McDonald's Food Chain

From its experience in other countries (Refer Exhibit II & III), McDonald's was aware that supply chain management was undoubtedly the most important factor for running its restaurants successfully. Amit Jatia, Managing Director, Hardcastle Restaurants Private Limited said, "A McDonald's restaurant is just the window of a much larger system comprising an extensive food-chain, running right up to the farms".

McDonald's worked on the supply chain management well ahead of its formal entry to India. "We spent seven years to develop the supply chain. The first McDonald's team came to India way back in 1989," said S. D. Saravanan (Saravanan), Product Manager, National Supply Chain, McDonald's India.

The brothers used assembly line procedures in their kitchen for mass production. Prices were kept low. Speed, service and cleanliness became the critical success factors of the business. 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 consequence, 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.