McDonald’s Rea Model

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McDonald’s

Resource-Event-Agents Project

MACC 5P51: REA MODELING & XBRL FOR FINANCIAL REPORTING

Professor: Dr. Anamitra Shome

Winter 2016

Jia   Dong    (5294996)

Yifei  Li      (5932272)

Ye    He     (5790514)

April, 2016

TABLE OF CONTENTS

Abstract        

Background        

Value System        

Value Chain        

REA Model of Acquisition Process        

Relational Database and Relevant Queries        

Appendix        

Abstract

This project analyzes the business activities of McDonald’s which can be divided into five main parts as follows. First, we will give an introduction about the background of McDonald’s Corporation. Secondly; we will show the value system level REA model of the company. In addition, we will illustrate the value chain level REA model of the company. Moreover, we will use the REA model to analyze the business process of the company and focus on the acquisition process. Finally, we will design a simplified Microsoft Access database according to the REA information and develop different queries for McDonald’s.

Keywords：REA, value system, value chain, business process

Background

    McDonald's Corporation headquartered in the United States, is an undisputed leader in the fast food industry. The first McDonald’s was built in 1940 as a barbecue restaurant operated by McDonald brothers (Dick and Mac) in California. Ray Kroc, who was a salesman of milkshake machines, joined McDonald's as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and built the McDonald's corporation.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The McDonald's Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as well as sales in company-operated restaurants. Take Canadian McDonald’s as an example, nearly 80% of McDonald’s Canadian restaurants are locally owned and operated by independent entrepreneurs in communities from coast to coast. There are over 1,400 restaurants across Canada, its more than 80,000 employs serve 2.5 million customers everyday.

McDonald’s vision is to be the best and leading fast food provider around the world. Its high recognition is benefiting from the 4Ps business strategies, which are products, places, promotions and prices. Quality, Service, Cleanliness and Value are the guiding force behind its’ service to customer. McDonald’s restaurants offer substantially uniform menu that comprises hamburgers and cheeseburgers, several chicken/ fish sandwiches, Chicken Nuggets, wraps, french fries, salads, desserts, McCafé beverages and other beverages. Although the products provided from McDonald’s are similar to its counterparts in the market, it irreplaceable image makes it holds a firm market status.

Business Description

Value System

The Figure 1 shows the McDonald's value system level REA model, it focuses on the resources exchanged between the company and its external business partners, which are investors and creditors, suppliers, employees, customers, franchisees and government.

1. Investors and creditors provide cash and funds to support McDonald's, they will receive cash dividend and interest as return.
2. Suppliers deliver the raw material, equipment and other services in exchange for cash payments from McDonald's.
3. Employees contribute their labor and knowledge to McDonald's and receive cash salary as rewards.
4. Customers pay cash to McDonald's in order to receive good quality and tasty food (e.g. hamburgers, fries).
5. Franchisees pay franchise fees and McDonald's provide operating support such as equipment, technologies.
6. Government ensure an stable, harmony environment and the company give tax payments to government.

Figure 1. Value System

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Value Chain

    The Figure 2 describe the internal resource flows within McDonald’s. There are five main processes in the value chain: the financing process, the acquisition process, the payroll process, the conversion process, and the revenue process

    In the financing process, when McDonald’s receives investments or funds from investors, the cash inflows will be used to pay for purchasing materials, recruiting and training employees through the cash disbursement event.

    In the payroll process, McDonald’s hire outstanding employees to provide good services as well as high quality foods to customers a to support the conversion process. The cash collected from the financing process will be used as an outflow resource for recruitment and paying salaries.

    In the acquisition process, raw materials, equipment are purchased by the capital collected from the financing process. Moreover, McDonald’s pay for outside resources to train and improve employees’ service quality and efficiency regularly so that the information and knowledge they gained can support the following conversion process.

In the conversion process, all the resources such as labors, technologies, raw materials enter machine operation, computer operation and human operation separately, it works together to promoting production. Besides, the well-prepared food and satisfied services will become the finished goods provided to customers.

The customized food and related services are sold to customers in the revenue process. The generated revenue will back to the financing process.

Figure 2. Value Chain

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REA Model of Acquisition Process

     The REA model we want to illustrate here for McDonald is the acquisition process. REA model is an ontology that shows integrated enterprise system by using real business activities and entities as the basic building blocks. In the acquisition process, McDonald acquires different kinds of materials and products and put them into production, which creates values and satisfy customers for the company by selling good-quality food. The target goal of the acquisition process is to get outstanding quality products and put them into conversion process. At the same time, the company make payment to their suppliers.