mcdonalds: entreprenuership and franchising

entrepreneur

ship

and

franchising

presentersSyed Wasiq Hassan

Ghufran Waseem

Salman Zia

Summaya Mehar Iqbal

Madiha Shahid

Saad Ullah Khan

Arsalan Ullah Qureshi

1940

19’61

Ray Kroc, a multimixer

salesman becomes the

franchising agent

McDonald brothers open the first McDonald’s

and names Speedee as their company image

Ray Kroc buys out the McDonalds

brothers for $2.7 million

creation of ‘McDonald’s Center of

Training Excellence’

“Hamburger University”

1954

Big Mac invented

opens in Canada and Puerto Rico

1965McDonalds goes public

first TV Ad airs

1967

‘71

Egg

McMuffin

invented

‘79

Happy

Meals

introduced

more than 34,000 restaurants worldwide

1.8 million employees

119 countries

81% of restaurants are franchised

global overview of McDonalds

69 million people served daily

Revenues by company operated restaurants

$18.29 billion (2011)

Franchised sales

$67.65 billion (2011)

Margin of company operated restaurants = $0.83 billion

Margin of franchised restaurants = $1.9 billion

2012 2007

Company operated restaurants 6,598 6,906

Franchised restaurants 27,882 24,471

% of franchised Restaurants 81% 78%

McDonaldspresence in Pakistan

Pakistani Parallel

UFONE – Tum He To Ho!!!

started it’s operation in January 2001

Ufone became the part of Etisalat in 2006

second largest cellular company in

Pakistan

franchises = 359

service centers = 17

one stop shops = 09

PTCL PTML UFONESubsidiary Brand

Pakistani parallel (contd.)

• Both McDonald's and Ufone are the example of Brand franchising

• Both mainly depend upon there franchising instead of company owned outlets.

• Both serve the customer directly. B to C

• Mainly franchises exist in the developed areas and both have opportunity in rural part

• Both companies have used extensive marketing as there main tool for growth maximization

Q1What do you understand by the

term economies of scale?

How will economies of scale affect

McDonald’s?

economics anyone?

economies

of

scalethe advantages that

result from being large

which lead to reductions

in average costs

Long run

average cost

uniform menu offerings can be

mass produced, lowering

production costs;

the company's bargaining power

with its suppliers lowers its input

costs and boosts margins;

the company's large advertising

budget gives McDonald's a

significant competitive advantage

over its competitors.

uniform menu offerings can be

mass produced, lowering

production costs;

the company's bargaining power

with its suppliers lowers its input

costs and boosts margins;

the company's large advertising

budget gives McDonald's a

significant competitive advantage

over its competitors.

uniform menu offerings can be

mass produced, lowering

production costs;

the company's bargaining power

with its suppliers lowers its input

costs and boosts margins;

the company's large advertising

budget gives McDonald's a

significant competitive advantage

over its competitors

franchisee perspective

due to division of labor efficiency

will improve

same operations for the large

volume will lower the per unit cost

of output

how will economies

of scale affect

McDonalds? (contd.)

franchisor perspective

the more restaurants are there, the

lower the cost of production and

hence the more profit margins will

be there.

Q2You have been hired as advisor on the

Pakistani market by McDonald’s. Based

on your observations of the Pakistani market,

prepare three instructions you

would issue to the franchisee on behalf of

McDonalds, and explain why you think they are

important.

Lets eat out! Look for the Golden Arches! The closest thing to

home McDonald's is your kind of place You deserve a break today

Enjoy the best food at McDonald's We do it all for you You,

you're the one Nobody can do it like McDonald's can You deserve

a break today Nobody makes great taste of McDonald‘s It's Mac

Tonight McDonald's is your place to be Good time, great taste

There's nothing quite like a McDonald‘s You Deserve A Break

Today Food, folks and fun McDonald's Today What you want

is what you get Do you believe in magic? Have you had your

break today? My McDonald‘s Did somebody say McDonald's?

We love to see you smile Put A Smile On Smile I'm lovin' it

It's what I eat and what I do It's what I eat and what I

do...I'm lovin' it What we're made of your day like McDonald's

can We cook it all for you at McDonald's McDonald's and you

McDonald's mission is to be

our customers' favourite

place and way to eat – with

inspired people who delight

each customer with

unmatched

quality, service, cleanliness

and value every time

Lets eat out! Look for the Golden Arches! The closest thing to

home McDonald's is your kind of place You deserve a break today

Enjoy the best food at McDonald's We do it all for you You,

you're the one Nobody can do it like McDonald's can You deserve

a break today Nobody makes great taste of McDonald‘s It's Mac

Tonight McDonald's is your place to be Good time, great taste

There's nothing quite like a McDonald‘s You Deserve A Break

Today Food, folks and fun McDonald's Today What you want

is what you get Do you believe in magic? Have you had your

break today? My McDonald‘s Did somebody say McDonald's?

We love to see you smile Put A Smile On Smile I'm lovin' it

It's what I eat and what I do It's what I eat and what I

do...I'm lovin' it What we're made of your day like McDonald's

can We cook it all for you at McDonald's McDonald's and you

+ local elements in products

+ training

+ quality checks

Q3Why do you think that over 70 per

cent of new businesses fail but

90 per cent of franchises succeed?

ARE YOU WATCHING CLOSELY?

franchising

success

new businesses

failure

success

new businesses fail…

start from scratch

incomplete market research

high investment at stake

high managerial skills

high risk involved

Q4Discuss the advantages and

disadvantages of being a

franchisee.

being there own boss

selling the brand

intensive initial training

continuous support

marketing by franchisor itself

managerial talent

get a head start

shared liability

+

legal regulations

investment

profit sharing

you must play by the rules

nothing is ever free

not independent

limited duration for agreement

-

Q5Evaluate why a business might choose

a corporate objective of growth

maximization over profit maximization?