McDonald’s Customers Are In It For The Ambiance

We all know that McDonald’s stands out from all the other fast food restaurants. It may have to do with their keen ability to take popular entrees and make them the perfect fast food meal. Most likely its the fact that they make the best breakfast on the planet. More recently they took Starbucks drinks and made them not only affordable, but desirable to the masses that you wouldn’t even think to enter Starbucks store. Though I love a good frappe, there is more to the McDonald’s story then that, there are the continually updated restaurants.

Many investors miss the obvious when it comes to evaluating McDonald’s. As average Americans (maybe in your case above average) we travel throughout the United States, or go through our hometown, and see many different fast food chains. As we mentioned above they are not all made the same, but more particularly their stores are not make the same. A key point many fail to realize about McDonald’s is the power that the franchisor holds. McDonald’s does not merely sell stores or regions, they lease these stores. Which in turn gives them the power to retract the store from the leasee. This means that McDonald’s can tell the franchisee to update their store and they must do so. In fact this happens quite often and is likely why McDonald’s continues to stay on top of their game.

This store policy  separates McDonald’s from all the other fast food chains. Drive by your local Wendy’s, Hardees, or Dairy Queen and the difference is obvious. What is important from an investors standpoint is the importance of aesthetics. A nice store, means happy customer, and anyone who has worked in a service industry knows happy customers are repeat customers. You may say aesthetics are a mute point. Let’s take a look at your recent dining experience. The last time you went out to a nice restaurant, what separated it from the other places you regularly dine? Let’s think, it was obviously the food, and oh yeah the atmosphere. The presentation often plays a huge role but is presented so subtly that we don’t realize it.

“The closest thing to home.” – McDonald’s Slogan (1966-1969)

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