGour World class Tra>n>ng #=s:e;s GloGal EC<osure Good BeneB>:s

'HA"TE!9.7

34

ANALI%#I# ON AL$ATION O+ TA( O+ M'DONALD# 'O!"O!ATION

/he %ompany records a valuation allowance to reduce its deferred ta& assets if it is more li2ely than not that some portion or all of the deferred assets will not be realiDed !hile the %ompany has considered future ta&able income and ongoing prudent and feasible ta& strategies, including the sale of appreciated assets, in assessing the need for the valuation allowance, if these estimates and assumptions change in the future, the %ompany may be re"uired to adBust its valuation allowance /his could result in a charge to, or an increase in, income in the period such determination is made :n addition, the %ompany operates within multiple ta&ing Burisdictions and is subBect to audit in these Burisdictions /he %ompany records accruals for the estimated outcomes of these audits, and the accruals may change in the future due to new developments in each matter $uring 200., the %ompany recorded a <3,3 million benefit as a result of the completion of an :'+ e&amination of the %ompanys 2003-2004 ( + ta& returns $uring 2005, the %ompany recorded a <,.- million benefit due to the completion of an :'+ e&amination of the %ompanys 2000-2002 ( + ta&

35

returns /he %ompanys 2005-2003 ( + ta& returns are under audit and the completion is e&pected in late 200; or early 200$eferred ( + income ta&es have not been recorded for temporary differences totalling <3 . billion related to investments in certain foreign subsidiaries and corporate Boint ventures /he temporary differences consist primarily of undistributed earnings that are considered permanently invested in operations outside the ( + :f managements intentions change in the future, deferred ta&es may need to be provided

33

=A*A?%4 +>44/ @6 #%$@?A*$+ 200.-0;

PERIOD 30-Jun-07 ENDING Assets CurrentAssets CashAndCash 2,142,100 Equivalents ShortTerm Investments Net Receivables 784,600 Inventory 1,055,500 OtherCurrent 379,200 Assets Total Current 4,361,400 Assets LongTerm 1,060,100 Investments PropertyPlant 20,106,600 andEquipment Goodwill 2,198,300 Intangible Assets Accumulated Amortization OtherAssets 1,268,500 DeferredLong TermAsset Charges Total Assets 28,994,900

31-Mar-07

31-Dec-06

30-Sep-06

2,438,400 848,000 143,700 449,300 3,879,400 1,064,400 20,975,200 2,254,300 1,300,200 29,473,500
3.

2,136,400 904,200 149,000 435,700 3,625,300 1,036,200 20,845,700 2,209,200 1,307,400 29,023,800

4,282,700 812,500 144,500 596,000 5,835,700 1,032,300 20,526,200 2,156,100 1,278,900 30,829,200

Liabilities CurrentLiabilities Accounts 2,120,900 Payable Short/Current 288,200 LongTermDebt OtherCurrent 1,020,500 Liabilities Total Current 3,429,600 Liabilities LongTermDebt 7,885,500 OtherLiabilities 1,652,500 DeferredLong TermLiability 941,600 Charges MinorityInterest Negative Goodwill Total Liabilities 13,909,200 Stockholders'Equity MiscStocks Options Warrants Redeemable PreferredStock PreferredStock CommonStock 16,600 Retained 25,881,200 Earnings TreasuryStock (14,832,700) CapitalSurplus 3,957,000 Other Stockholder 63,600 Equity Total Stockholder 15,085,700 Equity Net Tangible $12,887,400 Assets

2,451,000 613,500 3,064,500 8,199,900 1,471,000 971,100 13,706,500

2,739,000 17,700 251,400 3,008,100 8,416,500 1,074,900 1,066,000 13,565,500

4,122,100 454,200 4,576,300 8,569,400 1,154,300 1,002,900 15,302,900

16,600 26,592,500 (14,371,900) 3,731,300 (201,500)

16,600 25,845,600 (13,552,200) 3,445,000 (296,700)

16,600 24,585,700 (11,858,500) 3,228,200 (445,700)

15,767,000 $13,512,700
3;

15,458,300 $13,249,100

15,526,300 $13,370,200

'HA"TE!9.3-

ANALI%#I# ON M'DONALD# IM"O!T. E("O!T

/he business is managed as distinct geographic segments +ignificant reportable segments include the (nited +tates G( + H, 4urope, and AsiaN9acific, #iddle 4ast and Africa GA9#4AH :n addition, throughout this report we present Q@ther %ountries 5 %orporateR that includes operations in %anada and *atin America, as well as %orporate activities and certain investments /he ( + , 4urope and A9#4A segments account for 351, 3-1 and ,31 of total revenues, respectively 6rance, Cermany and the (nited )ingdom G( ) H, collectively, account for appro&imately 301 of 4uropes revenuesE and Australia, %hina and Kapan a 501-owned affiliate accounted for under the e"uity methodH, collectively, account for over 501 of A9#4As revenues /hese si& mar2ets along with the ( + and %anada are referred to as QmaBor mar2etsR throughout this report and comprise over .01 of total revenues /he %ompany continues to focus its management and financial resources on the #c$onalds restaurant business as we believe the opportunities for long-term growth remain signifi cant Accordingly, during the third "uarter 200., the %ompany sold its investment in =oston #ar2et :n 2003, the %ompany disposed of its investment in %hipotle
40

#e&ican Crill G%hipotleH via public stoc2 offerings and a ta&-free e&change for #c$onalds common stoc2 As a result of the disposals during 200. and 2003, both =oston #ar2ets and %hipotles results of operations and transaction gains have been reflected as discontinued operations for all periods presented :n analyDing business trends, management considers a variety of performance and financial measures including comparable sales growth, +ystem wide sales growth, restaurant margins and returns 8 %onstant currency results e&clude the effects of foreign currency translation and are calculated by translating current year results at prior year average e&change rates #anagement reviews and analyDes business results in constant currencies and bases certain compensation plans on these results because we believe they better represent the underlying business trends 8 %omparable sales are a 2ey performance indicator used within the retail industry and are indicative of acceptance of the %ompanys initiatives as well as local economic and consumer trends :ncreases or decreases in comparable sales represent the percent change in constant currency sales from the same period in the prior year for all restaurants in operation at least thirteen months, including those temporarily closed +ome of the reasons
4,

restaurants may be temporarily closed include road construction, reimaging or remodelling, rebuilding, and natural disasters #c$onalds reports on a calendar basis and therefore the comparability of the same month, "uarter and year with the corresponding period of the prior year will be impacted by the mi& of days /he number of wee2days, wee2end days and timing of holidays in a given timeframe can have a positive or negative impact on comparable sales /he %ompany refers to this impact as the calendar shiftNtrading day adBustment /his impact varies geographically due to consumer spending patterns and has the greatest impact on monthly comparable sales /ypically, the annual impact is minimal, with the e&ception of leap years 8 +ystem wide sales include sales at all restaurants, whether operated by the %ompany, by franchisees or by affiliates !hile sales by franchisees and affiliates are not recorded as revenues by the %ompany, management believes the information is important in understanding the %ompanys financial performance because it is the basis on which the %ompany calculates and records franchised and affiliated revenues and is indicative of the financial health of our franchisee base

M4THD2.289
42

This 5ro:ect is 5re5ared 7ith the hel5 o' theoretical #no7led)e as 7ell as 5ractical #no7led)e ; a cr$mb o' ad<ises ; s$))estions 'rom the concerned 5ro'essors= The theoretical 5ert ta#en 'rom the <ario$s boo#s ; ma)a>ines a<ailable on this s$b:ect= And other recent ha55in) in mar#etin) is ta#en 'rom ma)a>ines ; ne7s 5a5er= As 'ar as 5ractical is concerned! all the in'ormation abo$t the com5anies in'ormation a<ailable on net= 2<erall this mission has been com5leted 7ith the combination o' al those thin)s ; it had been 7ith the best o' my 'acts ; in'ormation=

BIBLOG!A"H%
43

 BOOK#9.
='A?$ 9'A%/:%4+

MAKINE#9.
=(+:?4++ !@'*$ ,00 /@9 ='A?$+ />4 JA*(A=*4 ='A?$+ @6 :?$:A

WEB #ITE#9.

www mcdonaldsindia com

www mcdonalds com

44

'ON'L$#IONIIII

TODAY, MCDONALDS HAS GROWN TO 25,000 RESTAURANTS IN ABOUT 120 COUNTRIES SERVING 50 MILLION CUSTOMERS DAILY. BECOMING THE LARGEST FAST FOOD CHAIN IN ALL OVER THE WORLD

45

BYE BYE SEE U AT McDonaldS

43

EQUIPMENTS

6'L #A+/4'

C':**4'

4.

J4C 6'44S4'

%>:**4'

4;

4-

Main M D!na"#$ M%n&

Big Mac Big N Tasty Big N Tasty w/ Cheese Quarter Pounder w/ Cheese Double Quarter Pounder w/ Cheese Crispy Chicken Chicken McGrill Filet ! Fish Double Cheeseburger Cheeseburger "a#burger Chicken McNuggets $%& Chicken McNuggets $'& Chicken McNuggets $(& Mc)alad )haker Che* )alad Mc)alad )haker Garden )alad Mc)alad )haker Grilled Chicken Caeser )alad

Main M D!na"#$ Si#% Di$' M%n& )#all French Fries Mediu# French Fries +arge French Fries )uper )i,e French Fries

Main M D!na"#$ B(%a)*a$+ M%n& -gg McMu**in )ausage McMu**in )ausage McMu**in w/ -gg Bacon. -gg / Cheese Biscuit )ausage Biscuit )ausage Biscuit w/ -gg "a#. -gg / Cheese Bagel )reak. -gg / Cheese Bagel )panish !#elet Bagel )ausage Break*ast Burrito Big Break*ast Delu0e Big Break*ast "otcakes / )ausage 1pple Danish 50

M D!na"#$ D%$$%(+ M%n& Baked 1pplePie )tawberry )undae "ot Fudge )undae "ot Cara#el )undae 2anilla 3educed Fat 4ce Crea# Cone !reo McFlurry M / M McFlurry Butter*inger McFlurry Fruit n 5ogurt Par*ait Fruit n 5ogurt Par*ait snack si,e McDonaldland Cookies Fresh Baked Cookies

M D!na"#$ B%,%(a-% M%n& Thick n Crea#y )hake 2anilla. Chocolate or )trawberry Coca Cola. Diet Coke or )prite Co**ee Tea !range 6uice 78 Milk #c$onalds 6ast food restaurants in :ndia is more popular now, its popularity is growing at fast rate %urrently #c$onalds is having largest networ2 of restaurants in :ndia in comparison to similar fast food chain li2e $omino 9iDDa :f you go at any #c$onalds restaurant, you will find the same menu /he "uality of food item will be always be superior #c$onalds is maintaining the same "uality across all the stores in the country :t have a single supply source for all the outlets in the country, so the end products is same throughout all outlets in :ndia #c$onalds food menu is protected by patents, so it is very difficult to get similar food in "uality and taste from other restaurants

Menu a: McDonalds is as follows G#enu and 9rice indicated is only for rough idea, they change there menu and pricing very very fre"uently in :ndia because of various weather seasonsH Lou will get actual price details at outlet only eg +ood I:e;. 5,

#cJeggie T 9rice is around 's 40-50 #cAloo /i22i T 's 20I50 9aneer +alsa !rap T 's 20I50 %rispy %hinese T 's 20I50 Jeg #c%urry 9an T 's 20I50 9iDDa #c9uff I G i forgot the price H *arge 6ries T 's 40- 50 >appy #eal T 's 50-30 %ombos T 's 30-'s .0 +oft $rin2 T 's 20

Non eg +ood I:e;

%hic2en #aharaBa #ac #c%hic2en - 's 50- 55 6ilet-@-6ish %hic2en #cCrill %hic2en #c%urry 9an

52

.M!/%n+$ O* T(&+'0 1 T'% S%(,i % En !&n+%(

)er9ice Pro9ider

)er9ice Deli9ery Points

#anaging these Qmoments of truthR is a great challenge in +ervice #ar2eting especially due to customers involvement as a co-producer of services Ge g #c$onalds self-service concept wherein the customer not only collects the order but also cleans the table after consuming the foodH >owever, #c$onaldAs has been able to create a great e&perience for its customers by understanding the nature of the entire +ervice $elivery 9rocess and the various stages in the process that are e&posed to the customers /ransparency in the processes at its outlet has helped #c$onalds bring the bac2 office in its outlet at the front so that the customer is able to 2now the operations and provide feedbac2 on service design improvements :nternal %ustomer 6ocus is e"ually important as 4&ternal %ustomer @rientation in order to win these Qmoments of truthR #c$onalds focus on its 9eople and their service delivery methods therefore plays a very important role in creating a successful +ervice =rand /he "uality and the consistency of the service delivered by #c$onalds have been greatly enhanced by the combination of the factors mentioned above /his has helped #c$onalds become +ervice *eader and a successful +ervice =rand /his is evident from the fact that very few of its customers opt for ta2e-home parcels or home deliveries while most of them prefer to eat at the outlet and enBoy the #c$onalds e&perience

53

!a:>ngs9 6ues:>onna>re
,. M>n>;u; ,1.MaC>;u; 5. A?erage >ow is the ambience at #c $onaldsP UUUUUUUUUUUUUUU >ow is the "uality at #c $onaldsP UUUUUUUUUUUUUUUUUU Are stores of #c $onalds at >yderabad are sufficientUUUUUUUU >ow is the accessibility of #c $onaldsPUUUUUUUUUUUUUUU >ow is the "uantity given by mc $onaldsPUUUUUUUUUUUUU >ow are the services provided by mc $onaldsPUUUUUUUUU :s price worth to the "uantity providedPUUUUUUUUUUUUUUU #c $onalds offers are attractivePUUUUUUUUUUUUUUUUUUUU /he items provided by #c$onalds are freshP UUUUUUUUUUUU :s home delivery goodPUUUUUUUUUUUUUUUUUUUUUUUUUU

6or #anager of #c$onald !hat is the strength of #c$onaldP !hich place is best suited for better mar2eting of #c $onaldsP !hat are the promotion strategies made for effective mar2eting of #c $onaldsP >ow is the price of the food items of #c $onalds are decidedP

54

!ho

are

the

most

targeted

coustemers

in

mar2etPG/eenagersN#iddle-aged

peopleN4veryoneH

6or %ustomer >ow often do you eat at #c $onaldsPGtwice a monthNonce a wee2Nwee2endsH :n a month how much do you roughly spend in #c $onaldsP !hat meals do you prefer at #c $onaldsPP Lou li2e to eat at #c $onalds becausePGit tastes goodNcheapNconvenientNproper hygieneNnot visited yetH :f there was a ) 6 % across the street,would you rather go thereP Are you satisfied by the services provided by #c $onaldsPGL4+N?@H !hich fast food Boint do you prefer other then #c $onaldsP 6or staff members of #c $onald !hat is the best selling item at #c $onaldsP !hat brand of cold drin2s is mostly sold at #c donaldsP Are you happy with the wor2ing conditions and services provided by #c $onaldsP !hat are the wor2ing hours of #c $onaldsP $o you get any monetary benefits by wor2ing at #c $onaldsP

Anal=s>s oB Lues:>onna>re and da:a >n:er<re:a:>on9 #c $ Ambience Ouality ?o of stores Accessibility Ouantity 55 5.3 54 3. 54 )6% 44 5; 433 55

+ervice 9rice @ffers :tems >ome delivery

.. ;0 3. 55 30

.; 5;; 33 20

Da:a >n:er<re:a:>on Bor Lues:>onna>re9 #c $ 5.3 54 3. 54 .. ;0 3. 55 30

Ambience Ouality ?o of stores Accessibility Ouantity +ervice 9rice @ffers :tems >ome delivery

53

5.