Just about everyone has eaten or heard about McDonald’s. There are very good reasons for it, which seem from the Quality, Service, Cleanliness and Value or QSC&V. Those four words ensure whatever McDonald’s you go to around the world, consistency of high standards will be there. As many who have traveled will attest, McDonald’s is a good, safe choice to eat at. Behind the counter, one of the big competitive advantages of the company is the relationship with their suppliers.

According to the book Vested by Kate Vitasek and Karl Manroot, McDonald’s relationship with its suppliers over the years has been and is on going similar to a 3 legged stool where the legs are employees, owner/operators and suppliers. McDonald’s has a vested interested in its suppliers both living the QSC&V as well as continual innovation for the restaurant. When the company started, this was likely a high risk for the suppliers, now days McDonald’s is large, profitable and pays dividends. The company demands a great deal from its suppliers to invest, to innovate, and to be aligned with the company’s plans which are shared. Suppliers and McDonald’s work with each other to solve problems and look for opportunities in the future. The suppliers work with basic operating principles of fairness, competitiveness, and continuous improvement. The vested model is in contrast to those that continually demand lower prices from their suppliers and the only aspect is price.

Linking to dividend paying stocks, while price is always important, the overwhelming dividend paying companies have a vested interest in their suppliers doing well. It is  important to look at aspects of operations on how the company and its suppliers gain innovation and opportunities. If the answer is overwhelming price, then there are better long term investments, a shining example is McDonald’s.

There are more questions than answers, till the next time – to raising questions