ĐẠI HỌC KINH TẾ KHOA KẾ TOÁN KIỂM TOÁN FINALL ASIGMENT BUSINESS ANLAYSIS MCDONALD''''S FOOD CHAIN Student name Phạm Thị Thảo Student code 19050961 Class QH 2019E KTKT CLC2 Subject Business Analysis[.]
ĐẠI HỌC KINH TẾ KHOA KẾ TOÁN KIỂM TOÁN FINALL ASIGMENT: BUSINESS ANLAYSIS MCDONALD'S FOOD CHAIN Student name: Phạm Thị Thảo Student code: 19050961 Class: QH 2019E KTKT CLC2 Subject: Business Analysis Instructor teacher: Ths Khiếu Hữu Bình Hà Nội, 2023 TABLE OF CONTENTS What is a 'Cold Chain' (3 marks)? Use PESTEL, FIVE FORCE models to analyze the external environment and explain why McDonalds apply the "Cool Chain"? (22 marks) a What is a 'Cold Chain b PESTEL, FIVE FORCE models to analyze the external environment and explain why McDonalds apply the "Cool Chain" * PESTEL * FIVE FORCE 10 Conclusion: 13 Which competitive strategy does the Cool Chain of McDonalds apply (cost leadership, differentiation or focus strategy) (2 marks)? Give the reasons for your answer? (8 marks) 15 What kind of method of growth does McDonald’s apply in this case (2 marks)? How does it contribute to the McDonald’s value chain (8 marks)? 16 a What kind of method of growth does McDonald’s apply in this case 16 b How does it contribute to the McDonald’s value chain (8 marks) 16 Assuming that McDonald’s decided to merge AFL Logistics Ltd (ALL), what are adjustments to financial statements of McDonald’s? (10 marks) 17 Cost management plays an important role in the implementation of corporate competitive strategy Figure out the cost structure of McDonald’s, its two competitors and the industry average (in your country) during the period 2019-2021 Make relevant comparisons and evaluate the cost control of McDonald’s? (45 marks) 18 McDonald's Food Chain Introduction It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time No matter what one ordered - a hot Maharaja Mac or an apple pie - the very best was served every time But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain, which extended from these outlets right up to farms all across India US-based fast food giant, McDonald's success in India had been built on four pillars: limited menu, fresh food, fast service and affordable price Intense competition and demands for a wider menu, drive-through and sit-down meals encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain Around the world (including India), approximately 85% of McDonald's restaurants were owned and operated by independent franchisees Yet, McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect Cold chain in place And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large, they would pop out of the patty and get burnt) These efforts paid off in the form of joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's USA) and Hardcastle Restaurants Pvt Ltd, (Mumbai) and Connaught Plaza Restaurant (New Delhi) By mid-1950s, the restaurant's revenues had reached $350,000 As word of their success spread, franchisees started showing interest However, the franchising system failed because the McDonald brothers observed very transparent business practices As a consequently, imitators copied their business practices and emerged as competitors The franchisees also did not maintain the same standards of cleanliness, customer service and product uniformity At this point, Ray Kroc (Kroc), distributor for milkshake machines expressed interest in the business, and he finalized a deal with the McDonald brothers in 1954 He established a franchising company, the McDonald System Inc and appointed franchisees In 1961, he bought out the McDonald brothers' share for $2.7 million and changed the name of the company to McDonald's Corporation In 1965, McDonald's went public and expand their market until nowadays (setting up restaurants inside WalMart retail stores, intense competition from supermarkets, convenience stores, mom and dad delicacies, gas stations and other outlets selling reheatable packaged food, promote Disney through its restaurants and opened restaurants in Disney's theme park) with25,000 restaurants in 116 countries, serving more than 15 billion customers annually During the same year, the company recorded sales of $36 billion, and net income of $1.5 billion McDonald's overseas restaurants accounted for nearly 60% of its total sales Franchisees owned and operated 85% of McDonald's restaurants across the globe In Search of Perfect Logistics - The Story of the Cold Chain in McDonald’s India In 1996, when McDonald's entered India, it was looking for a distribution agent who would act as a hub for all its vendors Mumbai-based Radhakrishna Foodland Private Limited (RFPL) was chosen for the job as it was already a distributor for its sister concern, Radhakrishna Hospitality Services, a catering unit supplying to offshore institutions The iceberg lettuce from Ooty, mutton patties from Hyderabad and sesame seed buns from Punjab were all delivered to RFPL's distribution center (cold storage) in its refrigerated vans RFPL stored the products in controlled conditions in Mumbai and New Delhi and supplied them to McDonald's outlets on a daily basis By transporting the semifinished products at a particular temperature, the Cold chain ensured freshness and adequate moisture content of the food The specially designed trucks maintained the temperature in the storage chamber throughout the journey Drivers were instructed specifically not to switch off the chilling system to save electricity, even in the event of a traffic jam This centralized distribution system is unique to McDonald's to handle McDonald's inventory Meeting McDonald's "cold, clean, on-time" delivery standards was no easy task considering that there were 30 suppliers situated all over the country AFL Logistics Ltd (ALL), a joint venture between Coughlin of the US, and RFPL was responsible for ensuring these standards Coughlin's task was to make sure that McDonald's had the proper amount of supplies and materials at each restaurant The challenge was the physical movement of material and inventory control in a country with bad roads and basic infrastructure bottlenecks To meet McDonald's high standards, Coughlin ensured that quality, temperature and packaging requirements were met At the same time, unused capacity in the vehicles was used to transport goods from other vendors This helped Coughlin deliver the lowest cost with the highest quality RFPL also handled in-city distribution to restaurants According to Vinay Adhye (Adhye), director, RFPL, the system reduces delivery time, from restaurants were not supposed to stock more than three days of inventory, the time limit for distribution centers or warehouses was a stringent 14 days to minimize costs and optimize quality control For in-city delivery, the truck was monitored from the time it left the distribution center till the time it reached the restaurant Not just that, the time taken in offloading was noted too (30 minutes to complete the delivery) The products were transported from the suppliers' end to the distribution center in refrigerated and insulated vehicles through a system of consolidation to ensure better utilization of vehicle capacity While the temperature in the reefers ranged from -18º to - 22º, that in chilled trucks ranged from to 4º It helps minimize damage to goods by maintaining temperature even the McDonald's restaurants face a power breakdown RFPL was also responsible for cleanliness (including the personal hygiene of the drivers), and the packing and temperature control of the food (digital probes were inserted into items selected at random) it transported There were also data logs to track the movement of each batch This meant that in the case of a complaint from a restaurant, the batch could be identified, isolated, and dumped McDonald's insisted on standardization by its suppliers Vista Processed Foods & Kitran Foods (Vista & Kitran Foods), which supplied the pies, nuggets, vegetable, and chicken patties, commissioned a new facility for the purpose in 1996, complete with insulated panels, temperature control, and chill rooms McDonald's also assisted its suppliers with improvements For instance, it helped Trikaya Agriculture develop a variety of iceberg lettuces (which is a winter crop) that would grow all year round And for quality control, Trikaya's post-harvest facilities included a Cold chain consisting of a pre-cooling room to remove field heat, a large cold room, and a refrigerated van with humidity controls Outsourcing at its Best McDonald's sourced ingredients from all parts of India (Refer Table I) The iceberg lettuce was specially developed for India using a new culture farming technique This variety of lettuce was similar to the lettuce McDonald's used elsewhere in the world To meet the demand consistently, McDonald's helped Trikaya Agriculture grow the lettuce throughout the year and even in rain-shadow areas The crop was harvested between 45 days, depending on the climate The crop was harvested early in the morning and immediately stored in vacuum precoolers installed at the farm The pre-cooler brought down the temperature of the lettuce from 26º to 3º McDonald's was able to bring technology to its suppliers too McDonald’s have developed a supplier chain to get fresh vegetables and chicken, and test everything that comes into McDonald’s plant The plant had a Hazard Analysis Critical Control Point (HACCP) system to ensure quality The ready-to-cook patties, manufactured at the plant, were stored in rooms at -26º c McDonald's convinced its suppliers to set up two separate production lines for chicken and vegetable patties, keeping in the mind the link between food and religion in India This was in sharp contrast with its global practice, where McDonald's suppliers produced all types of patties from the same line These two production lines were housed in two different rooms and the only way a worker could cross over from one line to the other was by passing through the shower room This eliminated all chances of contamination However, from a supplier's point of view, more lines meant a reduction in capacity utilization and high cost of production To minimize costs, McDonald's helped Vista & Kitran Foods produce derivatives of chicken and vegetable nuggets (not based on McDonald's recipe) for Indian hotels and restaurants and thereby reach new markets Vista & Kitran's higher margin and higher capacity utilization for non-McDonald's products helped it remain cost competitive McDonald's philosophy had been 'one world, one burger' i.e the McDonald's burger should be consistent in terms of cost and quality throughout the world To ensure this, all of McDonald's suppliers followed the internationally acclaimed HACCP systems wherein both inputs and finished goods were subjected to chemical and microbiological tests This kept food fresh and free from contamination Apart from this, the entire production line was automated using sophisticated technology, barring only the final compilation of the bun, cheese and patty which was done by hand What is a 'Cold Chain' (3 marks)? Use PESTEL, FIVE FORCE models to analyze the external environment and explain why McDonalds apply the "Cool Chain"? (22 marks) a What is a 'Cold Chain Cold Chain is a chain that ensures the freshness and moisture content of food by storing products under controlled conditions A cold chain refers to the warehousing, transportation and retailing of products under controlled temperatures Such a chain is necessary for ice creams, frozen vegetables, processed meats, dairy and bakery products While frozen foods need sub-zero temperatures up to -20°C, products like butter, which require chilling, need about 0-4°C This is shown through the details of articles such as: - The products were transported from the suppliers' end to the distribution center in refrigerated and insulated vehicles through a system of consolidation to ensure better utilization of vehicle capacity (the temperature in the reefers ranged from -18º to - 22º, that in chilled trucks ranged from to 4º) - For quality control, Trikaya's post-harvest facilities included a Cold chain consisting of a pre-cooling room to remove field heat, a large cold room, and a refrigerated van with humidity controls - The plant had a Hazard Analysis Critical Control Point (HACCP) system to ensure quality The ready-to-cook patties, manufactured at the plant, were stored in rooms at -26º c b PESTEL, FIVE FORCE models to analyze the external environment and explain why McDonalds apply the "Cool Chain" * PESTEL - PESTEL is a useful analysis tool that helps organizations know the "big picture" of the micro and macro environment in which the organization is operating, thereby identifying potential opportunities and threats hidden in it - PESTEL includes elements: ● Political ● Economic ● Social ● Technological ● Legal ● Environmental Economic: Including factors such as: growth rate; inflation rate; exchange rate; interest rate; unemployment trends; labor costs; the stage of the business cycle; ccredit; trade flows and related patterns; trade control; the level of disposable income of consumers; monetary policy; Social: Includes the most important social aspects that the organization must consider such as: population growth rate; immigration and emigration rates; sex ratio; trends and consumption habits for goods and services; age distribution and life expectancy rate; average disposable income; social class;religion and belief… Technological: Factors that can be mentioned are: Infrastructure, coverage, speed of the Internet and the ability to access the latest technology; expenses for research and development; technological level in the industry; communication infrastructure Legal: The legal regulations in each country have a direct impact on the industry and affect the operation of the organization Environmental: Environmental factors affecting the organization's activities such as: Weather, climate change; levels of air and water pollution, disease… Political Economic Social - India is a - Asia's 3rd largest - The country with parliamentary economy after the second largest republic with a Japan and China population in the multi-party system - It is a newly world - India tends to industrialized - The two major approach socialism country and the hubs are Mumbai with strict second fastest and New Delhi government growing economy People have quite control over the in the world high incomes and private sector, are influenced by foreign trade and Western culture foreign direct - Income investment distribution is very - Since the 1990s, unequal in India economic reforms There is a huge by reducing disparity between government the rich and the regulation on poor Most high foreign trade and earners prefer to foreign direct live in urban investment areas - Religion is extremely important in Indian culture Always respect religion when doing business in this country India has about 140 million Muslims, and Muslims not eat pork Hindu culture reveres the image of cows The Hindu scriptures teach that cows are God's gift to mankind The cow represents the divine Mother who saves human life Technological Legal Environmental - Since 1996, - The legal system is - The fertile Indoimplementing the quite Gangetic plains plan of comprehensive on occupy most of the comprehensive taxes, cutting north, central and development of procedures, eastern India, Information making investment suitable for Technology and trade regimes agricultural industry transparent, and development such - Promulgate encouraging FDI as potato lettuce policies to - The court system - Geographically prioritize the is transparent and development of the fair Information - India still holds a Technology high position in industry: terms of + Repealing the corruption, Law on political struggles Technology centered on Transfer religion and (MRTP 1969) hierarchical + More and more hierarchy capital is invested in the IT field + Building standard IT infrastructure with satellite and mobile fiber optic networks nationwide + No service tax applies to IT products and services there are many regions, the needs in each region are different, so it is difficult to distribute and transport products * FIVE FORCE - Michael Porter's Five Forces Model is a model that identifies and analyzes the five competitive forces in every industry and helps to identify industry strengths and weaknesses Rivalry Among Existing Firms: The main determining factor is the number and capacity of competitors; If in an industry/field there are many competitors providing the same products and services, the competition will be high and the attractiveness of the industry will decrease Threat of New Entrants: The potential for earning abnormal profits will attract new entrants to an industry The very threat of new firms entering an industry potentially constrains the pricing of existing firms within it Threat of Substitute Products: Relevant substitutes are not necessarily those that have the same form as the existing products but those that perform the same function Bargaining Power of Suppliers: The analysis of the relative power of suppliers is a mirror image of the analysis of the buyer’s power in an industry Suppliers are powerful when there are only a few companies and few substitutes available to their customers Bargaining Power of Buyers: Two factors determine the power of buyers: price sensitivity and relative bargaining power Price sensitivity determines the extent to which buyers care to bargain on price; relative bargaining power determines the extent to which they will succeed in forcing the price down Competitiv Evaluate e Force Rivalry High Evidence and explanation - The fast food industry becomes a fertile land for businesses to participate in => More and more competitors with McDonald's appear, pay attention to names such as: Burger King, Wendy's, KFC , Lotteria… - Product between us quite similar => Easy switch Threat of Medium new entrants - The advantage of scale in the fast food industry is low Because just have a small shop, we can sell it - The differentiation is not high, reducing the barriers to entry into the industry - License requirements to enter the industry are low, and new entrants have easy access to distribution channels Threat of High substitute products - Example in Indian follow the task, Intense competition and demands for a wider menu, drive-through and sitdown meals - Restaurants inside Wal-Mart retail stores, intense competition from supermarkets, convenience stores, mom and dad delicacies, gas stations and other outlets selling reheatable packaged food - Healthy foods are typical of each country that MC Donald enters However, the price is reasonable Bargaining High power of buyers - Products undifferentiated and low switching cost => Price sensitive - Large number of food and beverage providers - High availability of substitutes Bargaining Low power of supplier - Strict standards for suppliers to ensure high quality, for example McDonald's only accepts a specific bean size - Meeting McDonald's "cold, clean, ontime" delivery standards was no easy task considering that there were 30 suppliers situated all over the Indian country => Very few suppliers can meet the requirements of such technology and process standards Conclusion: McDonald's philosophy has been 'one world, one burger'; Cold Chain has helped McDonald's keep prices reasonable, maintain the quality and safety of the products and meet customer expectations, and reduce costs by: - Let business partners, who directly manage the store, be on their own to reduce the power of competitors and competitors to enter the industry + Established a franchising company, the McDonald System Inc and appointed franchisees - Adjusted changes to increase bargaining power with buyers: + Products differentiated because McDonald's adjusted the menu to each country For example, in India, McDonald's chooses chicken, fish or lamb to replace beef and pork to suitable for beliefs and culture - Increasing supplier quality: setting strict standards for suppliers to ensure the highest quality is essential, tightening relationships with suppliers to ensure the supply of products and production technology standard products, along with the development of sustainable relationships with suppliers + Only one particular size of peas was acceptable + Joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's USA) and Hardcastle Restaurants Pvt Ltd, (Mumbai) and Connaught Plaza Restaurant (New Delhi) + Chose AFL Logistics Ltd (ALL), a joint venture between Coughlin of the US, and RFPL to ensure freshness and adequate moisture content of the food + There were also data logs to track the movement of each batch This meant that in the case of a complaint from a restaurant, the batch could be identified, isolated, and dumped + Helped Trikaya Agriculture develop a variety of iceberg lettuces (which is a winter crop) that would grow all year round And for quality control, Trikaya's post-harvest facilities included a Cold chain consisting of a pre-cooling room to remove field heat, a large cold room, and a refrigerated van with humidity controls + McDonald's was able to bring technology to its suppliers too McDonald’s have developed a supplier chain to get fresh vegetables and chicken, and test everything that comes into McDonald’s plant + McDonald's convinced its suppliers to set up two separate production lines for chicken and vegetable patties, keeping in the mind the link between food and religion in India + To minimize costs, McDonald's helped Vista & Kitran Foods produce derivatives of chicken and vegetable nuggets (not based on McDonald's recipe) for Indian hotels and restaurants and thereby reach new markets Vista & Kitran's higher margin and higher capacity utilization for non-McDonald's products helped it remain cost competitive Which competitive strategy does the Cool Chain of McDonalds apply (cost leadership, differentiation or focus strategy) (2 marks)? Give the reasons for your answer? (8 marks) The competitive strategy that McDonald's applies in its cool chain is a cost leadership strategy because the company has standardized processes designed to maximize efficiency, minimize costs, and ensure profitability despite the use of competitive selling prices McDonald's applies this strategy in its cool chain by implementing efficiency measures: - Instead of renting locations to sell, McDonald's buys prime locations to reduce rental fluctuations - Using means of transport and cold storage: + To meet McDonald's high standards, Coughlin ensured that quality, temperature and packaging requirements were met This helped Coughlin deliver the lowest cost with the highest quality This means that it helps McDonal decrease cost but has quality products - Sourcing quality materials from low-cost suppliers, and bringing technology to suppliers to develop together This allows McDonald's to offer its products at a lower price than its competitors while still maintaining quality and safety + It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect Cold chain in place + McDonald's also assisted its suppliers with improvements For instance, it helped Trikaya Agriculture develop a variety of iceberg lettuces (which is a winter crop) that would grow all year round + To minimize costs, McDonald's helped Vista & Kitran Foods produce derivatives of chicken and vegetable nuggets (not based on McDonald's recipe) for Indian hotels and restaurants and thereby reach new markets Vista & Kitran's higher margin and higher capacity utilization for non-McDonald's products helped it remain cost competitive What kind of method of growth does McDonald’s apply in this case (2 marks)? How does it contribute to the McDonald’s value chain (8 marks)? a What kind of method of growth does McDonald’s apply in this case The method of growth that McDonald's applies in the case of its cool chain are organic growth and franchising because company combine an independent franchise and outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain which means that the company grows by expanding its operations internally, rather than through acquisitions or mergers b How does it contribute to the McDonald’s value chain (8 marks) This organic growth has contributed to McDonald's value chain: ● Primary Activities - Inbound Logistics: McDonald's manages inventory by not holding inventory for more than three days, a strict 14-day deadline for distribution centers or warehouses The fast food giant has been pursuing backwards vertical integration strategy This strategy involves companies to expand their roles and capabilities to complete tasks formally fulfilled by other companies in their supply chain.This is done for two purposes + To reduce costs + To ensure that its products are of top quality - Operations: The business is a franchise and each McDonald's location is owned by a franchisee - Outbound Logistics: McDonald’s is committed to providing the highest quality food and superior service, at a great value, in a clean and welcoming environment - Marketing and Sales: Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place and joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's USA) and Hardcastle Restaurants Pvt Ltd, (Mumbai) and Connaught Plaza Restaurant (New Delhi) increase market share - Services: McDonald's philosophy had been 'one world, one burger' i.e the McDonald's burger should be consistent in terms of cost and quality throughout the world • Support Activities - Human Resource Management: RFPL was also responsible for cleanliness (including the personal hygiene of the drivers) to ensure efficiency - Technology Development: Bring technology to farmers and suppliers to reduce raw material costs Applying technology in transportation in difficult road environments to reduce transportation costs and increase product quality Finally, use human resource management to improve the quality of work - Procurement: It is so efficient that it provides the backbone not only to all the logistics but the whole McDonalds supply chain management Such as co-operate with RFPL and AFL Logistics Ltd Beside the entire production line was automated using sophisticated technology, barring only the final compilation of the bun, cheese and patty Assuming that McDonald’s decided to merge AFL Logistics Ltd (ALL), what are adjustments to financial statements of McDonald’s? (10 marks) If McDonald's decided to merge with AFL Logistics Ltd (ALL), there would be a number of adjustments to the financial statements of McDonald's - These adjustments could include the consolidation of ALL's financial statements with those of McDonald's, the revaluation of assets and liabilities of ALL at fair value, and the recognition of any gain or loss on the merger - Additionally, McDonald's may need to adjust its income statement to reflect the inclusion of ALL's revenue and expenses, and its balance sheet to reflect the combination of assets and liabilities Cost management plays an important role in the implementation of corporate competitive strategy Figure out the cost structure of McDonald’s, its two competitors and the industry average (in your country) during the period 2019-2021 Make relevant comparisons and evaluate the cost control of McDonald’s? (45 marks) McDonald's McDonald's 2021 2020 2019 Total revenue 23222,9 19207,8 21364,4 Total operating expenses 12866,9 11883,8 12294,6 Total expenses/Total revenue 55,41% 61,87% 57,55% Food,beverage and packaging 3096,8 Ratio 24,07% Labor 2677,2 Ratio 20,81% Occupancy 2273,3 Ratio 17,67% General and administrative expenses 2707,5 Ratio 21,04% 2564,2 2980,3 21,58% 24,24% 2416,4 2704,4 20,33% 22,00% 2000,6 2075,9 16,83% 16,88% 2545,6 2229,4 21,42% 18,13% Wendy's Wendy's 2021 2020 2019 Total revenue 1897 1733,8 1.709 Total operating expenses 1530 1464,5 1446,4 Total expenses/Total revenue Food,beverage and packaging Ratio Labor Ratio 80,65% 224,1 14,65% 231,5 15,13% 84,47% 84,63% 221,8 222,8 15,15% 15,40% 233,6 214,7 15,95% 14,84% Occupancy 156,1 Ratio 10,20% General and administrative expenses 242,97 Ratio 15,88% 159,5 160 10,89% 11,06% 206,87 200,21 14,13% 13,84% Shake shak Shake shak Total revenue Total operating expenses Total expenses/Total revenue 2021 2020 2019 739,89 522,87 594,52 755,746 566,743 568,83 102,14% 108,39% 95,68% Food,beverage and packaging 218,262 153,335 168,18 Ratio 28,88% 27,06% 29,57% Labor 215,114 156,335 Ratio 28,46% 27,58% 28,27% 160,81 Occupancy 59,228 51,592 48,45 Ratio 7,84% 9,10% 8,52% General and administrative expenses 85,996 64,25 65,649 Ratio 11,38% 11,34% 11,54% Average ratio industry Ratio Total expenses/Total revenue 2021 2020 2019 69,89% 74,20% 70,26% 35,45% 35,68% 40,34% 26,34% 27,45% 27,87% 13,01% 13,65% 14,28% 20,89% 20,37% 20,35% Food,beverage and packaging Ratio Labor Ratio Occupancy Ratio General and administrative expenses Ratio Sources: BCTC McDonald ; BCTC Wendy's ; Shake Shak 2021 - 2020 Anual Report ; 2019 Annual Report The cost components studied here include the Cost of raw materials (food, beverage and packing), Labor expenses, the cost of house rental, unused factory (Occupancy expenses), and finally are General and administrative expenses In general, the average ratio of the fast food industry in terms of Total expenses/Total revenue is quite high, ranging from 69% - 75% This ratio at Wendy's is not significantly different from the industry average, but McDonald's and Shake Shak For McDonald's, this ratio is just over half, the lowest in 2021 is 55.41%; the highest is 61.87% This shows that McDonald's company is controlling its operations very well even during the Covid 19 epidemic That is thanks to the strategy of good cost control, technology optimization into the production process, and system unification around the world In addition, using Cold Chain to ensure fresh products inventory does not exceed the standard date, suppliers produce according to the process and are specially adapted to the conditions in each country, so they control costs, increase profits With Shake Shak it's the opposite Expenses are greater than revenue, making this ratio > in 2020 and 2021 This figure shows that Shake Shak has not controlled its costs well, and especially its age is very young compared to McDonald's and Wendy's, so its competitive competition and weak market share Regarding the Cost of raw materials (food, beverage and packing), this is the cost that accounts for the most of the total cost The industry average accounts for 35-40% However, this cost at all three companies McDonald's, Wendy's and Shake Shak is lower than the industry average This shows that despite fluctuations in raw material prices, with good purchasing organization, transportation and storage costs can be reduced At Wendy's, this rate is the lowest, in which it will decrease to 14.65% in 2021 Between the years 2019 2021, there is not much difference, ranging from 1%-2% Especially with McDonald's, with many stores around the world, but with the advantage of large production scale, the advantage of human resources, having a monopoly on purchasing raw materials, bringing technology to suppliers, so promoting cost advantages will create very high cost control capabilities and increase competitive advantages in the market Labor cost of the fast food industry is 27.87% respectively; 27.45% and 26.34% over the years 2019 - 2021 These are two of the important costs of variable costs At this rate, McDonald's and Wendy's are below the industry average and Shake Shak is above the industry average However, the common point of these three companies is that labor costs in 2019 are all higher than in 2020 and 2021 The reason may be due to 2020 and 2021, the outbreak of the Covid 19 epidemic, limited or closed stores Doors make stores cut workers, so costs are reduced Occupancy costs, industry average from 13% - 14% Shake Shak and Wendy's both have lower rates It is noteworthy that in 2021 this ratio only accounts for 7.84%, half of the industry average This is easy to understand because the system has not expanded to as many stores in the world as the other two rival companies and leading in terms of competition is McDonalds This company instead of renting space will buy back most of the stores worldwide This helps McDonald's have an advantage in the event of volatile real estate prices, the company will be less exposed to the risk of rental costs Besides, the company with larger fixed assets will dominate the market better Finally about General and administrative This percentage is also quite high in the total cost The industry average is 20.35%, respectively; 20.37% and 20.89% in 2019; 2020 and 2021 Shake Shak and Wendy's maintain this ratio at 11% - 16% However, McDonald's has a higher rate, from 18% to 21.5% This is because McDonald's has more than 35,000 stores worldwide Therefore, the number of managers is also very large The company also applies a technology system to manage people to maximize efficiency and productivity according to the process In summary, through cost structure analysis, we see that McDonald's has better cost control, more market share and more growth REFERENCES McDonald’s Supply Chain Management is The Secret to Their Success! (n.d.) Box Around the World McDonald’s Have A Ski-Thru Restaurant On A Mountain Yes, Really (2015) MPORA Annual Report (2021) McDonald’s Corporation Annual Report (2020) McDonald’s Corporation Annual Report (2019) McDonald’s Corporation Annual Report (2021) Wendy’s Corporation Annual Report (2020) Wendy’s Corporation Annual Report (2019) Wendy’s Corporation Annual Report (2021) Shake Shak Corporation 10 Annual Report (2021) Shake Shak Corporation 11 Annual Report (2020) Shake Shak Corporation 12 Annual Report (2019) Shake Shak Corporation