Last Updated 22 Jun 2020

Franchising Opportunities in McDonald

Category Mcdonalds
Essay type Process
Words 552 (2 pages)
Views 276

Operating since 1955, McDonalds is world’s leading food service retailer with approximately 30,000 outlets in 119 countries serving roughly 46 million customers per day. McDonalds holds a large share in the globally branded fast food restaurants practically in every country and is one of the most famous and valuable brands.

Since the very beginning, McDonald has always been a franchising company with franchising as its business focus. Moreover, since it is a well established brand franchising with it will ensure business security. The company poses attractive franchising opportunities as it is spread globally franchisees can literally choose the city of their choice. The franchisee will be assured that the brand is strong and business would be steady as the brand knows how to survive through generations despite the cutthroat competition.

There are advantages for the franchisee as working with a giant is lucrative and adds to personal business knowledge. McDonald takes personal interest and supports the business whether local or international especially in areas of training, operations,  advertising, marketing, human resources, real estate, construction, purchasing and maintenance. This would enable maintenance of standards and be a big support to the franchisee for running the business.

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The franchising process is quite flexible and attainable. A new McDonald restaurant varies from $466,000 -955,500 USD. Of course the size of the facility of the restaurant, area and locality, expenses of pre-opening, the inventory, equipment, signage, décor and the landscaping will impact the cost. An initial fee of $45,000 USD is paid to McDonald's Corporation for all new restaurants. The initial cash investment is $175,000 minimum for a conventional purchase or $100,000 for a Business Facilities Lease. However the company doesn’t offer financing to franchisees and the initial fee capital should be your own and not borrowed. This means that the franchisee has to have a solid initial capital of its own.

McDonald itself will develop the location and will evaluate and select it. It acquires the property, improves the site and undertakes the construction. It is the responsibility of the franchisee to equip the facility. Once the sites are developed they are offered to prospective franchisees. This ensures that the business is set in the right place and will be lucrative and at the same time standards will be maintained.

The profitably defers due to reasons like sales location of the restaurant, occupancy and the cost of operating and the individual ability of the franchisee to manage and control. 4% of monthly sales are given as royalty to the company which could at times be heavy for the franchisee.

The prospects look good but from the point of view of the franchisee they may not be so. Firstly, McDonald being a world renowned firm has its exceptionally high standards of quality and services which have to be met by world standards. There is tough competition between outlets in terms of promotions and services which the franchisee has to keep up. Also, there is a heavy down payment and a royalty from monthly sales. The franchisee may not be able to open the franchise in the location of his choice. Lastly, obtaining a franchise may be difficult as there is a long wait in line.

Nevertheless, because of the steady flow of business and prospective relations with a world renowned brand, franchisees choose McDonalds evident by their ever growing franchises globally.

Reference

[Online] Available at: http://www.mcdonalds.com/corp/franchise/franchisinghome.html/

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