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A World Without McDonald's

Economics ISP Project

Maurice Plaskett

on 14 May 2013

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Transcript of A World Without McDonald's

Healthcare McDonald's food is high in calories, fat, cholesterol, and sodium, and low in complex carbohydrates and fiber. This recipe is one that contributes significantly to major chronic diseases such as cancer and heart disease, obesity, strokes, and diabetes. In 1972, we spent around $3 billion on fast food worldwide, today, we spend more than $134 billion, 44 times as much. Obesity rates have also doubled in this same time period, largely due to the increased consumption of unhealthy fast food. Environment Employment Communities How McDonald's Revolutionized the Fast Food Industry The Local and Global Economic Impact of McDonald's
By Maurice Plaskett A World Without McDonald's Table of Contents Introduction to McDonalds- Global Statistics and Comparisons Impact on The Environment- C02 Emissions due to Packaging, Energy Usage, Car Emissions, and Beef Production, as well as McDonald's attitude towards the Environment Impact on Healthcare- Cost associated with obesity due to McDonald's (USA ONLY) and what McDonald's is doing to come up with healthier products Energy Usage How Big Is McDonald's? McDonald's has more than 33 000 stores worldwide, serving over 64 million customers every day in 119 different countries. (The YUM! Brands, made up of KFC, A&W, Pizza Hut, Taco Bell, among other smaller chains collectively has 38000 stores in 120 different countries) McDonald's sells more than 75 hamburgers every second of every hour of every day (2010) - During my presentation they will serve about 135 000 burgers. McDonald's Annual income of 27 Billion Dollars makes it the 88th largest world economy (greater than Latvia, Ethiopia, etc.) 1 in every 8 Americans has worked at a McDonald's The Golden Arches are recognized by more people than the cross. In the survey conducted around the world, 54% of people could identify the cross while 88% could identify the arches. The Queen of England owns her own McDonald's McDonald's is opening a restaurant in China Everyday for a 3-year period. McDonald's is the fourth largest employer worldwide - just behind Walmart Packaging On average 0.130 lbs of packaging is used for every transaction. McDonald's therefore uses 3 billion lbs of packaging every year. To satisfy their paper and wood fibre needs, McDonald's has to cut down approximately 500 million trees each year. In total, these trees would have absorbed 6.5 billion lbs of c02 in a year, which is the equivalent of 540 000 cars on the road for one year.
McDonald's has a really aggressive stance when it comes to protecting the environment in any way it can. 29% of all packaging is recyclable, and 31% of the packaging is derived from certified land managed sources. On Average, 1.77 kWh is used on every transaction. 80% of the energy consumption is from heating and cooling systems and the cooking equipment. Everyday, McDonald's uses 113 million kWh of electricity. If the average canadian household uses 9000 kWh/year, the energy McDonald's uses in a year could be used to power 4.6 million households annually. Over 3.8 billion pounds of C02 is emitted annually from electrical use in restaurants which would cost $38 million to clean up. If McDonald's wants to stay as the industry leader, they need to continually expand and innovate with new products, making it hard for McDonald's to reduce their energy usage. This information also isn't available for competitors. About 40% of all sales are through the Drive Thru. If it takes every car on average 5 minutes from the moment they enter the DT until they leave, those cars will output about 8.4 billion lbs of C02 every year. During this time, 397 million gallons of gasoline will be burned, which at today's gas prices will cost the world approximately $1.8 billion. This does not take into account the amount of gas used to drive to and from McDonald's. http://www.mcspotlight.org/media/reports/surgen_rep.html http://frac.org/initiatives/hunger-and-obesity/obesity-in-the-us/ A survey by the Pew Research Center (2006) reports that almost 20 percent of Americans eat at fast food restaurants at least twice a week. The American population is 315 Million, and therefore 63 million Americans eat fast food twice a week. two thirds of the adult population (aged 15-64) are obese. In America, 66.4% of the population are adults, therefore 27.9 million people, or 9% of the American population, are obese and eat McDonald's twice a week. Now we can take 9% of the total cost of obesity related diseases in the USA (145.8 billion) And we can see that $13.1 Billion dollars is spent on obesity related healthcare. McDonald's has a 43% market share in the states, therefore we can say that $5.65 billion is spent on obesity related healthcare every year, from McDonald's. A Good one or a bad one? You be the judge. Is Packaging Drive Thru Energy Usage Car Emissions McDonald's employs 1.9 million people worldwide, making them the 4th largest employer, just under Walmart and about the same as the Indian Armed Forces employs. About $24 billion is paid every year in payroll and employee benefits by McDonald's. Benefits includes free uniforms, crew outings, scholarships, discounts on food, raises every year, and full-time employee's get group insurance, McDonald's stocks which include dividends and more. McDonald's offers stable and secure jobs. Employees receive on average of 40 hours per year of training, while the market average is just 4 hours per year. If a new McDonald's store opens, employees (mostly aged 24 and under) will develop practical skills that they may not be able to develop otherwise. For Example, I work at McDonald's and I came into the job not knowing anything about anything food service, hospitality, cash control, time management etc, I was just the guy pressing the timer on the fries and cleaning up messes. After just two years of working, I am now running the shifts scheduling breaks, dealing with customer complaints, training others, I have such a better understanding of the work force in general and I have developed a lot of skills that will help me in future careers. McDonald's training considerably increases skills portability for employees and significantly contributes to the pool of qualified workers available to employers in the wider economy. This impact can really be huge if it's in a third world country because now for each store, about 75 employees will and develop skills, and get a better perspective of the work life while spending their money and stimulating the economy. McDonald's employees are sought after by other employers so in the long run a McDonald's will help local communities by providing them with potential jobs in the future. The pay, skills developed, and reputation of being a McDonald's employee definitely encourages young adults to improve not only their own lives, but the well being of the community as well.
Overall, directly and indirectly, Each McDonald's store in Canada creates 143 local jobs, with 75 of those working in the restaurant, contributes more than $500 000 in overall taxes, pays annual wages and benefits in excess of $760 000 and generates over $2 million in spending. McDonald's owns 7 "Hamburger Universities" with 22 regional training teams in which on average 19 professors teach their restaurant operations and business expertise in 28 different languages. The courses are aimed at students specific career paths, for crew, restaurant managers, suppliers, and executives. To Date, 275 000 people have graduated from the various programs. 60% of the top executives at McDonald's started behind the counter. The American Council on Education has determined that many of the courses have a recommended equivalent value in college credits. These credits may be able to apply to a college degree and, if you choose a major like general business or restaurant and hospitality management, your McDonald’s coursework may give you a head start so you can save on tuition and other college expenses Local Impact of a New McDonald's Restaurant Hamburger University Video start at 5:00
http://www.mcdonalds.ca/ca/en/our_story/mcdonalds_worldwide.html http://www.businessinsider.com/amazing-facts-mcdonalds-2010-12?op=1 http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29 http://en.wikipedia.org/wiki/List_of_largest_employers Ronald McDonald is the second most recognized person in the world, second only to Santa Clause. Fast Food Nation-Eric Schlosser http://www.yum.com/company/social.asp 40% of the sales are from europe. http://www.mcdpressoffice.eu/downloads/Economic_footprint_Report.pdf http://www.aboutmcdonalds.com/mcd/corporate_careers/training_and_development/hamburger_university/our_faculty.html Suppliers McDonald's Giving Back McDonald's spends $32 billion dollars worldwide in local suppliers for their food and paper expenses. They also own $35.7 billion worth of property and equipment ( décor, furniture and kitchen equipment) which is about $1.1 million per store. http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf McDonald's works with over 1600 different companies supplying their stores around the world, an average of 2 billion spent on each supplier. McDonald's best-known product, the Big Mac, provides a good illustration of the company's economic impact. The approximately 1.1 billion big macs sold in 2009 contained
16 500 tons of cheese, 35 000 tons of lettuce, and 81 750 tons of beef. In value terms, the raw materials needed to produce these Big Macs (and Big Mac Meals) generated sales of around $862 million for the food supply industry and logistics providers. Almost all of the suppliers are local relative to the stores they are serving the food out of. On top of that, the Big Mac also creates demand for other products and services, such as kitchen equipment, electricity, packaging, and advertising. In Total the Big Mac is responsible for the employment of
95 000 people and almost $1 Billion in salaries. It is also indirectly responsible for around 6750 people in supplier business. These figures are based on a London Economics estimate based on an assumption of the Big Mac’s contribution to total McDonald’s net turnover, then extrapolated to worldwide scale and adjusted based on currency. http://www.mcdpressoffice.eu/downloads/Economic_footprint_Report.pdf Economic Impact of the Big Mac Supplies McDonald's pays $1.1 billion to governments in income tax, as well as over $811 million in social taxes every year. They also spend $2.7 billion in capital expenditures. In General, McDonald's spends about 48 cents in local economies for every dollar they bring in. Capital expenditures are basically fixed assets, non operating expenses, investing in the future of the company. The McDonald Brothers recognized how consumer preferences was changing. The public wanted something different; fast, and affordable and capitalized on this by innovating a new restaurant system.
They Changed the kitchen to become more mechanized and simple, for example using dispensers and new equipment which easily and effectively made an identical sandwich, which allowed them to hire low-waged, unskilled labor.
Changed to self serve (making customers order their food, take it to their table and throw out the garbage), eliminating the need for busboys and waiters, reducing costs even further
Essentially offered fast and cheap food that was always consistent. In the monopolistic market they were in, consumers had no substitution for this kind of service and their competitors had to adapt to and follow McDonald's example or go out of business. McDonald's USA says they buy just under 1 billion lbs of beef every year. The American market makes up for about 32% of McDonald's worldwide revenue, so we can extrapolate this to say that McDonald's buys around 3.1 billion lbs of beef worldwide every year. The average cow that McDonald's uses is around 1000-1200 lbs when it's ready for slaughter. Once it's been butchered, about 700-800 edible lbs remain. Depending on how the carcass is divided up, about 12-15 % of that weight is used in hamburgers, so 1 cow is good for about 100 lbs of beef. In Total, McDonald's uses 310 million cows per year. One cow produces approximately 95 kg of methane every year, and therefore McDonalds is responsible for releasing 24.9 billion kg of methane every year. This is the equivalent of 622.5 billion kg of c02, which will cost $13.7 billion dollars to clean up. Thesis http://timeforchange.org/are-cows-cause-of-global-warming-meat-methane-CO2 http://www.tcfa.org/McDsHoax.htm http://www.greenpowerindia.org/Biogas.htm Emissions due to cows http://www.forbes.com/2009/06/03/cap-and-trade-intelligent-investing-carbon.html Employment- Statistics, Employee Benefits, Impact of a new McDonald's for workers and skills learned. Impact on Communities- Taxes, Suppliers, impact of McDonald's on the Canadian Economy, and Charities. How McDonald's Created the Fast Food Industry and Why They are so Successful Packaging: If there is 2 metres between trees, there is 250 000 trees per sq. km, and in total 500 million trees are cut down by McDonald's. If the average healthy tree absorbs 13 lbs of carbon annually, McDonald's indirectly creates 6.5 billion lbs of c02. At an average cost of $20 to clean up 1 ton of c02 from the air, it will cost $65 million dollars each year. http://www.solargrid.ca/Energy%20Saving%20Tips.pdf http://www.mcspotlight.org/case/pretrial/factsheet.html http://www.treesontario.ca/learn/index.php/tree_facts http://www.socialfunds.com/shared/reports/1305053943_McDonalds_2010_CSR_Report.pdf http://www.socialfunds.com/shared/reports/1305053943_McDonalds_2010_CSR_Report.pdf DT Car Emissions:If 64 million customers go to McDonald's every day, 40% of that (25.6 million) go through the Drive Thru. The values are from an average between small engines and 8-cylinder engines. If one person idles for 5 minutes a day, by the end of the year they would have emitted 330 lbs of c02 and burned 15 gallons of gas. If 25.6 million people idled for 5 minutes a day, 8.7 billion lbs of c02 is emitted, and 397 million gallons of gasoline is burned. Gas price calculated by taking top 10 gas companies and averaging their high's and lows for the last 2 weeks to arrive at $1.17 per litre, and at 397 million gallons, or 1.5 billion litres, we arrive at total cost of $1.76 billion http://www.thehcf.org/antiidlingprimer.html http://tomorrowsgaspricetoday.com/ McDonald's buys around 3.1 billion lbs of beef every year. Each cow is going to provide about 100 lbs of beef, and therefore McDonald's and it's suppliers kill 310 million cows worldwide. These cows will release 25 billion kg of methane in a year, which is equivalent to 1.3 trillion pounds of c02 which will cost $13.7 billion to clean up Beef Production The business of McDonald's has a far reaching environmental impact on the world. The packaging, energy usage, Drive Thru and beef production are just a few of many examples of how McDonald's interacts with the environment. Obviously McDonald's is not an environmentally neutral company, and as the largest entity in the fast food industry, they are more than likely responsible for the most environmental damage. While I would like to compare their environmental impact with other companies, they haven't released or even had study's done to find out the same information. McDonald's does however try hard to reduce their global impact. In 1990, McDonald's and the Environmental Defense Plan worked together to create a waste reduction action plan for the U.S. creating jobs and eliminated 300 million pounds of packaging waste. This was the first partnership between an environmental group and a fortune 500 company, during a time when business interests were not typically aligned with the environment. This provided a model that McDonald's has used with more than 40 other initiatives over the last 20 years to address a wide range of social and environmental issues. McDonald's early environmental actions and investments into finding out just how much damage they do to the environment has helped making the public aware of these environmental hazards and has helped create the ever growing trend of sustainability, which puts pressure on the public and other companies to reduce their impact as well. McDonald's is a socially responsible company that has a major beneficial impact on local and global economies. As the industry leader in a monopolistic environment, McDonald's sets the standards for other companies with regards to their attitude on the environment, healthy products, and the extent of employee training and benefits offered. In addition to pressuring competing companies on these standards, McDonald's contributes greatly to the community by donating, creating lots of jobs, and spending lots of money locally One of McDonald's biggest impact on local communities is the workers and the skills they develop. As I mentioned, employees learn more than just how to cook hamburgers in all of the training. They learn practical skills like communication, building and earning trust, and improve the number and quality of capable workers in communities which will ultimately benefit the economy in the long term. McDonald's employees are generally sought after by other companies and will ensure the community has income in the future. Almost 20 percent of Americans eat fast food at least twice a week. Two-Thirds of the adult American population is also obese. I calculated that 9% of the population, or 28 million people are obese adults and eat fast food at least twice a week. If we then take 9% of the total cost on the healthcare of obesity related diseases, and then take 43% of that value, which is their current market share in the States, we see that McDonald's can be held accountable for up to 5.6 billion dollars every year. Of course there is no way we can find out the true value as this does not take into account what people eat for the other 19 meals and how much they exercise. What is McDonald's doing to fix this? There is not too much they can do. McDonald's can make any kind of food they want, however unhealthy food doesn't sell. They had to remove their deli sandwiches, and "fatten up" their salads. This year McDonald's made it mandatory for happy meals to contain yogurt and a smaller size of fries. Since then, happy meal sales have dropped by 40%. McDonald's has to try and innovate new, healthy products and ingredients that consumers will still love to eat. Some successful changes they have made include switching vegetable oil to not contain any additional trans fat, offering chicken that is grilled with water, having salad options that have no meat or dressing on them, and their recently released real fruit smoothies with no added sugar. McDonald's has been trying to promote healthy eating because they don't want to deal with the criticism, as well because McDonald's employees eat at McDonald's regularly themselves. All of the effort McDonald's has put into innovating new products and advertising the healthier options they are encouraging not only consumers, but other company's to offer healthy products, and you can see it worked for example Tim Horton's, who now sells fruit smoothies as well, right after McDonald's started to develop them in the states and other foreign markets. McDonald's Giving Back. McDonald's Ronald McDonald's House Charity is the main charity that McDonald's sponsors. They are a non-profit organization that provides housing for families near major hospitals if their child is sick. Since 2002, McDonald's has raised over $170 million dollars for the charity. McDonald's also matches employees contributions to charities so their employee contributions double the impact. In 2009 and 2010, more than $900 000 in matching funds was distributed to charities identified by employees. Some McDonald's markets take on charity projects on their own, for example restaurants in Latin America raised $1.1 million for Haiti relief. Operating a charity is beneficial to the company, in addition to the community. The McDonald's charity is very well known and acts as positive goodwill advertising for McDonald's. The money given to the charity offers the company a tax break as well. This model once again has encouraged other companies to do the same and operate charities of their own. Some examples include the Tim Horton's children foundation and the Burger King Have It Your Way Foundation. McDonald's Canada creates $4.5 billion in local economic activity every year. This comes from the 150 million pounds of potatoes from farms in Alberta and New Brunswick, 46 million pounds of Chicken from Ontario, 66 million pounds of beef from Alberta, Quebec etc. As the Single largest purchaser and seller of apples, toys, beef, among other things, as well as spending more than $1.5 billion on energy, maintenance, land scaping, operating supplies, wages and benefits, McDonald's has a huge impact on a countries GDP, which we all know is the total dollar value at current prices of all final goods and services produced in Canada. Besides the direct impact of the salaries and wages the company pays to its staff, McDonald’s – like other businesses – produces what is termed an induced income effect that occurs as employees (McDonald’s and suppliers’) go out and spend their earned income.The induced income effect captures the process by which employees spend a fraction of their income on goods and services, which in turn becomes income for the people who provide them. Service providers then spend a fraction of their income, and so on. This effect means that, taken together, the final impact of McDonald’s is well above the 4.5 billion stated earlier McDonald's impact on Canadian GDP McDonald's Impact on Canada World Wide Impact of the Big Mac McDonald's considerably helps the communities in which it operates in. Aside from giving them direct payroll, they create job positions in the companies supplying McDonald's. McDonald's suppliers have to raise the bar and have very high standards if they want to have McDonald's business, which encourages competing suppliers to offer better quality as well. With the constant Income of being a McDonald's supplier, they are able to develop better techniques and expand to new markets, which in the long run will have a very positive effect on the economy. All of this economic activity generattes taxes which allow the government to improve the community even more. with respect to roads, education, security etc. McDonald's gives back to its communities with charities and provides a model in which other companies have followed to donate as well. In Conclusion, McDonald's is great for the communities it operates in. Thesis How Did McDonald's Become so Successful? Head start by being the company that revolutionized the industry
Unique Way of Franchising
Great Innovators of new food and following consumer trends
Emphasis on customer service- providing excellent Quality, Service, Cleanliness, and Value.
Great Marketing 18 Janurary 2013
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