Lanyards McDonalds Supply Chain of Potatoes
McDonald's buys its potatoes from corporate farmers in Idaho not the commodities market; therefore it limits its exposure to price gouging that might have occurred by using the commodity exchange to get those potatoes. Starbucks is doing the same thing, but instead of having partnerships and coffee beans, they are all of in-house. Its Starbucks owns the partnerships they grew the coffee then they might have a conflict of interest for their stockholders. Because they would be dictating the price of the coffee at the partnerships been sold to Starbucks. If they paid a little more than normal for those coffee beans, so the coffee plantation can expand by better production facilities and upgrade then Starbucks funneled money to those partnerships, that should have either paid in dividends, shown as profits or retained earnings. By doing that their stock price would go up and shareholders would be better served short-term. There is a lot more involved before that food or drink gets to your table. Commodities are very much part of the behind the scenes of our civilization.
McDonald's has even other things to consider. Its franchisees need to realize economies of scale to pay the extra franchise fee, royalties and price for the potatoes that make the French Fries. If the McDonald's made a deal long ago to help Ray Kroc's personal friend expand the production of his potato farm, in turn for loyalty to sell to McDonald's, then that is totally fair (speaking of Simplot of ID). Even if, McDonald's pays 2 cents more per potato now. You see, the potato farmer is reaping the rewards for helping Ray Kroc in the beginning; build the McDonald's brand name. Building a brand name is the most important thing that McDonald's has today. Sometimes, accounting irregularities do not take in consideration future market domination, marketing strategies, brand name building, and loyalty of partnerships, co-brands, team members and vendors. What we should understand is that anytime you are building a prototype, or trying out a new system, you must reward for potential success. By doing this, with what ever means is possible is important. You have to reward your team. Your team consists of much more than just employees, Just stockholders, and partners.
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