The Franchising Scheme Of Mcdonalds

McDonalds is one of the biggest fast food companies in the market share today. It has been running in over 119 countries, as well as they have acquired over 31,000 restaurants in the world now. McDonald’s brand mission is to be customers’ favourite place and way to eat, they are aligned around a global strategy called the ‘Plan to Win’, they also committed to continuously improving their operations and enhancing their customers’ experience. As we all know that McDonald’s had successfully achieved their goal through out the years. (aboutmcdonald’s, 2012) Apart from this, as McDonald’s is a worldwide company, they also had the social responsibility to return the community; therefore, the ‘Ronald McDonald House Charities’ was

McDonald's has successfully created a brand/name for itself as the leading fast food retailer in the world. It is somewhat of impossibility for one to not come across a McDonald's with over 30,000 local restaurants in over 100 countries (McDonald's, 2011). Those restaurants are owned either by a franchise owner or a corporation; a percentage of all the earnings from a franchise owner, including a percentage from their annual revenue go to McDonald's.

Kroc gave McDonald’s to people willing to allot great amount of time and effort in the McDonald’s name. His idea turned out to be affluent as many ideas were created because of this caring franchisees. The Filet-O-Fish (originally intended for Catholics during lent), Big Mac (in celebration to its fifth billion burger sold), Egg McMuffin (wanted to cater to breakfast lovers) ,Quarter Pounder, and McFlurry were all introduced by franchisees and all reaped prosperous benefits. In 1956 Kroc hired Harry Sonneborn, a former vice president of finances at ‘Tastee Freeze”. Harry quickly rose among the ranks at McDonald’s Corp. and even became the very first president and chief executive. A couple months later Sonneborn pitch the idea that McDonald’s hould own the buildings of the franchise and make franchisees pay rent. They even could evict franchisees if necessary for the first time. This revolutionized McDonald’s turning them into a semi-real estate institution forever changing urban land

The corporation I chose to discuss is McDonald’s. McDonald’s is a publicly traded corporation that includes the following domestic companies, McDonald’s, Chipotle Mexican Grill, and Boston Market. This paper will discuss the following:

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.

With the enlargement of company across countries, McDonald’s has started to raise the franchise fee which has created a lot of hustle bustle among the franchisees. If this forced fee demand continues, many of

McDonald's franchise operates in oligopoly market since the fast food industry is one of the major industries with this type of markets. Some of the common features of oligopolistic markets are price rigidity and price war that have significant impacts on the firm's pricing strategies. The reason for the operation of this franchise in oligopolistic markets is that fast food industry is characterized by a small number of large producers or sellers. As a result, every large seller in the industry has a perceptible impact on other sellers as they influence the market.

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.

From Ray developing the strategy of his unique business model, to controlling it through organizational design of franchising to developing unique global strategies for competing on a global scale. This is a wonderful example of having a carefully thought out plan and executing such a plan that has enabled McDonald’s to gain and sustain competitive advantage for the past decades. All the aforementioned strategies have contributed to their rapid growth and high profits placing them at number one for the most successful fast food restaurant and franchisees in the world ahead of its top three competitors: Doctor’s Associates Inc., Yum Brand, Inc. and Burger King Worldwide, Inc. (Hoovers & Business Insider). McDonald’s has been able to differentiate itself as the burger giant serving its signature Big Mac hamburger and as an affordable fast food restaurant despite the emergence of several hamburger restaurants. For these aforementioned strategic decisions, McDonald’s continues to reap the reward of the retail industry and separates itself from its competitors including those who try to substitute its products. What this company has done is truly remarkable. Ray saw a unique business opportunity that had never been previously attempted. Not only did Ray Kroc had a genius idea, but a carefully

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

In 1954 Ray Kroc became the first franchisee appointed by Mac and Dick McDonald in San

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

By buying into a franchise you are gaining the benefit of the franchisors experience as well as the name and reputation that has already been built up by the franchisor. Therefore it is no wonder that ‘according to the U.S. Commerce Department, an estimated 95% of franchises succeed, whereas only 25-35% of independent businesses succeed.’ (http://money.howstuffworks.com) It is also not surprising that franchising makes up for about 3.2 percent of all businesses and 35 percent of all retail and service revenue in the United States, proving that it is big business. Franchising is very often a wise choice because consumers like

1. Competitors – As there are many other restaurants who are trying very hard to compete with McDonalds like KFC, Burger King, and Burger Fuel etc. They are also serving people with same kind of services like McDonalds and burger king is really giving a tough competition to McDonalds at the moment.