Report on setting up a mcdonalds franchise in UK

Report on setting up a mcdonalds license in UKMcDonalds has been proved as fortunate business done the globe for quite some time now. This piece aims at exploring the business authorization in setting up a McDonald franchise by researching into its franchise structure. It gives information about the terms and conditions for becoming the McDonalds franchise along with the brief history of its business. It focuses on the strength and weakness of the business and discusses the macro instruction environmental factors that may affect the franchise business. I had further focused on any problem that may arise during the functioning of the franchise and performed a VRIO analysis to check the sustainability of the business. The report end with a brief conclusion about the entire report suggestion whether it is beneficial to go ahead with the project. designThe loyal sustenance business is fast growing business in the UK and when talking about fast food most often the prototypical ra ise comes to the mind is the McDonalds. It has been a genuinely successful business in its category for a long time now. This report discusses about setting up a franchise of McDonalds in UK and the pro and cons of owning a McDonald franchise. McDonalds has been making profits and is growing even in the current scotch downturn. The figure below shows the development of McDonald over the last year.Figure McDonalds Historical stock chart (advfn.com, 2010)The above figure shows clear growth of the conjunction selected to invest in getting franchise for. The growth also triggered an interest in researching for getting an franchise for McDonald and get good returns on the investment.This section is divided in to two where the first give a brief account of McDonalds business history while the later discusses the terms and condition for setting up a franchise. The data collection is majorly done from the McDonalds sustain and associate websites. The later sections discuss the SWOT an alysis and the VRIO and finally the report concludes with conclusion and recommendations.McDonalds brief historyMcDonalds was started by the Dick and Mac McDonald in 1940 in San Bernandino in California. It was a typical drive-in featuring a large menu and car hop services. It started as a barbeque eatery but in 1948 the actual McDonalds was launched when McDonald br new(prenominal)s shut their restaurant for alterations. The menu was reduced to nine items and staple of the menu was the 15 cent hamburger. Within a year the potato chips were replaced by the world famous French fries. Through its history McDonalds kept on evolving and capturing the expectations of its clients. In 1954 a multi-mixer salesman Ray Kroc met Mc brother to sell his mixers but was spell-bound by the movements. The following year in 1955 he opened the first franchise of McDonalds in Des Plaines, Illinois and by 1965 there were over 700 McDonalds restaurant through out United States. In 1958 McDonalds sold i ts 100 millionth hamburger and by 1959 the 100th McDonald restaurant was opened. In 1965 McDonald celebrated its 10th anniversary with its first public stock offering at $22.5 per sh be. 1966 saw the first TV commercial of McDonald featuring Ronald McDonald who became an instant hit. In 1967 first McDonald restaurant opened in Canada and Puerto anti-racketeering law and at present it is having its presence in 118 countries. Over time McDonald kept launching products that gain individual brand images like the Big Mac, quarter pounder and happy meal. The first McDonalds restaurant in Britain opened in Woolwich, south-east London, in 1974 (mcspotlight.org, 2010). In 1978 5000th restaurant was opened in Japan and two age later it celebrated its 25th anniversary. In 1996 McDonald went online as its internet site macdonald.com was launched. McDonald has been evolving rapid in terms of product, technology and organisational strength over the years.McDonald Franchise operationThe fast foo d industry has grown many folds in recent years with many new international and local chains competing with each other. operational a fast food restaurant has many factors to be considered right from its competitors to the demographics and socio- cultural factors concerning its customers. In case of McDonalds the big brand name and massive publicize may help running the franchise but the most important is obtaining a franchise license. McDonalds people are very concerned about their customers and thus very careful about whom they choose to serve their customers. The financial terms and conditions involving a McDonald franchise are as followsThe typical cost for owning a McDonalds restaurant ranges from 125,000 to 325,000. The investor are necessary to provide at least 25% of the value as unencumbered funds, the remaining 75% kindle be funded through a bank loan with favourable funding terms (mcdonalds.co.uk, 2010).thithers also a one-off franchise fee of 30,000 and a training d eposit of 5,000 which is refunded when you complete your training (mcdonalds.co.uk, 2010).There are also ongoing fees. These include Monthly rent on the premises, based on sales and profitability (usually ranging from 10% to 15%) Service fee for use of the McDonalds system 5% of sales Contribution to the national marketing spend, currently 4.5% (mcdonalds.co.uk, 2010).And the returns?Cashflow (before debt repayment) typically ranges from 95,000 to 200,000 per year for each restaurant but this isnt guaranteed it could be more, it could be less (mcdonalds.co.uk, 2010).Apart from the above terms and conditions the common questions arise about the benefit the investors get. The investors get equipment and license to operate from a location for a mark term and investors buy the profitability of the business. The McDonalds management expect its franchise owners to actively participate in the daily business of the restaurant and the franchise owners are non allowed to sell their owners hip to other person without the managements permission.SWOT Analysis of McDonaldsMcDonalds has been a successfully evolving business since 1955 and almost half of the assoil corporate staff employees started as a restaurant level employee. Fortune Magazine 2005 listed McDonalds as the Best Place to Work for Minorities.(McDonalds fact sheet, 2007) The franchise owners and their staff are also required to undergo training in McDonalds. Moreover it invests around a billion USD in training its staff every year.StrengthsMcDonalds was ranked number one in Fortune Magazines 2008 list of most admired food service companies.One of the worlds most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). Attractive McDonalds packaging are so popular among the children that according to the Packard Childrens Hospitals Centre research concluded that children age 3 to 5 prefer food given in McDonald packaging over the food without packaging.McDonalds have ons a h igh corporate social responsibility value. They own Ronald McDonald House facilities providing very low cost room and board, food and sibling computer backup for families with children needing extensive hospital care.They also sponsor Olympic athletes and local teams.It is global company that operates more than 23,500 restaurants in 118 countries. Their diversified presence gives them the ability to withstand economic fluctuations which are localized by sphere.They are very good in adapting to local cultural appeal and requirements. For example, they dont sell beef products in India and facilitate breach entranceto male and females in Middle East, as swell up serving Halal meat in Muslim dominated regions in UK as well.They are globally present in all major airports, and cities, along the highways, tourist locations, theme parks and inside shopping mall. Locations are selected with careful consideration and selecting the busiest locations possible.They have an efficient, concou rse line style of food preparation. In addition they have a systemization and duplication of all their food prep processes in every restaurant (marketingteacher.com, 2010).McDonalds ensures unmitigated compliance with the food quality used in its restaurants and invest producing fresh farm products.The external products used by McDonalds like cheese, yogurt, mayo etc are from top brands who ensure strict quality measures like Kraft Cheese, Nestle Chocolate, Dasani Water, Newmans Own Salad Dressings, Heinz Ketchup, Minute Maid Juice.McDonalds pioneered the provision of printed nutrition fact of its products on its packages. McDonalds offers salads, fruit, roasted chicken, bottled irrigate and other low fat and calorie conscious alternatives.McDonalds has grown into a very big and trustworthy brand worldwide and especially in UK and US so opening a franchise in UK comes with the added advantage of the brand name which help getting the customers easily.McDonalds invests a large amoun t in advertisement in print and motion media thus making life easier for its franchise.WeaknessesMcDonalds venture into pizza making failed badly affecting their ability to compete with fast food pizza chains.They have yet to capitalize on the trend towards organic foods.McDonalds have problems with fluctuations in operating and net profits which ultimately impact investor relations.From the survey of franchisee the problem they have to face is that they cannot use their owned property to run a franchise if it nota site of interest to McDonalds. In that case they have to bear an additional sum for renting place offered by McDonalds.OpportunitiesThe current UK generation is more attracted towards healty or low calorie food thus McDonalds has a very good chance introduce healthy or low calorie hamburgers.Provide optional allergen free food items, such as gluten free and earthnut free.It has a great scope in introduce hot beverages along with healthy breakfast option helping it comp ete with coffee shops and other fast food restaurants.ThreatsTheir marketing to children often attracts criticism from parent advocate groups questioning their ethics.In Britain, McDonalds has infamously registered itself in to the record books for fighting the longest-ever libel suit in the country (mcspotlight.org, 2010).High food safety standards need to be maintained even a small contamination issue can land them in trouble.The other threats are from major international fast food restaurant chains like KFC, Burger King and Subway etc.Apart from the big names it faces potential threat from the local fried chicken chains.In order to decide on investing in the franchise a VRIO analysis of McDonald is done in the next section to test the sustainability of the venture.VRIO Analysis for McDonald franchise in UKVRIO stands for Value, rarity, Imitability and organisational endorse where Value is the firm ability to neutralise external threats using resources and capabilities. Rarity is suppress if resources in the hands of few while imitability is the hard-foughty to imitate in any way.Value Mc Donald hold a high value in accordance to its brand image and exploitation of the available resources which had helped it evolved successfully for more than five decades.Rarity The utility of the resource may be franchise oriented and spread through its breadth but the main control still remains in the hands of the top 50 management authorities. The franchisee has to follow the company rules strict to run a franchise of McDonalds.Imitability McDonald may not be difficult to imitate in aspect of the product but its functionality is very difficult to achieve.Organisation support McDonalds is always ready to exploit new resource and evolve and the organisation structure is well organised and provides a good support to its franchise operations.ValueRarityImitabilityOrganizationCompetitive implicationsNetwork infrastructureYesYesNoYesTemporary competitive advantageDiversified revenue baseYesYesNoYesTemporary competitive advantageLeading market positionYesYesYesYesSustained competitive advantageThe VRIO framework of McDonaldsLooking at the above VRIO frame it can be said that McDonald has a sustainable competitive advantage and thus it seem to be vice decision to invest in the project.ConclusionThe report deals with the franchise operation of McDonald and UK was selected as the location for the franchise. UK was selected on basis of the brand image and success of the franchise network of McDonalds. It has a very good customer base in UK which are very loyal as well. McDonald has good organisational support to its franchise in terms of training and publicity. It also operates a alter recruitment drive which helps the franchise to get desired employees without having a headache to hunt for them. The SWOT analysis reveals a large number of strengths as well good opportunities to work on thus large scope to increase profitability. The VRIO analysis also ind icates a competitive sustainability thus it is recommended to invest in the project.