How to compete with McDonald’s happy meals
It is a well-known fact that McDonald’s is the world’s largest manufacturer of toys, and in case you did not know it, well, now you do. McDonald’s sales globally account for almost US$ 40 BILLION and the sales of their happy meals represent about 10% of that total (some people claim that the may be as high as 15%). That is a whopping US$ 4 billion just in kids meals. That number is higher that the overall sales of some of the top restaurant chains in the world.
The real question here is, how many toys does the giant sell a year? This is a very hard number to gauge but, trust me on this, the number is huge…I am talking anywhere from 1 billion to 2 billion toys, depending on what movies or properties are selected on a given year, the economy, number of stores opened, etc.
Every week we always get an inquiry from a restaurant operator overseas that claims that McDonald’s continues to chop away at their profits and it is extremely difficult to compete with them head to head for the attention of kids and families. It makes perfect sense. The cost to produce a toy when you amortize all your expenses over 1 billion pieces is going to be much less than if you were to produce only 50,000 pieces. You don’ t have to be a math wizard to figure this out. In addition, McDonald’s has always partnered up with the large movie studios and signed multi-million dollar deals to promote their happy meals using the latest and trendiest properties or associated themselves with highly recognized brands to create premiums of their own.
A chain of 20 stores that can sell up to 50,000 kids’ meal toys per month would not be able to amortize a US$ 10,000 licensing fee (even if they could get it before McD’s) in addition to paying the cost of the actual toy. It simply does not make economic sense. So how is it that some restaurant chains, especially overseas, have managed to not only give McDonald’s a run for their money, but have actually been able to beat them at their own game? I call this phenomenon the “home court” advantage.
McDonald’s, Burger King and other fast food giants spend millions of dollars doing research locally for flavors, culture, trends, etc. and put their findings to good use, most often adapting to what locals like and prefer. However, when it comes to their kids’ meals, they simply focus on what is popular, trendy and depend heavily on movies and properties. It has seemed to work, so why not continue doing so? The agreements they hold over their franchisees also specifically limit them to who they can buy these toys from. There have been a couple of times in which some smaller McDonald’s franchisees had reached out and asked if they could purchase a given item from us, but, once they usually attempt to get approval from their corporate offices, that is usually the end of it.
If I am an operator of 20 locations in a foreign country, this is exactly the ammunition that I would need to go to battle. International markets have always been fascinated with the American culture (with a few exceptions obviously). But foreign cultures are also very proud of their own and heavily respect local and native entrepreneurship favoring in many cases, not only local flavors, cultures and tendencies, but also local themes…geography, fauna, etc.
So let’s say McDonald’s came out with an awesome set of toys for the movie “OZ, the great and powerful” (which by the way, was a really cool movie). Some restaurant operators would spend extra dollars trying to get a bigger, more expensive item…an item with bells and whistles so that they could compete with McD’s awesomeness…but remember, they are producing BILLIONS of toys – so how are you going to be able to do that? You can’t and you won’t…not unless you want to spend several dollars per toy and we know that is simply not good for business and it could eventually put you out of it.
What you do instead is focus on your local culture. Focus on what it makes your country great – how you could put an educational twist on a set of local attractions. Contact your local zoo…and your local museum…and your planetarium….and your aquarium and there you have it! You can come up with a set of 4-6 jungle animals that are popular in your region…or fish that are hosted by your local aquarium and that populate your local rivers, lakes or ocean. You include an insert card that explains about those specific animals and why they are important in the country you live in. Add a coupon that offers a discount if you visit the zoo or aquarium during given days. If you can produce 10,000 pieces per promotion, you have the capabilities of doing a wonderful program, fully custom with your logo, characters, language, branding, etc. There is no need to spend thousands in getting the latest and most popular property or license.
For more specific tips and information on how to compete head to head when it comes to getting the attention of kids and families, please feel to reach out to us.