s McDonald’s only offers franchises to
Background McDonald’s - A Global individuals - not to partnerships, absentee
Organisation fulfilling investors or families. Potential franchisees
Franchising is a particularly attractive local needs are expected to divest themselves of any
business opportunity for people with other business interests. They are also
entrepreneurial flair. It is a route to owning required to invest approximately nine
your own business without the high risk McDonald’s is one of the most successful unpaid months to learn all aspects of running
element normally attached to owning a sole examples of a truly global organisation. It a McDonald’s restaurant.
trader’s business. Through franchising, the operates in 111 countries and serves some 38
entrepreneur buys into an operation whose million people every day - making it the s The franchisee is expected to become
business methods have been tried and tested largest food service company in the world. involved in McDonald’s community,
many times over and therefore the rate of Achieving a global presence, however, does civic and charitable activities.
business failure is usually quite low. not automatically mean a company will be
successful in every country. In fact, there are s Individual franchisees must have their
In the US, almost a third of all retail sales many examples of global companies whose own capital to commit to the business.
come from franchising operations. In brands have failed to make a strong impact in The cost of entering a franchise operation
Ireland, however, less than 10 per cent of the Irish market. can sometimes be prohibitive. However,
The retail sales are cu rren tly through
franchising. This would suggest that
franchising is set to become one of the
major growth areas in Ireland in the
McDonald’s is one of a number of brands that
command instant recognition in virtually
to overcome this limitation, McDonald’s
provides a number of alternatives to
entering into a franchise agreement,
requiring different levels of financial
every country of the world. A key factor in
coming years. achieving this level of global success lies in McDonald’s, The Waterfront, Drogheda. commitment.
McDonald’s McDonald’s is the largest franchise
restaurant organisation in the world, with
over 23,300 restaurants in 111 countries.
McDonald’s commitment to understanding
the wants and needs of the consumer that are
common across countries and those which
differ. Based on this, it identifies which
quality, service, cleanliness and value. In
return, the franchisee is granted the right to
operate a McDonald’s restaurant, usually for
a period of 20 years. These rights include the
Training to become a
Chicago businessman Ray Kroc opened the elements of its product or service may be use of McDonald’s:
first McDonald’s franchise in 1955 in Des Although McDonald’s is a global business, it
standardised across its international markets Those who are successful at the selection
Plaines. The first Irish restaurant was and which elements require a degree of is primarily a franchise operation. Globally s Trade marks process are then invited to begin a nine-
opened in 1977 and there are now 40 adaptation to allow for local differences. over 70% of restaurants are operated by s Restaurant decor designs month training programme. The aim of the
restaurants serving some 150,000 people franchisees. A franchise is an agreement or a s Signs and equipment training is to achieve competency in running
every day. McDonald’s employs almost The same brand name, brand symbol (the licence to sell another company’s product or s Formula for menu items a McDonald’s restaurant. It is also designed
3,000 people in Ireland. Companies who Golden Arches) and the same range of service. It permits the individual accepting the s Method of operation to ensure that the same standards of service
Agreement supply McDonald’s with its raw materials
have also generated a significant number of
products is available in every McDonald’s
restaurant throughout the world. At the same
time, McDonald’s responds to the specific
local market requirements for every country it
agreement (the franchisee) to use the
established name and logo of the existing
business by agreement with the owner (the
franchiser). The franchiser provides the know-
Method of inventory control, book
keeping and accounting
and product quality are maintained
throughout every McDonald’s restaurant in
the world. Franchisees are not charged for the
training, although they do have to support
how and the business format in return for an
In this business study the franchise enters. For example, in deference to the local themselves financially during this period.
annual fee. This is usually a negotiated So what does it take to
operation of McDonald’s is described. The culture in India, burgers are made with mutton percentage of sales, together with a negotiated
study also examines the benefits of running and the global favourite Big MacTM goes by the become a McDonald’s Training is normally carried out at a
a McDonald’s franchise operation and the name ‘Maharaja Mac’. In Israel, McDonald’s McDonald’s restaurant convenient to the
Franchisee? franchisees and is supplemented by a number
essential requirements necessary to become burgers are made with kosher beef, thereby Under the McDonald’s franchise agreement
A Partnership part of the McDonald’s franchise team. fulfilling local religious requirements. the franchisee agrees to operate the business
in accordance with McDonald’s standards of
McDonald’s franchisees play a critical role
in delivering the McDonald’s brand
of residential courses at training centres in
Ireland and the UK. Training focuses on the
areas critical to success in operating a
promise to consumers. Because of this, dynamic McDonald’s restaurant, such as:
McDonald’s has a rigorous process in
approach to place for ensuring that potential new
franchisees have what it takes to run a
Handling customer enquiries
s People skills
s Franchisees must possess an s Business management.
business entrepreneurial flair for business. They
must possess the drive and energy
necessary for running a busy restaurant
to the standards set by McDonald’s.
s Franchisees must possess a high level of
personal commitment and demonstrate
strong managerial skills. These qualities
are essential to run a business that will
Business 2000 employ 50 people or more and serve
Ilac Centre, Dublin. Franchising. some half a million customers a year. Sprucefield, Lisburn, Co. Antrim.
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The first three months of training is spent as matches this commitment. It offers for advice and practical help with any felt that with a McDonald’s franchise (RMCC), which was established in
part of the restaurant crew. The focus of this individual entrepreneurs all of the advantages aspect of the running of the business. the risk was far more calculated. Ireland in 1997. RMCC collection TASKS AND ACTIVITIES
phase is to master the basics - cooking and of running one of the world’s most successful In Ireland, McDonald’s franchisees According to Gerry, the management b o x e s a re d is p la y e d in a ll th e
preparing food, serving customers and global franchise operations. It does this in a also help each other out. For example, skills and the successful business systems restaurants and the money collected is
cleaning. Trainees will also learn operational number of ways: existing franchisees send staff and that he learnt from McDonald’s would (a ) D e s c rib e w h a t is me a n t b y
theory about cooking times, temperatures managers to help new franchisees with
sent to various Irish children’s causes. 1 franchising.
have taken him years to acquire on his Each restaurant has an annual Ronald
and hygiene standards. s A McDonald’s Franchise offers an the opening of their restaurants. own. McDonald’s Charity day during which (b) List the factors critical to the success of
entrepreneurial approach to
The next three months is focused on junior business Joe Byrne, a McDonald’s franchisee in s
one pound is donated to the charity for a franchise operation.
McDonald’s enjoys global brand
management training, which prepares the McDonald’s franchisees enjoy the Wa t e r f o r d b e g a n w o r k i n g f o r awareness which it supports with every Big MacTM sold. The most recent
franchisee for managing daily restaurant freedom and challenge of running their McDonald’s while he was still at local marketing activities day succeeded in raising over £20,000 (c) Describe the factors that may lead to
operations. The final period of training own business. Ray Doherty has been school. He spent seventeen years with McDonald’s franchisees benefit from using for the Charity. the failure of a franchise operation.
concentrates on the more senior managerial running a McDonald’s franchise in Cork the organisation and worked his way one of the best known brands
duties such as stock ordering, profit and loss for 15 years. Before entering into a up to becoming a restaurant manager in the world. The McDonald’s brand Joe Byrne and his team in Waterford
accounts, inventory control and hiring and franchise agreement with McDonald’s he by the age of 29. He managed many of commands instant recognition in virtually are currently raising funds for a
motivating staff. spent eleven years working for a large the McDonald’s restaurants in Dublin every country of the world. McDonald’s children’s playroom in Waterford (a) Outline how franchising can offer
company. He had a lifelong ambition to before moving to Waterford. Although invests heavily in national advertising,
2 a more successful route into business
Participants’ performance on the training run his own business and McDonald’s he always wanted the challenge of especially TV advertising, and sales than going into business as a sole trader.
programme is assessed on an ongoing provided the necessary route. According running his own business he was aware promotional activities in every country in
basis by a McDonald’s field consultant. A Ray Doherty and his team in Cork
to him, the McDonald’s system is ideal for of the high rates of small business which it operates. This support maintains (b) List the disadvantages or limitations of
field consultant is a person who works ‘in failure. McDonald’s however provided renovated a room at the University
those with entrepreneurial flair. It high levels of interest and awareness in the being a franchisee.
the field’; ie on a day-to-day basis with a the ideal route. The back-up support brand and its products - all to the benefit of Hospital creating a children’s playroom.
provides an opportunity for entrepreneurs
franchisee and his managers, crew and with a love of retailing and who enjoy and the McDonald’s proven franchise its individual franchisees. They have also just completed a play area
administrative team to advise as requested. dealing with the challenges and problems methods were just what he needed to in the waiting room at the hospital.
He/she serves as an advisor on ‘best practice’. of running their own business, whilst take the fear out of going into business When Ray Doherty identified an Describe how the McDonald’s franchise
allowing them to reap the benefits of an for himself. opportunity for a quick service 3 operation works.
Those who successfully complete the established brand identity. restaurant in Cork, he examined the
training programme are then offered their suitability of a number of different
own McDonald’s franchise. s McDonald’s provides back-up organisations. However, he came to
support and advice to franchisees the conclusion that McDonald’s as the Outline the advantages of McDonald’s
most recognised brand in the world,
4 franchise to (a) the McDonald’s franchisee
The benefits for Franchisees enjoy the comfort of a
sound support structure to help them together with its high standards of quality and (b) the McDonald’s franchiser.
McDonald’s Franchisees through any difficult business periods. and service, was the one to choose.
E ach f r anchisee has th eir ow n
All of this may appear to be a lot to ask McDonald’s field consultant. The s Superior quality and service is
consultant visits the franchisee on a delivered in a consistent manner Outline the key factors which have
fro m s o m e o n e w i s h i n g t o e nter the 5 contributed to the global success of
business. However, in return, McDonald’s regular basis and is always available throughout every McDonald’s
restaurant the McDonald’s organisation.
There is a high level of product and
service quality standardisation among all
Ronald McDonald and friends.
McDonald’s franchise operations. This
means that no matter where in the world Describe the qualities that are essential
6 in order to become a McDonald’s
Ilac Centre, Dublin. a McDonald’s meal is consumed, A partnership approach
customers are assured that the same high franchisee. Explain why they are essential
s A McDonald’s Franchise offers a
to success qualities.
level of service and quality will be
more successful route into business provided.
A McDonald’s franchise operation is a Franchising has been the key to McDonald’s
more successful route into business than s McDonald’s makes a valuable global success. Through franchising it has
setting up in business as a sole trader. grown to become the world’s largest Develop and describe a franchise
Franchisees gain access to McDonald’s
contribution at local community 7 agreement for any business of your
level restaurant provider. McDonald’s franchise
proven franchise methods. This provides In every country where McDonald’s operation is based very much on a partnership choice. Outline what is required from (a)
the assistance necessary to establish and does business, it strives to make a the franchisee and (b) the franchiser.
approach to business. Each franchisee brings
run the business profitably. Because of valuable contribution at both a national their own individual skills and qualities to the
this, the risk attached to setting up in and local level. All franchisees are organisation. The Big MacTM, Filet-o-Fish,
business is vastly reduced. therefore encouraged to put something Drive-Thru and Playlands are just some of What lessons can other business
back into their communities. They do
the products and concepts which were 8 organisations and entrepreneurs learn
Gerry Riordan worked in the banking this by involving themselves and their
industry for a number of years before staff as much as possible in local developed by McDonald’s franchisees. By from this business study?
opening his McDonald’s franchise events, schools, community groups encouraging its franchisees to shape the
restaurant in Blackrock, Dublin. From and by raising funds for local charities. future of the McDonald’s organisation
his banking experience he was aware through ambition and ideas, McDonald’s has While every effort has been made to ensure the accuracy of
of the high risks associated with setting All Irish franchisees are involved with created a truly world-wide story of personal information contained in this case study, no liability shall attach
to either The Irish Times Ltd or Woodgrange Consultants Ltd for
HGV from Snowcrest Services Ltd - McDonald’s Distribution Co. up your own business. However, he Ronald McDonald Children’s Charities success. any errors or omissions in this case study.
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