MC Donald

Mc Donald’s case:
I. Overall success:
-Founded: 1955
- Franchising since: 1955
- History: Ray Kroc, a milkshake mixer salesman, ventured to California in 1954
to visit McDonald's hamburger stand, where he heard they were running eight
mixers at once. Kroc was impressed by how rapidly customers were served and,
seeing an opportunity to sell many more milkshake machines, encouraged
brothers Dick and Mac McDonald to open a chain of their restaurants. Kroc
became their business partner and opened the first McDonald's in Des Plaines,
Illinois in 1955. McDonald's and the Golden Arches have since become an
internationally-recognized symbol of quick-service hamburgers, fries, chicken,
breakfast items, salads and milkshakes.
- The business model works, and with national and international advertising,
McDonald’s Corporation manages to serve 27 million Americans everyday.
- 32,478 units gives employments to 1,5 million people (2009).
- McDonald's brand is in 122 countries around the world. Over thirty thousand
locations serve 51 million customers worldwide each day.
- More than 70 percent of McDonald's restaurants around the world are owned
and operated by independent local businesspeople.
- Revenue: $22,745 million (2009)
II. Mc Donald’s and franchisee agreement:
- Initial required cash liquidity: 300,000 (2009)
- Total investment: $1,057,200 - $1,885,000
- Franchise fee: $45,000
- Terms of agreement: 20 years, renewal
- Initial (franchise) fee
- Royalty fee – generally 4%–5% of sales
- Rent income to McDonald’s(base and percentage rent)
- Franchised restaurant expenses
- Rent expense paid by McDonald’s to landlords
- Depreciation on buildings and leasehold
Terms:
Franchisee McDonald’s
– Initial franchise fee – Site selection
– Signs, seating and equipment – Land acquisition or long-term
- Pre-opening costs (training, lease obligation
advertising, etc.) – Site development and building
-Full-time best efforts construction
– Adhere to operating business – Operational training and
model: consultation
+Training – Operational training and
+ Reinvestment (buildingand consulting
equipment) to comply with – Product and operations
standards development
+Advertising contribution – Marketing and advertising
+ Rent and royalties support
+ Maintain financial stability – Supply chain management
– Protect proprietary rights
(trademarks, logos, etc.)
– Architectural design and
drawings
III. Why succeed: McDonald’s Franchise Model
- One of the first to franchise in the industry
- Model: follow business format so that they give support for the whole
process:
Franchisee McDonald’s
– Lower risks and rewards of – Lower risks of owning or
owning and operating leasing land and building
a McDonald’s franchise – Covers costs and earns a return
– Earns a return on investment on investment
through operating profits through rent, royalties and initial
fees
-It's not hamburgers. It's not the commercials. It's not massive corporate
contracts with Disney and Coke. It's the operating system.

+ The most important thing that leads to McDonald's success is managers willing
to do what it takes to follow procedures and implement policies that ensure
employees follow procedures, not to mention riding crew and other managers'
asses in regards to training those procedures and following up with them on the
procedures, all the time!
It's a heavy responsibility for a manager who wants to do the best they can
everyday, because it's pretty likely most of the people around you do not wake up
and set out to excel every day. The majority of crew and managers in any
McDonald's are just people showing up collecting a paycheck, looking to finish
their shift and get away as fast as possible! So if you are "that manager" who
wants the best for your store, your crew and your own career, you'll have many
obstacles in the way- but the obstacles are only people. That’s also what Mc
Donald’s can do.

+ Production crew? Explain to them the severity of following Food Safety
procedures. How would they feel if their child/loved one/spouse/parent were to
come in to the store on a day that Food Safety procedures weren't being
followed, they get E. coli and, if they survive it, they may have to live on dialysis
for the rest of their life. Consumer safety is the standard of the food here that
many people become addicted to it!
+ Service crew? The staffs are asked about a situation where they got poor
customer service, and how they felt about it. Get them to describe the whole
situation. Help them to realize for themselves that when they aren't smiling,
when they aren't pleasant, when they aren't providing and instant greeting, and
fast, accurate service, they make someone else feel exactly how they felt in their
poor customer service experience. Such trainings are available at headquarters: 1
week, and 12-24 months at local McDonald's restaurant.

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Mc Donald’s case:

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