McDonalds’s Franchise 3
Justification of Resources 3
Pros 4
Cons 4
Levels of administration 5
Administrative level 5
Operation 5
Strategic administration 6
Training program to implement 7
Conclusion 7
References 8
McDonalds’s Franchise
McDonald’s is among the most successful restaurants in fast food industry with a valuable trademark globally. It is the leading franchising company and the second largest in the fast-food restaurant market in the world. Over 80 percent of its restaurants globally are owned and run by their Franchisees (Coleman, Anderson & Yatchak, 2011). The corporate supplies fast foods such as French fries among others using standardization and branding as its driving force. The idea of fast food restaurant was initiated by the two McDonald’s brothers, Mac and Dick, who opened their first restaurant in California in 1940(Coleman, Anderson & Yatchak, 2011). They later discovered a new formula of selling high quality products at affordable prices. However, the greatest success of the company is attributed to Ray Kroc who had a global vision of the company and help attain the highest success level.
Franchising has been among its primary methods in expanding into foreign markets along with joint ventures. It established its first franchised outlet in UK in 1986 and today it has over 31,000 restaurants in more than 120 countries globally (Coleman, Anderson & Yatchak, 2011).Their franchises include hands-on business owners who operate in all restaurant areas right from preparation of food, in marketing department as well as in the customer care unit. Franchising system has continued to heavily contribute to the corporate’s international success. It is one of the most memorable brands and products in U.S. Owning such a franchise is safer compared to unpopular franchises since its name and model of operation are packaged with its loyal customers as well as restaurant industry success.
Justification of Resources
The research has employed two leading academic resources as well as method and perspectives across the field of fast-food restaurant industry to analyse and determine the best franchising company to purchase. These includes McDonald’s company website (http://www.aboutmcdonalds.com/mcd/franchising.html) and Franchising Law journal by Coleman, Anderson& Yatchak, (2011). The two information sources above have been selected because they contain a valid and reliable information useful in examining a viable franchising company. They also contain timely and reliable sales figures and statistics from a trusted internal sources and fit for the task at hand. The two sources contain an in-depth research on franchising companies in fast-food industry.
Industry knowledge has provided me with a very significant tool for evaluating business opportunities for success of my business. Availability of the corporate’s sales figures has facilitated easy assessment of the total budget required for purchasing the franchise. Availability of wide range of general information of various franchising companies has enabled easy comparison and determination of the suitable franchisor for my business. From the website of my suitable franchisor, McDonalds franchising company, adequate and updated information of its current franchisees and ex-franchisees was accessible. Considering their training programs, support levels, integrity and profitability of the franchisor, have been able to obtain a clear understanding of the company.
Pros
McDonald’s offer an intensive training to beginners. Every franchisee undertakes a nine-months training including cooking and food preparation, customer services as well as restaurant ethics. A further on- going training is offered covering areas such as leadership skills, business management, team building and dealing with customer enquiries.
Selling of well-known and high quality products. McDonald’s brand and product is known all over the globe and leading in local U.S. restaurant market. Further, standardization of its products in all its outlets has enabled the brand achieve the same high quality in its products. This will considerably reduce and save us the risks of market research and starting new brands.
Cons
High start-up cost. The company is charging franchisees way too much to run their restaurants. For one to own a brand new McDonald’s franchise, a 40 percent total cost is required which does not just come from anywhere but from cash in hand, bonds or stocks, that is a non-borrowed resource.
On-going fees on remodelling programs, rent and other business maintaining expenses hurt franchisees bottom lines. Expenses such as rent which are based on sales add up quickly. For instance, in the past the franchisees have paid about 8.5 percent on rent and a service fee at a rate of 4% of sales which is challenging for small business owners (Coleman, Anderson & Yatchak, 2011).
Levels of administration
Administrative level
McDonald’s is among the largest companies in the world with a more distinctive private company management team. Its top executive management team has been working since the era of President Richard Nixon and there seems to be no future plans to shuffle the team (MacGregor, 2015).Addition of directors with no direct control, consumers, employees and shareholder is a reassurance that’s their deed are to the benefit of the company. Change is not likely to be its top priority, company has basically not changed for the last 5 decades.
Its management system ensure the corporate directives regarding food preparation are strictly followed as well as monitoring restaurant services and food preparation through a computerised technology. It is also in charge of strategic planning to ensure that the corporate meets its competitive customer service strategies for a sustainable capitalization and growth. In order to strengthen their company, a regular server is carried out on all their outlets to ensure customer complaints and suggestions are reviewed.
Operation
The company consists of joint venture partners as well as franchisees. It has employed broad approaches to grow overseas, for instance, in the past it relied on transferring U.S. food products and strategies to other developing markets (MacGregor, 2015). It has invested in corporate knowledge to spread to foreign markets. Right from establishing firm supplier chains to design and implementation of stores. The corporate has always first considered local markets for market test the transfers the functions to oversee markets. Information is channelled from the company to franchisees depending on performance in the U.S. markets, anticipating to implement in foreign markets. The company has effectively utilized its expansion plan successfully in both domestic and international markets. Through utilizing its brand power, huge cash flow, customer spending and real estate, McDonald’s has emerged as the leader worldwide. Through franchising McDonalds restaurants have expanded to foreign markets easily (MacGregor, 2015). It embraced franchising as a business model to transform retail economy.
Over the past years, its international section has become more important to the success of the company. The non-U.S. based outlets account for more than 50 percent of the corporate $40 billion revenue and around 60 percent total profits (MacGregor, 2015). It currently serves more than 43 million people globally in a day which is less than one percent of the total world population, this clearly indicates more potential opportunities for the company.
Strategic administration
McDonald’s utilizes various methods to control its many franchises. The management uses both cultural and Rules approach to ensure that all its international outlets optimize their potential without interfering with the corporate plan (Coleman, Anderson & Yatchak, 2011). Their aim is to ensure the franchises are still motivated while striving to accomplish the corporate objective. The Rules approach is commonly used when magnifying franchisees requirement where the management relies on paperwork and reports to monitor franchising systems. A little bit of cultural approach has been adopted by some oversea restaurants. Tight internalized organizational norms have been constantly enforced through it’s headquarter offices.
Standardization in the corporate dictates how tasks, techniques and quality are done. Operators who disobey the corporate directives stands a chance to lose their franchises. It has created attention to detail management operation system which has been enforced by strategically placing its offices across the globe (Coleman, Anderson & Yatchak, 2011). There is a built-in tension in the franchising relationship, however, the franchises are given some freedom of operation.
Generic strategies have been put in place in its restaurant to enable the company achieve its productivity and expansion goals. For instance, in over 14,000 of its food outlets globally provide customers with free WIFI services. Further, they have employed market segmentation strategy through targeting a certain group of target audience particularly kids with their low prices and “happy meal” offers (MacGregor, 2015). This has been achieved through division of labour and training programs where the corporate can recruit inexperienced staffs other than training.
Training program to implement
I would implement an engaging restaurant management training program to shape and give employees skills and capabilities to execute the company objectives. I would provide the staff with an opportunity to attain an initial certificates and diploma restaurant management training. Each program would incorporate both theoretical and practical classes and assessments as well. The training may not necessarily be on a regular basis but at least an annual compulsory training can be put in place to avoid disruption of the corporate plan. An online portal would be established to communicate to all employees about launch of a new process or product. A continuous revision of training documents would carried out regularly as the business evolves. Other than the compulsory training, employees would be assigned a consultant to provide them with an on-going support.
Conclusion
In conclusion, McDonald’s franchising company stands to be my number one choice due to their commitment. Its successful business model has always been an interplay between the owners and the operators including the franchisees. As an individual with the same vision as the corporate of serving high quality and tasty fast-food through franchising across the world, would wish to join other entrepreneurs to harness both domestic and global innovations to soar my business to international markets.
References
Coleman jr., r. T., anderson, c. C., & yatchak, s. J. (2011). Franchising (& Distribution) Currents. Franchise Law Journal, 30(4), 257-270.
MacGregor, J. (2015). History, with Fries. Smithsonian, 46(2), 9-10.
McDonalds company website, http://www.aboutmcdonalds.com/mcd/franchising.html viewed on 2 February, 2016.
