McDonald's Success Story in Brazil

McDonald's Success Story in Brazil
Case Code: BSTR408
Case Length: 14 Pages
Period: 1979-2011
Pub Date: 2012
Teaching Note: Not Available
Price: Rs.400
Organization: McDonald's Corporation
Industry: Fast Food
Countries: Brazil
Themes: Localization, International Marketing, Emerging Markets
McDonald's Success Story in Brazil
Abstract Case Intro 1 Case Intro 2 Excerpts


For the third quarter ended September 30, 2011, Arcos Dorados Holdings Inc. (Arcos), the world's largest franchisee of McDonald's Corporation (McDonald's), the US-based fast food chain, reported that McDonald's Brazil had recorded a year-on-year revenue growth of 24.4 percent. According to Arcos, also the largest restaurant chain in Latin America, the growth was attributable to system-wide comparable sales and the expansion of McDonald's restaurants in the Brazilian market. McDonald's, the world's largest chain of hamburger fast food restaurants, entered Brazil in 1979 in a joint venture (JV) with Rio de Janeiro entrepreneur, Peter Rodenbeck.

In 1981, the company opened another restaurant in Sao Paulo in a JV with a businessman, Gregory James Ryan (Ryan). In 1995, both Rodenbeck and Ryan sold their shares to McDonald's and the JVs were merged to form a single entity, McDonald's Brazil. From then on, McDonald's Brazil operated as a wholly-owned subsidiary of the parent company, McDonald's. In its initial years, McDonald's Brazil faced the challenging task of introducing American fast food in Brazil and gaining acceptance from the consumers. The company was also a victim of the financial and political instability prevailing in the country. The devaluation of the Brazilian real against the US dollar from 2001 till early 2003 led to a decline in revenues for McDonald's Brazil. But the company's focus on localizing its menu to suit the tastes of Brazilian consumers led to its success in Brazil. The company started reaping profits since 1988, according to the then president of McDonald's, Marcel Fleischmann (Fleischmann). McDonald's Brazil had company-owned stores and franchise outlets in the country till July 2007. In August 2007, it entered into a 20-year master franchise agreement (MFA) with Arcos. Under the MFA, Arcos operated all of McDonald's-branded restaurants in Latin America and the Caribbean....

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