Exploring McDonald's Business Model in 2025: How It Remains a Global Leader in Fast-Food Innovation

About McDonald's

McDonald's was founded by Ray Kroc in 1955 in Des Plaines, Illinois, to bring quick and consistent fast food to the masses. The brand's unique selling proposition lies in its combination of affordable, high-quality meals and an efficient franchising model that facilitated rapid global expansion. By 2025, McDonald's will generate over $150 billion in systemwide sales and operate in over 100 countries, with a workforce of 2.5 million employees worldwide.

McDonald's ethos is rooted in innovation, community, and accessibility. The company prioritises affordability, speed, and consistency, ensuring a positive and reliable experience for customers at every touchpoint. Through technological advancements like the McDonald's App, self-order kiosks, and loyalty programs, McDonald’s continues to adapt to changing consumer preferences while maintaining its legacy.

As a customer, McDonald's experience is focused on convenience, offering quick service, a broad menu selection, and consistent quality. The brand’s secret to success lies in its franchising model and ability to stay relevant through constant innovation while delivering a seamless, customer-centric experience globally.

Summary Table 

How does McDonald's make money?

Revenue Stream Breakdown:

Product Sales (e.g., food and beverages):

• McDonald's generates significant revenue from the sale of products like burgers, fries, beverages, and breakfast items at its company-operated restaurants.
• Contribution: Approximately 60% of total revenue.

Franchise Fees (e.g., royalties, rent):

• McDonald's earns revenue from franchisees who pay an initial franchise fee and ongoing royalty payments (typically 4% of gross sales). Additionally, franchisees pay rent based on the sales of their location, contributing to McDonald's income.
• Contribution: Around 30% of total revenue.

Advertising Revenue:

• McDonald's collects advertising revenue from franchisees who contribute to the national advertising fund, typically about 4% of gross sales. This fund is used for global advertising campaigns and sponsorships.
• Contribution: Part of Services & Advertising Revenue, approximately 10% of total revenue.

Services (e.g., delivery, mobile app-based orders, drive-thru):

• McDonald's earns additional revenue from delivery services, mobile app orders, and drive-thru services, catering to growing customer demand for convenience and digital engagement.
• Contribution: Around 10% of total revenue.

Revenue Contribution:

• Product Sales: 60% of total revenue, primarily from food and beverages.
• Franchise Fees: 30% of total revenue, from franchisee payments (royalties and rent).
• Services & Advertising Revenue: 10% of total revenue, from advertising contributions and delivery services.

Pricing Strategy:

• McDonald's follows a Value-Based Pricing strategy.
• The brand offers affordable meals to appeal to a wide demographic, while maintaining a balance between quality and price.
• This pricing model enables McDonald's to remain competitive in the fast-food industry while ensuring healthy profit margins.
• By combining affordable pricing with efficient operations and a strong franchising model, McDonald's successfully caters to a large customer base globally, securing its market dominance.

McDonald's Business Model Canvas

McDonald's Value Proposition

McDonald’s delivers fast, affordable meals with an emphasis on consistency and quality.

The brand’s value proposition is centred around its ability to provide a reliable and consistent experience across its global locations, offering customers the same taste and service every time.

McDonald’s addresses key customer pain points, such as convenience, by providing quick service, affordable prices, and easy accessibility through drive-thru, delivery, and mobile app options.

The emotional benefits include a sense of nostalgia and familiarity, with McDonald’s serving as a global brand that customers can trust.

Additionally, its functional benefits, speed, convenience, and consistency are key drivers.

McDonald’s competitive advantage lies in its vast franchise network, economies of scale, and its ability to innovate through seasonal menu items and local adaptations, which differentiate it from other fast-food chains.

McDonald's Revenue Model

McDonald's revenue is driven by Product Sales, including burgers, fries, and beverages, which contribute 60% of its total income.

Franchise Fees account for 30% of revenue, including royalties and rent from its vast network of franchisees.

Additional income comes from Advertising Revenue and Services such as delivery and drive-thru, making up 10%.

This diversified revenue stream helps McDonald’s maintain strong financial stability.

McDonald's Cost Structure

McDonald's major expenses include supply chain management, marketing, and labour costs.

To optimise costs, McDonald’s employs automation in operations and bulk production to achieve economies of scale.

Partnering with third-party delivery services helps reduce operational expenses.

Despite rising logistical and food costs, McDonald’s keeps costs low through efficient supply chain management, driving healthy margins and supporting its global expansion.

McDonald's Customer Segment

McDonald’s primarily targets middle-income consumers, with a broad B2C model that appeals to families, time-sensitive individuals, and value-conscious customers.

Its core demographic spans across various age groups, from children to adults, with a focus on price-sensitive individuals.

McDonald’s also caters to digital-first users through mobile app-based orders and delivery services.

Customers are motivated by affordability, convenience, and consistency, making McDonald’s a popular choice for fast, quality meals.

Distribution Channels of McDonald's

McDonald’s uses a hybrid model of distribution, combining physical stores and digital channels.

Its physical stores include company-operated restaurants and franchise locations, with a strong presence in global markets.

McDonald's operates through an e-commerce platform via its mobile app for digital orders and delivery.

The brand embraces Omnichannel strategies, offering drive-thru, in-store service, and delivery.

Additionally, McDonald’s has implemented innovative solutions, like Ready on Arrival technology, which streamlines the customer experience across key markets.

McDonald's Key Partnerships

McDonald’s partners with global suppliers for ingredients and food production, franchisees for store operations, and tech partners for CRM systems and app development.

It also collaborates with third-party delivery platforms like UberEats and DoorDash to extend its service reach.

McDonald’s further engages with NGOs and charitable organisations like Ronald McDonald House Charities to promote community initiatives.

These partnerships help McDonald’s enhance operational efficiency, reach a wider customer base, and support its community-driven values.