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.

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McDonald's and Franchising

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

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