Macdonald 's Corporation Strategies For Sustainable Profitability

In this company research project I have decided to do my research on McDonalds Canada. I decided to select this company because as a formal employee who had a great experience working there, I wanted to look deeper into what makes this company runs so well. I started with knowing McDonald Canada’s mission statement; it says, “Our customers are why we 're here. We show our appreciation with high-quality food and exceptional service, in a clean, welcoming environment at a great value. Our goal is always quality, service, cleanliness and value for every customer, every time”. (McDonald’s Canada, 2015).

In Australia exist several restaurants which give to the costumer fast food, as Mc Donald, KFC, Hungry Jack’s, Subway. All of them offer to the costumer fast food, but Subway offer something different as such healthy food.

McDonalds opened in 1955. They view themselves as a franchisor and believe that franchising is important to delivering customer experiences and gaining

Almost sixty-four percent of its stock holders held are institutions. Places such as, Bank of America, Northern Trust Corp, Wellington Management Co and many others that are interested in this company’s growth. Since opening in the middle of 1960’s, McDonald’s any one can recognize its trademark golden arches. We as Americans cannot turn a street corner without seeing a different McDonalds down the road. They are located everywhere, but that just means more profit for the company and its stockholders. The company owns and leases out real estate primarily in connection with its restaurant business. It generally owns the land and buildings or secures out long-term leases for the restaurant sites.

The business operation of an organization is always influenced by the policies of state and its government. McDonald’s business is also under the control of government’s rules and regulations. The main issue of controlling food business is health and other issues are license, employee laws, tax issues etc. McDonald’s follows the local government’s policies as well as foreign investment policies on its franchise business strategy. Political instability of local state also affects McDonald’s business.

This capital acquisition explanation argued that organizations were forced to resort to franchising because it allowed them to expand quickly without having to source scarce external financial resources or to relinquish control as in a joint venture or stock market operation (Caves & Murphy, 1976). Thus, over time, it was expected that franchisers would repurchase or take over the (best) franchised units in the system and eventually become fully company owned (Oxenfeldt & Kelly, 1969). However, research into this phenomenon has produced mixed results in the United States (for example, Hunt, 1973; Brickley & Dark, 1987; Lafontaine, 1992). Moreover, it has been found that where ownership redirection occurs it is ‘‘more strategy driven than opportunistic’’ (Dant, Kauffman, & Robicheaux, 1998, p. i). Indeed, Blair and Lafontaine (2005) comment that ‘‘most franchise chains are hybrids: partially vertically integrated and partially franchised’’ (p. 107). In contrast, while some large fast food chains (such as McDonald’s) strategically ensure a mix of franchised and company-owned units, most franchise systems in Australia are almost fully franchised (Frazer, Weaven, & Wright, 2008). Hence, different franchising models are employed around the world, and there is no ‘‘one-size-fits-all’’ approach. An alternative explanation of franchising, first put forward by Rubin (1978), focuses

McDonaldization effects all aspects of today’s society—even the venues we often overlook. Two examples of some commonly overlooked McDonaldized venues are the Kimmel Center and the Hard Rock Cafe. Both of these venues emphasize the McDonald elements of success according to George Ritzer: efficiency, Calculability, predictability, and control. (14, Ritzer). Although these places may feel like a luxurious break from the everyday fast food trip, they are not all that much different.

Due to globalization and increased competition in the fast food industry, a very complex environment is created for McDonald’s. There are various internal and external environmental factors affecting the functions of McDonald’s corporation and demands for new innovations. The factors are as follows:

In the article “The Franchisees Are Not Lovin’ It,” the authors, Gruley and Patton, discuss the difficulties of the McDonalds franchise, the struggles of the franchisees, and the inability to solve these problems. The article goes on to talk about how McDonalds needs to get back to basics, just as they say themselves. Yet, they continue to make the menu more complex by the constant introduction of new foods. They are getting away from their identity as a burger joint. As a result they are closing restaurants and are continuing to experience declining revenue. McDonalds isn’t what they used to be and something needs to be done to improve the well-being of the company, the franchisees, the employees, and most importantly the customers.

The fast food and quick service restaurant industry consisted of about 945,000 restaurants representing approximately $552 billion in annual sales. The industry is highly fragmented, with the top 50 companies holding about 25% of industry sales and is intensely competitive with respect to food quality, price, service, convenience, location and concept (Hoovers 2009). The major companies of the industry include McDonald’s, Burger King, Subway, Domino’s Pizza, Dairy Queen and the Yum Brands restaurant companies. Quick service restaurants are often affected by changes in consumer tastes; national, regional or local economic conditions; currency fluctuations; demographic trends;

Today Mcdonald 's operates in 118 countries and has over 36,000 facilities with 30,000 of these locations being franchises. “McDonald 's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants.” (McDonald 's) Even with multiple revenue streams the company earns a significant portion of it from rental payments from franchisees. “These rent payments have risen 26 percent over the past five years, and currently account for one fifth of the company 's total revenue.” (McDonald 's) Moreover, unlike some other franchises Mcdonald’s “currently owns all of its property – valued at an estimated $16 to $18 billion.” (LUBLIN, JOANN S) There are famous quotes by Ray Kroc saying “We are in the real estate business, not the hamburger business.” and “The real estate wasn’t ever going to come down in price – no way!”. With this type of business model it is important for to Mcdonald’s to have the best locations in cities and towns so that their franchisees are able to make the most money from the sale of food and

McDonald’s has extremely strict rules when it comes to awarding franchises. First, it is very costly to open a new location or purchase an existing location, with the median startup cost being $300,000 (Kalnins & Lafontaine, 2004, p. 750). As well, the company does an extensive background check on a variety of issues including credit history, business management experience, and the acceptance of the contractual agreement that the company provides. Because of these strict rules and the large amount of capital needed to purchase a location, “rates for franchise applicants are 1% for McDonald's” (Norton, 1988, p. 204). This is an extremely low acceptance rate and is even lower than McDonald’s chief competitor, Burger King, who accepts 1.5% percent of applicants (Norton, 1988, p. 199). These low numbers are understandable in the context of the business and risk that is involved. Though the franchise purchaser must pay a large amount of money to gain the rights to the restaurant, they truly have nothing to lose besides money because they are simply running another company’s business model as well as using their trademarks and logos. McDonald’s on the other hand, has a great amount at stake because they place the well being of an entire restaurant into the caretaking of an individual who simply purchased the rights for the store. If the store does poorly or if there are issues with customer service, it reflects

The McDonald's Corporation is one of the world’s largest chain fast food restaurant, which is headquartered in the United States. It has expanded its business in 119 countries, including Hong Kong. The company mainly provides fast food such as hamburgers, french fries, chickens and soft drinks. McDonald’s started its business in Hong Kong in 1975. Now, the company already has 218 branches in Hong Kong. Our group would like to analyze how McDonald's Restaurants (HK) Ltd(McDonald's) maintained its sustainability of business in the past 38 years since it had already influenced lifestyle of most Hong Kong people and become part of the local culture of Hong Kong.

The second force that acts on the industry is the threat of new entrants. Fortunately for McDonald’s and it’s over 30,000 restaurants world-wide, the corporation has set itself in a position of dominance. Using a growth strategy, “McDonald’s is continuously expanding its reach which makes it increasingly difficult for new fast food restaurants to enter the industry, through franchising, McDonald’s is able to reach nearly every corner of the globe” (Shell, Ellen Ruppel).

The company researched for the purpose of this paper is McDonald 's. This company 's history dates back since 1940 when Mac and Dick McDonald initially opened McDonald 's BBQ restaurant located in San Bernardino, CA. In 1948 they shut down the restaurant, just to reopen it as a self-service drive-in restaurant. According to About McDonald’s (2012), their menu included only 9 items, such as: milk, coffee, soft drinks, cheeseburger, hamburger, potato chips, and a slice of pie. Potato chips were then replaced by French fries. The history of this company is significantly market by Ray Kroc, who in 1954 at a visit to McDonald 's in San Bernardino decides to have a franchise of McDonald 's. A year later, in 1955, he opens his first restaurant in Des Plaines, Illinois. The franchising plan allowed growth and by 1965 there were more than 700 restaurants across United States. McDonald 's