Conduct a benchmarking analysis
As explained by Prasnikar, Debeljak and Ahcan (2005) benchmarking depends on comparing between two activities of an organization and another. In our case, we shall compare McDonald's activities and those of its competitors, Burger King and Wendy's.
• Best practices
McDonald's as a main player in the fast food industry is concerned with best practices with the industry. To this end, the corporation has adopted some best practices that include sustainability, nutrition and well-being, employee experience ad environmental responsibility. Accordingly, McDonald's protects the environment by going green and using methods that protect and conserve the environment. McDonald's also encourages its suppliers to uphold effective environmental. The company treats it employees well and offers them good working conditions as a way retaining them. Employees are offered training and promoted accordingly. McDonald's also adheres to ethical conduct its operations and food items are produced ethical. Similarly, the company also takes part in community development. These best practices are witnessed across the industry and can be observed both at Burger king and Wendy's.
Operational processes and procedures
McDonald's as a fast food companies strives to create process that ensure that food is served as quick as possible. McDonald's as well strives to create consistency in its process and procedures all through its restaurants around the world. This is important for the customer satisfaction. Similarly, Burger King and Wendy's do the same. Customer satisfaction within the industry includes accuracy of orders given by customers and wait time for tables. However, when these two aspects are compared among McDonald's, Burger King and Wendy's, McDonald's leads in accuracy of orders.
McDonald's applies standardization fully to reduce taste differences among its franchises. Thus, French Fries in New York City will be same as those in Daban, South Africa. This only happens due to standard work procedures as well as processes. LEAN processes are important in achieving this standardization. Wendey's and Burger King as also adopted LEAN processes to create standardized products.
• Products or services
In the recent past, fast food industry has been going through a trend where fast food restaurants offer customers higher quality products within the shortest time possible. Restaurants that offer these services are normally known as "fast casual" or as "quality quickservice." Their objective is to offer clients with freshly made, made-to-order meals. Accordingly, their operations are based on speed and convenience, as offered by traditional fast food. However, it combines high quality food and attractive decor as found in casual-dining restaurants.
Fast food restaurants have usually been associated with unhealthy foods. However, more and more customers are becoming health-conscious and have seemed to opt for those places that offer nutritious meals. In response to this trend, many fast food restaurants have developed new menu products to satisfy this category of customers. Indeed, customers remain the key driving force behind fast food business, they are the main reason why fast food have tried to improve the quality of products and services they offer and this has resulted in introduction of new products and services as a way of satisfying their demands.
Compared to Wendy's and Burger King, similar products and services are being offered by the two companies. However, there are some differences in the menu items of these two companies when compared to McDonald's.
References
Hollensen, S. (2004): Global Marketing, a Market-Responsive Approach, 2nd Edition, Essex, and Pearson Education
Maclaney, E and Atrill, P. (2002). Accounting: An Introduction. 2nd ed. London: Prentice Hall.
McDonald's (2012). 2011 Annual Report: Retrieved from: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf
Morningstar.com (2012). MCD Key Ratios. Retrieved from: http://financials.morningstar.com/ajax/exportKR2CSV.html?t=MCD&culture=en-U.S.®ion=USA&order=asc&r=199410
Prasnikar, J., Debeljak Z. And Ahcan, a. (2005) Benchmarking as a Tool for Strategic Management, Total Quality Management, Vol.16, No. 2, 257-275,
APPENDIX
Growth Profitability and Financial Ratios for McDonald's Corporation
Financials
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
Revenue USD Mil
15,406
17,141
19,065
20,460
21,586
22,787
23,522
22,745
24,075
27,006
27,441
Gross Margin %
50.2
50.2
50.8
30.9
32.4
34.7
36.7
38.7
40
39.6
39.6
Operating Income USD Mil
2,113
2,832
3,541
4,022
4,445
3,879
6,443
6,841
7,473
8,530
8,668
Operating Margin %
13.7
16.5
18.6
19.7
20.6
17
27.4
30.1
31
31.6
31.6
Net Income USD Mil
1,471
2,279
2,602
3,544
2,395
4,313
4,551
4,946
5,503
5,561
Earnings Per Share USD
0.7
1.15
1.79
2.04
2.83
1.98
3.76
4.11
4.58
5.27
5.35
Dividends USD
0.24
0.4
0.55
0.67
1
1.5
1.63
2.05
2.26
2.53
2.62
Payout Ratio %
30.5
33.9
30.7
32.8
43.5
77.7
43.2
49.9
49.3
48
48.9
Shares Mil
1,282
1,277
1,274
1,274
1,252
1,212
1,146
1,107
1,080
1,045
1,039
Book Value Per Share USD
8.1
9.44
11.3
12.03
12.5
13.27
12.01
13.03
13.89
14.06
14.43
Operating Cash Flow USD Mil
2,890
3,269
3,904
4,337
4,342
4,876
5,917
5,751
6,342
7,150
7,231
Cap Spending USD Mil
-2,552
-1,683
-1,569
-1,607
-1,742
-1,947
-2,136
-1,952
-2,136
-2,730
-2,810
Free Cash Flow USD Mil
1,586
2,335
2,730
2,600
2,930
3,782
3,799
4,206
4,420
4,421
Key Ratios -> Profitability
Margins % of Sales
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
Free Cash Flow Per Share
0.26
1.24
1.83
2.13
2.07
2.42
3.3
3.43
3.89
4.2
Working Capital
-707
-600
-663
1,813
-917
1,444
Revenue
COGS
49.78
49.78
49.18
69.09
67.64
65.31
63.27
61.35
59.97
60.43
60.41
Gross Margin
50.22
50.22
50.82
30.91
32.36
34.69
36.73
38.65
40.03
39.57
39.59
SG&a
31.1
30.6
29.93
10.85
10.83
10.39
10.01
9.82
9.69
8.86
8.83
R&D
Other
5.41
3.1
2.31
0.4
0.93
7.28
-0.68
-1.25
-0.7
-0.88
-0.83
Operating Margin
13.72
16.52
18.57
19.66
20.59
17.02
27.39
30.08
31.04
31.58
31.59
Profitability
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
Net Int Inc. & Other
-2.93
-2.83
-1.77
-1.56
-1.29
-1.35
-1.21
-1.56
-1.96
-1.92
-1.85
EBT Margin
10.79
13.69
16.8
18.09
19.3
15.68
26.18
28.52
29.08
29.67
29.74
Tax Rate %
40.31
35.72
28.85
29.7
31.04
34.63
29.96
29.84
29.34
31.32
31.86
Net Margin %
5.8
8.58
11.95
12.72
16.42
10.51
18.34
20.01
20.55
20.38
20.26
Asset Turnover (Average)
0.66
0.69
0.71
0.71
0.73
0.78
0.81
0.78
0.77
0.83
0.84
Return on Assets %
3.84
5.95
8.54
9
12.01
8.2
14.91
15.51
15.9
16.94
17
Financial Leverage (Average)
2.33
2.13
1.96
1.98
1.88
1.92
2.13
2.15
2.19
2.29
2.27
Key Ratios -> Growth
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Revenue %
Return on Equity %
9.04
13.22
17.4
17.73
23.16
15.58
30.1
33.2
34.51
37.92
38.2
Return on Invested Capital %
4.62
7.01
10.1
10.69
14.41
9.88
17.9
18.88
19.49
20.75
20.62
Year over Year
3.6
11.26
11.23
7.32
5.5
9.05
3.23
-3.31
5.85
12.18
7.12
3-Year Average
5.13
6.37
8.64
9.92
7.99
7.01
7.16
2.87
1.85
4.71
Operating Income %
5-Year Average
6.19
6.65
7.53
7.51
7.74
8.14
6.53
3.59
3.31
4.58
10-Year Average
8
8.75
8.64
7.64
7.28
7.16
6.59
5.54
5.39
6.15
Year over Year
-21.66
34.04
25.01
13.59
10.53
-12.5
66.1
6.18
9.24
14.14
7.6
3-Year Average
-13.05
-3.31
9.5
23.93
16.21
3.12
17.38
15.56
24.43
9.8
Net Income %
5-Year Average
-4.75
-1.3
1.95
5.12
10.51
12.92
17.87
14.08
13.19
13.92
10-Year Average
1.63
3.95
5.08
4.89
5.56
3.71
7.86
7.85
9.08
12.2
Year over Year
-45.41
64.68
54.85
14.21
36.2
-32.42
80.08
5.51
8.69
11.26
3-Year Average
-22.88
-9.38
11.66
42.81
34.05
1.68
18.35
8.69
27.35
8.46
EPS %
5-Year Average
-11.46
-1.04
3.19
5.65
16.71
21.8
24
14.84
13.71
9.2
10-Year Average
-0.7
3.12
6.41
6.19
8.47
3.84
10.78
8.86
9.6
12.89
Year over Year
-44
64.29
55.65
13.97
38.73
-30.04
89.9
9.31
11.44
15.07
6.96
3-Year Average
-20.44
-7.65
12.71
42.84
35.01
3.42
22.61
13.24
32.25
11.91
Key Ratios -> Cash Flow
Cash Flow Ratios
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
5-Year Average
-9.37
0.89
5.19
6.92
17.75
23.12
26.74
18.09
17.56
13.24
10-Year Average
0.9
4.94
7.86
7.55
9.86
5.63
13.08
11.45
12.11
15.48
Operating Cash Flow Growth % YOY
7.51
13.1
19.42
11.1
0.11
12.32
21.35
-2.81
10.27
12.75
Free Cash Flow Growth % YOY
-24.99
47.24
16.94
-4.78
12.7
29.07
0.46
10.72
5.09
Cap Ex-as a % of Sales
16.57
9.82
8.23
7.85
8.07
8.54
9.08
8.58
8.87
10.11
10.24
Key Ratios -> Financial Health
Balance Sheet Items (in %)
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Free Cash Flow/Sales %
2.19
9.25
12.25
13.34
12.04
12.86
16.08
16.7
17.47
16.37
16.11
Free Cash Flow/Net Income
0.38
1.08
1.02
1.05
0.73
1.22
0.88
0.83
0.85
0.8
0.8
Cash & Short-Term Investments
1.38
1.93
4.96
14.21
7.36
6.74
7.25
5.94
7.47
7.08
6.87
Accounts Receivable
3.57
2.88
2.68
2.65
3.12
3.59
3.27
3.51
3.69
4.05
3.7
Inventory
0.47
0.51
0.53
0.49
0.51
0.43
0.39
0.35
0.34
0.35
0.34
Other Current Assets
1.74
2.07
2.1
2.16
1.5
1.43
1.45
1.5
2.17
1.87
1.86
Total Current Assets
7.16
7.39
10.27
19.51
12.49
12.19
12.36
11.3
13.66
13.35
12.76
Net PP&E
77.53
78.06
74.37
66.38
71.82
71.4
71.16
71.24
68.99
69.22
69.91
Intangibles
6.51
6.52
6.57
6.5
7.61
7.83
7.86
8.02
8.09
8.04
8.16
Other Long-Term Assets
8.81
8.03
8.79
7.6
8.07
8.59
8.62
9.44
9.26
9.39
9.17
Total Assets
Accounts Payable
2.65
2.26
2.57
2.3
2.87
2.12
2.18
2.1
2.95
2.91
2.12
Short-Term Debt
1.15
1.52
3.1
4.01
0.06
6.77
0.11
0.06
0.03
1.11
2.17
Taxes Payable
0.89
1.59
1.21
1.82
2.56
Accrued Liabilities
5.43
4.81
4.91
4.48
5.7
5.56
5.74
6.14
4.96
4.79
4.08
Other Short-Term Liabilities
0.87
1.15
2.07
2.67
1.73
0.84
0
0
0
0
Total Current Liabilities
10.11
9.74
12.65
13.46
10.36
15.31
8.92
9.89
9.15
10.64
10.94
Long-Term Debt
40.48
36.6
30.02
29.8
29
24.87
35.79
34.94
35.96
36.78
36.17
Other Long-Term Liabilities
6.52
6.72
6.32
6.23
7.38
7.84
8.27
8.74
9.13
8.96
8.91
Total Liabilities
57.11
53.06
48.98
49.49
46.74
48.01
52.98
53.57
54.23
56.38
56.02
Liquidity/Financial Health
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Total Stockholders' Equity
42.89
46.94
51.02
50.51
53.26
51.99
47.02
46.43
45.77
43.62
43.98
Total Liabilities & Equity
Current Ratio
0.71
0.76
0.81
1.45
1.21
0.8
1.39
-2.93
-2.83
-1.77
-1.56
-1.29
-1.35
-1.21
-1.56
-1.96
-1.92
-1.85
EBT Margin
10.79
13.69
16.8
18.09
19.3
15.68
26.18
28.52
29.08
29.67
29.74
Tax Rate %
40.31
35.72
28.85
29.7
31.04
34.63
29.96
29.84
29.34
31.32
31.86
Net Margin %
5.8
8.58
11.95
12.72
16.42
10.51
18.34
20.01
20.55
20.38
20.26
Asset Turnover (Average)
0.66
0.69
0.71
0.71
0.73
0.78
0.81
0.78
0.77
0.83
0.84
Return on Assets %
3.84
5.95
8.54
9
12.01
8.2
14.91
15.51
15.9
16.94
17
Financial Leverage (Average)
2.33
2.13
1.96
1.98
1.88
1.92
2.13
2.15
2.19
2.29
2.27
Key Ratios -> Growth
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Revenue %
Return on Equity %
9.04
13.22
17.4
17.73
23.16
15.58
30.1
33.2
34.51
37.92
38.2
Return on Invested Capital %
4.62
7.01
10.1
10.69
14.41
9.88
17.9
18.88
19.49
20.75
20.62
Year over Year
3.6
11.26
11.23
7.32
5.5
9.05
3.23
-3.31
5.85
12.18
7.12
3-Year Average
5.13
6.37
8.64
9.92
7.99
7.01
7.16
2.87
1.85
4.71
Operating Income %
5-Year Average
6.19
6.65
7.53
7.51
7.74
8.14
6.53
3.59
3.31
4.58
10-Year Average
8
8.75
8.64
7.64
7.28
7.16
6.59
5.54
5.39
6.15
Year over Year
-21.66
34.04
25.01
13.59
10.53
-12.5
66.1
6.18
9.24
14.14
7.6
3-Year Average
-13.05
-3.31
9.5
23.93
16.21
3.12
17.38
15.56
24.43
9.8
Net Income %
5-Year Average
-4.75
-1.3
1.95
5.12
10.51
12.92
17.87
14.08
13.19
13.92
10-Year Average
1.63
3.95
5.08
4.89
5.56
3.71
7.86
7.85
9.08
12.2
Year over Year
-45.41
64.68
54.85
14.21
36.2
-32.42
80.08
5.51
8.69
11.26
3-Year Average
-22.88
-9.38
11.66
42.81
34.05
1.68
18.35
8.69
27.35
8.46
EPS %
5-Year Average
-11.46
-1.04
3.19
5.65
16.71
21.8
24
14.84
13.71
9.2
10-Year Average
-0.7
3.12
6.41
6.19
8.47
3.84
10.78
8.86
9.6
12.89
Year over Year
-44
64.29
55.65
13.97
38.73
-30.04
89.9
9.31
11.44
15.07
6.96
3-Year Average
-20.44
-7.65
12.71
42.84
35.01
3.42
22.61
13.24
32.25
11.91
Key Ratios -> Cash Flow
Cash Flow Ratios
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
5-Year Average
-9.37
0.89
5.19
6.92
17.75
23.12
26.74
18.09
17.56
13.24
10-Year Average
0.9
4.94
7.86
7.55
9.86
5.63
13.08
11.45
12.11
15.48
Operating Cash Flow Growth % YOY
7.51
13.1
19.42
11.1
0.11
12.32
21.35
-2.81
10.27
12.75
Free Cash Flow Growth % YOY
-24.99
47.24
16.94
-4.78
12.7
29.07
0.46
10.72
5.09
Cap Ex-as a % of Sales
16.57
9.82
8.23
7.85
8.07
8.54
9.08
8.58
8.87
10.11
10.24
Key Ratios -> Financial Health
Balance Sheet Items (in %)
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Free Cash Flow/Sales %
2.19
9.25
12.25
13.34
12.04
12.86
16.08
16.7
17.47
16.37
16.11
Free Cash Flow/Net Income
0.38
1.08
1.02
1.05
0.73
1.22
0.88
0.83
0.85
0.8
0.8
Cash & Short-Term Investments
1.38
1.93
4.96
14.21
7.36
6.74
7.25
5.94
7.47
7.08
6.87
Accounts Receivable
3.57
2.88
2.68
2.65
3.12
3.59
3.27
3.51
3.69
4.05
3.7
Inventory
0.47
0.51
0.53
0.49
0.51
0.43
0.39
0.35
0.34
0.35
0.34
Other Current Assets
1.74
2.07
2.1
2.16
1.5
1.43
1.45
1.5
2.17
1.87
1.86
Total Current Assets
7.16
7.39
10.27
19.51
12.49
12.19
12.36
11.3
13.66
13.35
12.76
Net PP&E
77.53
78.06
74.37
66.38
71.82
71.4
71.16
71.24
68.99
69.22
69.91
Intangibles
6.51
6.52
6.57
6.5
7.61
7.83
7.86
8.02
8.09
8.04
8.16
Other Long-Term Assets
8.81
8.03
8.79
7.6
8.07
8.59
8.62
9.44
9.26
9.39
9.17
Total Assets
Accounts Payable
2.65
2.26
2.57
2.3
2.87
2.12
2.18
2.1
2.95
2.91
2.12
Short-Term Debt
1.15
1.52
3.1
4.01
0.06
6.77
0.11
0.06
0.03
1.11
2.17
Taxes Payable
0.89
1.59
1.21
1.82
2.56
Accrued Liabilities
5.43
4.81
4.91
4.48
5.7
5.56
5.74
6.14
4.96
4.79
4.08
Other Short-Term Liabilities
0.87
1.15
2.07
2.67
1.73
0.84
0
0
0
0
Total Current Liabilities
10.11
9.74
12.65
13.46
10.36
15.31
8.92
9.89
9.15
10.64
10.94
Long-Term Debt
40.48
36.6
30.02
29.8
29
24.87
35.79
34.94
35.96
36.78
36.17
Other Long-Term Liabilities
6.52
6.72
6.32
6.23
7.38
7.84
8.27
8.74
9.13
8.96
8.91
Total Liabilities
57.11
53.06
48.98
49.49
46.74
48.01
52.98
53.57
54.23
56.38
56.02
Liquidity/Financial Health
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
Latest Qtr
Total Stockholders' Equity
42.89
46.94
51.02
50.51
53.26
51.99
47.02
46.43
45.77
43.62
43.98
Total Liabilities & Equity
Current Ratio
0.71
0.76
0.81
1.45
1.21
0.8
1.39
1.14
1.49
1.25
1.17
Quick Ratio
0.49
0.49
0.6
1.25
1.01
0.67
1.18
0.96
1.22
1.05
0.97
Key Ratios -> Efficiency Ratios
Efficiency
2002-12
2003-12
2004-12
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
TTM
Financial Leverage
2.33
2.13
1.96
1.98
1.88
1.92
2.13
2.15
2.19
2.29
2.27
Debt/Equity
0.94
0.78
0.59
0.59
0.54
0.48
0.76
0.75
0.79
0.84
0.82
Days Sales Outstanding
20.58
16.93
14.17
13.75
14.37
15.68
15.4
15.98
16.98
16.99
15.93
Days Inventory
5.17
5.16
5.39
3.8
3.7
3.36
2.9
2.85
2.73
2.54
2.46
Payables Period
31.54
25.95
25.14
18.12
19.04
17.88
15.26
16.43
19.97
21.31
15.51
Cash Conversion Cycle
-5.79
-3.87
-5.58
-0.57
-0.97
1.16
3.04
2.39
-0.26
-1.78
2.87
Receivables Turnover
17.74
21.56
25.76
26.55
25.39
23.28
23.7
22.84
21.5
21.49
22.92
Inventory Turnover
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