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McDonald’s Franchise Analysis Report (Assessment)

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Updated: Apr 9th, 2022

The McDonald’s franchise is one of the best performing food service retailers in the world. This franchise has established outlets in various countries and serves a significantly large number of people.

It was Raymond Kroc‘s idea of franchising the McDonald’s, which was by then a single store, that catapulted it into the global scene. This considerable transformation attracts attention to the power of franchising if executed appropriately.

The McDonald’s franchise operates as a food service retailer with a particular interest in hamburgers, fries, chicken, breakfast items, salads and milkshakes. The business adopted the franchising concept upon the realization that the demand for their products was considerably increasing.

In this regard, it needed to expand its coverage and cater for more consumers. The McDonald’s uses agents to operate its outlets in different locations.

This strategy is crucial, especially concerning operations outside America, in reducing operation costs and maintaining the quality of products. In addition, it helps shied the business from various aspects of corporate exposure.

Despite the high demand for its products, the McDonald’s management ensures that prices remain affordable. Since even the low-income earners can afford McDonald’s products, the franchise has a huge customer base.

This has enabled the franchise to retain its market dominance. In addition, the management ensures consistency in all its outlets to maintain its products’ quality. This involves standard procedures regarding cooking and serving.

This strategy ensures the availability of labor as it is considerably easy for new employees to become acquainted with procedures and ensure timely services. The charges on franchisees are relatively low and thus favorable.

The McDonald’s policy requires franchisees to pay a commission of about 2 percent of their sales. This offer ensures the availability of labor for the business as it is attractive to a large number of potential franchisees.

Considering the rapidly changing market and consumer preferences, the McDonald‘s keeps revising its products to ensure they remain valid. Outside America, the McDonald’s ensures the integration of local cultures into its menu items.

To start a franchise in the food service industry, one has to incur various costs. The costs vary depending on factors such as the franchise type, location and equipments. In food retailing, the main consideration at entry is sufficient non-borrowed personal resources.

This is crucial concerning the setting up of an operation base. In addition, one has to pay the franchise fee, which ensures that the franchisee can use the franchisor’s brand and access support in various aspects such as marketing and training.

An Opportunity cost refers to the benefits forgone by producing a good or service. For example, considering a limited budget, allocating resources to a certain type of surgery means that other departments under the same pool of resources will operate under fewer resources and thus may not function effectively.

The Initial costs involved in purchasing a franchise are considerably higher than starting a business from scratch.

However, there are higher rates of return for operating a franchise since one deals with a product that is already in market, and the franchisor offers support in various aspects of business operations.

A startup business has to incur the costs associated with such options. The opportunity cost in this scenario is the benefits of a lower initial capital associated with a startup business that one forgoes owing to the long-term benefits associated with venturing into franchise business.

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