The Franchising Scheme Of Mcdonalds

872 Words4 Pages
1) Back in the 1960s and 1970s, company and corporations tried to branch out using the franchising scheme, since it’s the safest way for both the franchisor and franchisee. Compared to others, McDonald was way ahead of their competition again when it comes to franchising. Unlike other fast food chains, McDonalds’ executives were interested in expanding their franchises by offering lower franchising fee instead of demanding a large fee up front, sold off the rights to entire territories, and earned money by selling supplies directly to their franchises. Together with their well-known brand recognition, McDonalds continues to expand more and more, just like what Ray Kroc wanted from the beginning. This kind of explained why there are so many McDonalds restaurants compared to others, such as Carl’s Jr and Burgers King. While this might seems like a good business decision for the company, it’s a 2 way knife for franchisee. Instead of demanding large royalties or selling supplies, McDonald became the landlord for most of their franchises. These franchisee have to pay up to 40% markup and that one single contract breach could lead to franchisee’s eviction. Over the years, this eventually turned into a good business for company and as one of McDonalds’ executive put it’’ We are in the real estate business and the only reasons that we were able to sell fifteen cent hamburgers is because it is the only way that help our tenants to us our rent.’’ In other words, to open up a franchise
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