Torts and Liabilities: Impact on the Business Environment

  Torts and Liabilities: Impact on the Business Environment 1. Profile of the Company: McDonald’s Corporation McDonald’s Corporation is a global fast-food restaurant chain based in the United States. Founded in 1940 by Richard and Maurice McDonald, the company has grown to become one of the world’s largest and most recognizable fast-food brands. McDonald’s operates over 38,000 restaurants in more than 100 countries, serving millions of customers daily. The company’s core products include hamburgers, french fries, chicken sandwiches, and various beverages. McDonald’s has experienced significant milestones and growth throughout its history. It introduced the concept of a streamlined production system, known as the “Speedee Service System,” which revolutionized the fast-food industry. This system allowed for fast and efficient service, contributing to the company’s rapid expansion. McDonald’s continued to innovate with menu additions such as the Big Mac, Filet-O-Fish, and Happy Meals, further solidifying its brand identity. In terms of financial performance, McDonald’s has been a consistent performer. Key performance indicators (KPIs) such as sales revenue, net profit margins, gross margins, and yearly sales growth rate reflect the company’s financial strength. McDonald’s relies on diverse income sources, including company-operated restaurants, franchised restaurants, and rental income from properties. The company maintains a strong working capital position, enabling it to invest in expansion and innovation. 2. Analysis of the Lawsuit: Liebeck v. McDonald’s (the Hot Coffee Case) Liebeck v. McDonald’s, popularly known as “the Hot Coffee Case,” is an iconic lawsuit that had a significant impact on both McDonald’s and the fast-food industry. In 1992, Stella Liebeck, a 79-year-old woman, sustained severe burns after spilling a cup of hot coffee purchased from a McDonald’s drive-thru. She filed a lawsuit against McDonald’s, claiming that the coffee was unreasonably hot and that the company failed to provide adequate warning about its temperature. The case went to trial, and the jury awarded Liebeck $2.7 million in compensatory damages, which was later reduced to $640,000. The decision received widespread media attention and sparked debates about tort reform and personal responsibility. The lawsuit impacted McDonald’s and the industry in several ways: Public Perception: The case significantly impacted public perception of McDonald’s and fast-food chains in general. It led to criticism of the industry’s practices and raised concerns about product safety and corporate responsibility. Product Liability: The case highlighted the importance of product liability in the food industry. It emphasized that companies must take reasonable measures to ensure customer safety and provide clear warnings about potential risks. Litigation Costs: McDonald’s faced substantial litigation costs associated with defending the lawsuit and subsequent similar cases. The company had to allocate significant resources towards legal expenses, which impacted its financial performance. Changes in Practices: Following the lawsuit, McDonald’s implemented changes to its coffee preparation process and cup design to reduce the risk of burns. The case prompted other fast-food chains to also reassess their safety practices and improve product warnings. Regarding the court’s decision, opinions vary. Some argue that the jury’s award was excessive and that Liebeck should bear personal responsibility for her injuries. Others believe that McDonald’s should have been more diligent in ensuring customer safety and providing adequate warnings about hot coffee. Ultimately, courts have different interpretations of negligence and liability, making it challenging to definitively agree or disagree with the decision. 3. References “Liebeck v. McDonald’s Restaurants.” Legal Information Institute, Cornell Law School. “McDonald’s Corporation.” Company Profile, Bloomberg. “McDonald’s Reports Fourth Quarter And Full Year 2020 Results.” McDonald’s Corporation Press Release. Note: The analysis is focused on Liebeck v. McDonald’s (the Hot Coffee Case). The other listed cases (Taylor vs Baseball Club of Seattle, Schwarck v. Arctic Cat, Inc., Stange v. Jansen Pharmaceuticals, Inc.) were not covered in this essay due to space constraints.

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