McDonald's and Franchising

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A look at Franchising and how McDonald's is one of the best companies to benefit from this business model.

A look at Franchising and how McDonald's is one of the best companies to benefit from this business model.

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  • 1. McDonald’s
  • 2. A Few Facts About McDonald’s
    • 28,700 restaurants worldwide in over 120 countries
    • $40 billion sales worldwide
    • $1.9 billion net profit
    • First UK restaurant opened in 1974
    • Now over 1,116 restaurants in UK
  • 3. The Menu
    • The Big Mac
    • McChicken Sandwich
    • Chicken McNuggets
    • McMuffin
    • Fillet-o-Fish
    • Vegetable Deluxe
    • McFlurry
  • 4. What is a franchise?
    • A franchise is a license granted by a business to another business to make and sell goods/services
    • A franchisor is the owner of the business who grants the license
    • A franchisee is the person who purchases the business name
  • 5. What is a franchise agreement?
    • The franchise agreement grants to the franchisee the right to operate a specific McDonald's restaurant for a period of 20 years.
  • 6. Franchise Rights Include:
    • McDonald's trademarks
    • restaurant decor designs
    • signage and equipment layout
    • formula and specifications for menu items
    • use of McDonald's method of operation
    • inventory control
    • accounting and marketing.
  • 7. What does the franchisee have to do?
    • In return the franchisee agrees to operate the business in accordance with McDonald's standards of quality, service, cleanliness and value.
    • The franchisee is expected to take a "hands on" role in operating the business and to become involved in local civic and charitable activities.
    • Throughout the franchise term the franchisee must only have one business interest - McDonald's restaurants.
  • 8. Becoming a Franchisee
    • Every McDonald's franchisee must successfully complete a training programme
    • This takes around nine months full-time to complete.
    • Franchise candidates are not charged for the training, but have to fund themselves during this period.
    • Each franchisee has the constant support of a McDonald's Field Consultant who is always available for help and advice
  • 9. Cost/Benefit Analysis of Franchising for Franchisee
    • Benefits
    • Use a well-known name & logo
    • Gains from national advertising
    • Gets an immediate business with national help & support
    • Costs
    • May require large capital outlay
    • Limited freedom
    • Need to pay franchisor royalties
    • Total dependency on skills of franchisor
  • 10. Cost/Benefit Analysis of Franchising for Franchisor
    • Benefits
    • Quick & simple, low risk route to expansion
    • Little capital required for expansion
    • Costs
    • Need to monitor & control franchisee
    • Franchisee may not achieve required standards