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McDonald's Co. (Japan) Ltd
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Leo Paul Dana: Nanyang Technological University, Singapore
Situational summary
Japan was hard hit by the recession of the late twentieth century. In Tokyo alone, several dozen Arby's restaurants closed down. McDonald's, with 1,000 restaurants across Japan, was determined to survive in that country. Nowhere else outside the USA did McDonald's have such a concentration of outlets.
McDonald's
In 1937, Richard and Maurice McDonald opened a tiny drive-in restaurant east of Pasadena, in California. This was the first McDonald's, and from this new, small business, the two brothers developed food-processing and assembly-line techniques.
In 1954, Ray Kroc, a salesman of milkshake mixers at the time, identified an opportunity in this small business; he then negotiated a franchise deal, granting him exclusive rights to franchise McDonald's across the USA. At a time when other franchising companies sold restaurant and ice cream franchises for up to US$50,000, Mr Kroc offered entrepreneurs a McDonald's franchise for $950 plus a service fee of 1.9 per cent of sales; Mr Kroc kept most, but not all, of the service fees, as the McDonald brothers received 0.5 per cent of sales. Preferring a calmer life, in 1961, Richard and Maurice McDonald sold their shares of this business for $2.7 million.
McDonald's first international venture was in Canada, during 1967. It soon became the country's fast-food industry leader. By the mid-1990s, Cara Operations (the owner of Harvey's and Swiss Chalet) was approaching annual sales of $1 billion (Canadian); McDonald's Canada surpassed $1.6 billion in sales during 1994. By 1997, McDonald's Canada operated almost 1,000 restaurants in Canada, and had been involved in the launch of McDonald's in Russia.
By the late 1990s, there were about 12,000 McDonald's restaurants across the USA, and this was the single most advertised brand in the nation. About 85 per cent of the...