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INTRODUCTION
Franchising Business in India McDonalds
INTRODUCTION
HISTORY
Franchising dates back to at least the 1850s; Isaac Singer, who made improvements to an existing model of a sewing machine, wanted to increase the distribution of his sewing machines. His effort, though unsuccessful in the long run, was among the first franchising efforts in the United States. A later example of franchising was John S. Pemberton's successful franchising of Coca-Cola.[1] Early American examples include the telegraph system, which was operated by various railroad companies but controlled by Western Union, and exclusive agreements between automobile manufacturers and operators of local dealerships.[3] Earlier models of product franchising collected royalties or fees on a product basis and not on the gross sales of the business operations of the franchisees.
Modern franchising came to prominence with the rise of franchise-based food service establishments. This trend started before 1933 with quick service restaurants such as A&W Root Beer.[4] In 1935, Howard Deering Johnson teamed up with Reginald Sprague to establish the first modern restaurant franchise.[5]HYPERLINK "http://en.wikipedia.org/wiki/Franchising" \l "cite_note-5#cite_note-5"[6] The idea was to let independent operators use the same name, food, supplies, logo and even building design in exchange for a fee.
In the late 1800's and early 1900's many other forms of franchising took place. Some examples included monopolized franchises for several utilities as well as street car companies. Then as oil refineries and auto manufacturers found that they could sell their products over a larger geographical area, they began to franchise.
Transportation and increasingly mobile Americans were the basis for the establishment of retail and restaurant chains/franchises. As time went on a large number of establishments began to franchise. Some of the well-known franchises include Kentucky Fried Chicken in 1930, Dunkin Donuts in 1950, Burger King in 1954, and McDonald's in 1955.
The growth in franchises picked up steam in the 1930s when such chains as Howard Johnson's started franchising motels.[7] The 1950s saw a boom of franchise chains in conjunction with the development of the U.S. interstate highway system.[8] Fast food restaurants, diners and motel chains exploded. In regard to contemporary franchise chains, McDonald's is arguably the most successful worldwide with more restaurant units than any other franchise network.
According to Franchising in the Economy, 1991-1993, a study done by the University of Louisville, franchising helped to lead America out of its economic downturn at the time.[9] Franchising is a unique business model that has encouraged the growth of franchised chain formula units because the franchisors collect royalties on the gross sales of these units and not on the profits.
Conversely, when good jobs are lost in the economy, franchising picks up because potential franchisees are looking to buy jobs and to earn profits from the purchase of franchise rights. The manager of the United States Small Business Administration's Franchise Registry concludes that franchising there is continuing to grow and that franchising is growing in the national economy.
MEANING
The dictionary meaning of franchise is right to vote, the citizenship and authorization to sell the companys products.
Franchising is one form of marketing channel; rather it is the fastest growing form of retailing. it is extended version of license. Franchisee invests his own capital, runs the business and enjoys the profits or the losses.
The franchisee is normally appointed to save the resources or to benefit from franchise expertise in the field. Franchising is a marketing format, a very powerful way of retailing goods and services. It is a business partnership. Like all business partnerships it involves two parties, the franchisor and the franchisee.
The franchisor provides the know-how, training, system and the brand, whereas the franchisee forms the front end and is responsible for managing his business unit. In the US, almost a third of the retail sales come from franchised business. Globally, there are over a nine hundred thousand franchised outlets with sales exceeding a couple of trillions of dollars.
In India, the industry is a little over ten million ($). There is limitless potential, as this industry is at a very nascent stage.
Franchising is the practice of using another person's business model. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.
Franchising has been around for many centuries but did not come to prominence until the 1930s in the United States, when the establishment of electricity, vehicles, and, in the 1950s, the Interstate Highway system helped propel modern franchising, most notably franchise-based food service establishments.
According to the International Franchise Association approximately 4% of all businesses in the United States are franchises.
Franchising offers an excellent opportunity for you to be in business for yourself. When you hear the word "franchise" you probably think of fast food restaurants such as Burger King, McDonald's or Subway.
But the truth is franchising is so much wider than that. In simple terms, franchising is where a successful business format is replicated. This involves developing all the systems and procedures the franchisor has found to be most successful. Anyone joining the franchise will be expected to operate the business using these tried and true systems.
There are franchises available in almost every business category that you can think of, and across all price ranges.
In addition, because franchising has such a low failure rate, especially when compared to starting a business from scratch, a franchisees chance of success is extremely good.
Compared to starting your own business from scratch, franchising can provide a relatively safer route into self employment. The franchisor has established a tried and tested path through the maze, and will have eliminated many of the mistakes that are often made when starting a business.
It is this experience and system that you are paying for when you buy a franchise.
While franchising is a safer route into becoming an entrepreneur, it is not just a question of signing up, paying your money and being successful.
The franchisor will not do your work for you and cannot be expected to. What is supplied is a proven format, a brand name, support and guidance. It will still be your hard work and skills that make your business successful.
As a franchisee you will have access to market knowledge, established name awareness in the business sector that you will be operating in, training and marketing help. You will often take part in and contribute to national advertising campaigns which would otherwise be outside your reach.
Financially, you will pay the franchisor an initial franchise fee and the costs of establishing the business, including any equipment, facilities and supplies necessary, together with the costs of operating the business until it is cash flow positive. Once established, you will normally pay the Franchisor a monthly payment based on your sales.
This is known as royalties or monthly management fees. Effectively this is where you are paying for the ongoing support of the franchisor and his team.
As the royalties are based on your revenues, it can be clearly seen that it is in the Franchisor's interest to help you succeed.
A successful franchise relationship is like a partnership. It combines your talents with the experience and knowledge of the franchisor.
DEFINITION
According to the international franchise association of america,a franchise operation is the contractual relationship between the franchisor and the franchisee in which the franchiser is obligated to maintain a continuing interest in the business of the franchisee in such areas as know-how and training, where in the business operates under a common trade name or procedure owned and controlled by the franchisor and in which the franchisee has or will make a substantial capital investment in his business from his own resources.
A continuing relationship in which a franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees).
Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty, and gains (1) immediate name recognition, (2) tried and tested products, (3) standard building design and dcor, (4) detailed techniques in running and promoting the business, (5) training of employees, and (6) ongoing help in promoting and upgrading of the products. The franchiser gains rapid expansion of business and earnings at minimum capital outlay.
Franchising can be described as a pooling of resources and capabilities; the franchisor contributes the initial capital investment, know-how and experience; the franchisee contributes the supplementary capital investment, motivated effort and operating experience in a variety of markets. Franchising is a comprehensive business relationship, not just a buyer-seller relationship. There is considerable interdependence between the franchisor and the franchisee.
OBJECTIVES OF FRANCHISING
Achieving a certain level of sales.
Gaining a number of new customers.
Expanding your franchises territory.
Making a minimum amount of profit.
Improving your personal finance situation.
TYPES OF FRANCHISING
In simple terms there are four ways in which it can be used.
1. AN ENTIRELY NEW PRODUCT OR SERVICE CAN BE CREATED SPECIFICALLY FOR FRANCHISING.
This has been done with businesses such as Snappy Snaps in the UK - which provides 1 hour film processing services and retails associated products such as picture frames and the like in the high street.
Dublcheck is another example; it operates a contract cleaning business. Very often a local businessman identifies a successful franchised concept in another market such as the USA, and decides to create a similar concept in his own jurisdiction.
2. DEVELOPMENT OF AN EXISTING BUSINESS
This is perhaps the most usual way of evolving a franchise. An existing product or service is further developed by use of the franchising method. Such businesses include the Dyno-rod drain cleaning business, the restaurant businesses and so on.
3. CONVERSION OF EXISTING BUSINESS TO THE FRANCHISE FORMAT
Sometimes an established business can decide to convert its managed outlets to franchised outlets. The Thresher off-license chain in the UK is a good example of this. Such decisions are usually taken because of a desire to accelerate growth and reduce overheads without sacrificing quality control.
4. IMPORTATION
This is a very common method of evolving a franchise in the specific territory. The United States is the great exporter of franchise concepts around the world. Brands such as KFC, Holiday Inns, Hilton Hotels, Pizza Hut and McDonalds are all American exports. Body Shop is an example of a British franchise that has established itself around the world.
5. JOINT-VENTURE
This method is also applicable in franchising territory. When a company wants to expand its presence in a particular company so through joint venture helps to expand its business and presence
ADVANTAGES TO THE FRANCHISERS:
They can cover more territories
They get the marketing support from the entrepreneurs.
Franchising is the key to rapid growth as franchisees cover wide areas and expand market.
Once the network of franchisees as set up, company enjoys regular income in form of royalty without much fresh investment and additional efforts.
Franchisees, familiarity with local market and prevailing terms and conditions helps franchisor in establishing brand quickly with less risk for budding efforts
Generally big giants through franchising can create entry barriers for competitors
Franchisers need not invest heavy amount, which is otherwise extremely essential in the areas like sales force, management costs, etc. franchises being independent business organization involve and invest in these activities they try to carry out these activities more effectively.
Many cos. find it difficult to control the enterprise as they grow and many of them find it comparatively easier to influence, manage and control each franchisee.
Franchisee works more as more consultant who works out some solutions for franchisers problem and generates new ideas. E.g. most of the successful product ideas of todays McDonalds were generated by franchisees.
FOR FRANCHISEES
EMPLOYMENT
Opening a franchise is a way of owning a business.
QUICK START
As practiced in retailing, franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch (often in the face of aggressive competition from franchise operators). A well run franchise would offer a turnkey business: from site selection to lease negotiation, training, mentoring and ongoing support as well as statutory requirements and troubleshooting.
EXPANSION
With the help of the expertise provided by the franchisors, the franchisees may be able to take their franchised businesses to a level which they wouldn't have been able to without the expert guidance of their franchisors.
TRAINING
Franchisors often offer franchisees significant training, which is not available for free to individuals starting their own business. Although training is not always free for franchisees, it is sometimes supported through the traditional franchise fee that the franchisor collects and tailored to the business that is being started. When training fees and travel expenses, etc. are required beyond the initial franchise fee, these fees are deductible as part of the startup expenses of the business.
Many franchisors nowadays also have an online Corporate University to help franchisees with both initial and ongoing training. An online Corporate University has the advantage of enabling anytime, anywhere learning and is generally made available free of charge to the franchisee.
FRANCHISEE-FRANCHISER RELATIONSHIP
Franchiser and franchisee both should avoid all such acts and misunderstanding which may cause any conflicts between them
None of them should do any such activity that goes against each others interest.
Both the end should strive to keep the relation in order.
There has to be mutual understanding that will help each other to grow.
Agreement should not create any ambiguity and should clearly mention responsibility and demarcation of areas of activity.
They should share the cost and carry out advertisements and promotional activities jointly to avoid duplication of work and cost
They should consider each other as business partners and no one should behave like dictator and try o rule other.
Franchisee can quickly en-cash the market opportunities being connected with reputed brand and can expect good returns in a short period.
Franchising provides excellent business opportunities to the entrepreneurial ambitions individuals having sincere urge for business, certain in amount of capital and capacity to bear some risk, but lack experts advice and management support. Franchiser personnel assist, traits, motivate, share and work with franchisees. Thus, franchising can solve all start-up problems of business aspirants and thus leads to entrepreneurship development
FRANCHISING LAW IN INDIAINTRODUCTION
There is no specific legislation regulating franchise arrangement in India, reason being the complexity of the relationship and the vast areas of law which such relationship involve.
The laws regulating franchising in India includes law relating to contract, agency, distribution, leasing, assignment, securities, financial investments, intellectual and industrial property, competition, companies, immovable and movable properties, labour, foreign investment, insurance, banking, import-export, technology transfer, and other legislations which may become applicable in particular case.The applicability of laws depends precisely upon the modes of franchising which may be domestic or transborder.
ROYALTY REMITTANCE
The FEMA and RBI regulate the terms of payment under Franchise Agreements(such as franchise fees, management fees, development fees, administrative fees, royalty fees and technical fees) where one party is a non-Indian entity including the amount to be paid and procedure for remittance of these payments outside India.
The RBI prescribes certain requirements such as furnishing of tax clearances and chartered accountant certificate at the time of remittance of royalty payments by the franchisee to franchisor outside India.
The Indian government permits foreign franchisors to charge royalties up to 1% for domestic sales and 2% on exports for use of the foreign franchisors brand name or trademark, without transfer of technology.
The laws in India also permit lump sum and royalty payments to be made by Indian franchisees to their foreign counterparts for use of foreign techno logy, which includes manuals, systems etc.
Lump sum payments up to US$ 2 million are permitted and royalties of 5% on domestic sales and 8% on exports can be paid to the foreign franchisor. In addition, foreign companies can enter into consulting agreements and receive up to US$ 1 million per project.
Amounts in excess of these can also be received but with the permission of the Indian Government. These rules allow a foreign franchisor to structure its business in India in such a way so as to ensure that it can repatriate the maximum amount from India.
The Government has specified formula for calculation of royalties which must be adhered to before the foreign company can remit funds out of India. If the franchise agreement proposes royalties or lump sum fees beyond the specified limits, the approval of the Foreign Investment Promotion Board is required.
TAXATION
Taxation is another issue which deserves due consideration. It is important to know the local sales tax, property tax, and withholdings tax applicable in certain area. Further, how the franchise arrangement is structured and the existence of treaties between the countries involved may have considerable influence on the structure adopted.
Where the franchisor receives royalties, service or franchise fees, tax has to be paid under the income tax Act (as income arising and accruing in India), whether the franchisor is an Indian or foreign.
In case where the foreign franchisor sends training personnel and supervisors to India, the salaries payable to these persons may be subject to personal income tax, whether an arrangement is made to deduct the tax at source or they are taxed as self-employed persons (professionals).
In calculating the amount of tax payable by the franchisor or the franchisee company, the deduction available in tax laws of India can be important for tax planning purposes.
Sometimes of these relate to rent, repairs and insurance in respect to premises used for business; depreciation and expenditure on research; and, expenditure of capital nature on acquisition of patent rights or copyrights.
However, the availability of tax advantages depends on the type of franchise, the product of the franchise and unit locations
FRANCHISING IN INDIA
India is a geographical diverse country. Franchising in India is at a very nascent stage. However, this industry has clocked the growth rate of 25-30%, the second fastest growing industry.
In the US, 45% of the sales come from franchised business, India is still to reach that stage, where franchised business are as widespread as the local grocer.
Franchising, as a dynamic and ever changing industry will firmly establish itself in a couple of years. It is not difficult to spot malls. Organized retailing though only at 2% of the retailing, will take off in a very big way.
The Indian middle class has been slowly expanding; it now buys consumer appliances, thanks to the economy growth of over 8, the stock market crossing 6,000, forex reserves surpassing 100 Billion USD, and the increase in disposable income. Today, over 33 million Indians can afford the best services and products and over 310 million Indians buy consumer appliances.
India offers lot of potential for the franchising community. Apart from Indians being very entrepreneurial, franchising as a way of doing business has been well accepted.
FRANCHISING TAKE IN INDIA
In India, the concept of franchising started around seventies but didnt get much acceptance till nineties. Traditionally it was limited to few sectors like IT training, clothing and footwear sector etc. Today in India, the acceptability for franchising system is much stronger, which helps franchising in India to touch a new height. It has forayed into all industries from Food and Fuel to health and travel. The franchising trend in India includes domination of service sector, growth in retail franchising, introduction of many master franchisees by international franchisors etc. Today franchising spread across the country, providing immense opportunity to the Entrepreneurs.
FRANCHISING
FACTS AND FIGURES IN INDIA:
There are more than 800 active franchising systems currently operating in the country which are spread across the different sectors.
More than 5,000 franchisees (across the sectors) are involved in the system.
The annual turnover achieved by franchised business in India touches Rs. 12,000 13,500 crores approximately.
The total investment (annually) made by the franchisees is over Rs. 7,000 crores and rapidly growing at the rate of 25-29%.
More than 650,000 people are directly employed by franchised business.
Around 180 foreign franchisors are already exist and operational in India and many are Coming or planning to come shortly.
Variety of franchising formats (retail franchising non retail franchising / pure
THE FRANCHISING ASSOCIATION OF INDIA
The very first Indian organization committed to promote franchising in India
The Franchising Association of India (FAI) is a membership organization of franchisors, franchisees, vendors, consultants, financial institutions, potential franchisees, students and others.
Our services are dedicated to provide a one-stop shopping experience for franchising business and with membership of the prestigious World Franchise Council (WFC) we have ongoing access to knowledge of the world accepted best practice related to franchising in different areas of business activity as also networking contacts with the WFC member franchising associations in different parts of the world for generating new business opportunities for Indian entrepreneurs.
FAI was formed about 5 years ago the growing list of FAI members include many renowned companies like Aptech, Pepsi, McDonalds, Subway, Kodak, Vitesse, Apollo Healthcare, Lakme, NIIT, The Bombay Store, Golds Gym, Moginis and many more.
FAI is registered as Non- Profit organization under the Companies Act 1956, FAI has been admitted as a member of the prestigious World franchise council and is thus link into all the knowledge and opportunities available in this area at the international level.
We have a mission: tapping the vast entrepreneurial energy available in the country by promoting the concept and practice of franchising in India.
FOUR MAIN OBJECTIVES:
1. Exchange and safeguard the business environment for franchising, both with regard to franchisors and franchisees
2. Act as the resource centre for current and prospective franchisors, franchisees, the media and the Government.
3. Disseminate knowledge to promote the concept of 'franchising' and propagate it as a healthy business practice
4. Establish a forum for discussion and deliberation on franchising related matters and problems and help promote the interest of members by organizing seminars, conferences and meetings.
The act for the creation of appropriate forums for discussion of issues and problems related to franchising and we provide international linkages to promote - bringing in of foreign franchisors and best practice for doing business in India through marketing India at international expos and otherwise.
We also work to make representations to the Government with regard to legislative and other measures affecting the promotion of concept and practice of franchising. We encourage bank and venture capital funding for franchisees and we act for publication of franchising successes.
FAI has its own quarterly publication, Franchising Focus, covering the franchise industry in India. Franchising Focus articles are produced in collaboration with the experienced industry experts and it provides you with all the knowledge and contacts you need to succeed in franchising.
Franchising Focus is distributed primarily amongst the potential franchisees, franchisors, franchise consultants, retail companies, suppliers to the franchise industry and also at international expos and seminars and other shows, and its readership is 25,000.
FAI also acts to organize and promote exhibitions in India. The most popular and highly attended is IFE. IFE 2007, to be held from 2nd 4th March 2007 is an upcoming event, co-organized by FAI, where around 100 franchisors are expected to participate.
This event will include an evening on franchising awards, a two-day conference, where existing Franchisors and franchisees will provide their knowledge, experience and insights. This conference shall include leading Indian and international speakers.
IFE exhibition will focus on quality national and international franchises wanting to sell their franchises.
An unique opportunity to interact, explore, learn and expand the franchising business. It will be attended by a large number of high quality potential franchisees. This event will provide a valuable connect with the franchising community at large.
LEGAL ISSUES OF FRANCHISING
A good relationship between the franchisor and franchisee is critical for the success of both parties.
Since franchising establishes a business relationship for years, the foundation must be carefully built by having a clear understanding of the franchise program. Unfortunately, understanding the legal language of franchising can be daunting.
The advice of an experienced franchise attorney should be sought to help a prospective franchisee understand the legal issues and to protect them from making costly mistakes.
Franchising is governed by federal and state laws that require franchisors to provide prospectivefranchisees with information that describes the franchisor-franchisee relationship.
THE TWO MAIN FRANCHISING LEGAL DOCUMENTS ARE THE:
UFOC
franchise agreement
THE UFOC
The purpose of the UFOC is to provide prospective franchisees with information about the franchisor, the franchise system and the agreements they will need to sign so that they can make an informed decision.
In addition to the disclosure part of the document, the UFOC includes the actual franchise agreement as well as other agreements the franchisee will be required to sign, along with the franchisors financial statements.
The UFOC is designed to give you some of the information you need in order to make an informed decision about investing in a particular franchise.
THE IFA EDUCATIONAL FOUNDATION
By law, a franchisor cannot offer a franchise until the franchisor has presented the prospective franchisee with a Disclosure Document.
In fact, 14 states require franchisors to register their UFOCs with the state or to notify them that they will offer franchises before they begin to conduct any franchising activity in the state.
The UFOC includes information about:
The franchisor
The companys key staff
Managements experience in franchise management
Franchisors bankruptcy and litigation history
Initial and ongoing fees involved in opening and running the franchise
Required investment and purchases
Territory rights
Responsibilities of the franchisor and franchisee
Other franchisees in the system with contact information
Receipt of the UFOC is governed by the ten-day rule. This is a cooling-off period in which franchisors must give prospective franchisees 10 business days to think about their decision before they are allowed to sign the franchise agreement
THE FRANCHISE AGREEMENT
The franchise agreement is more specific than the UFOC about the terms of the relationship between the Franchisor and franchisee. A typical franchise agreement may include specifics about:
The franchise system, such as use of trademarks and products
Territory
Rights and obligations of the parties: standards, procedures, training, assistance, advertising, etc.
Term (duration) of the franchise
Payments made by the franchisee to the franchisor
Termination and/or the right to transfer the franchise
The franchise agreement is the legal, written document that governs the relationship and specifies the terms of the franchise purchase. Like the UFOC,the franchise agreement also enjoys a cooling off period.
Prospective franchisees are legally entitled to have the final franchise agreement for at least 5 business days before they are allowed to sign. This gives them time to review and consider the terms of the agreement
'FRANCHISE BUSINESS IN INDIA SET TO GROW'
The franchise business industry in India is hopeful of high growth in the coming years despite the global economic downturn, an industry representative said here Thursday.
"The franchise business in India has huge potential and we think it will grow to a large extent in next five years," Indian Franchise Association (IFA) executive director Upendra Sachdev told IANS on the sidelines of a seminar.
"We can see the franchise industry growing in India, even during these times of recession and lay-offs. With the property rates lowering due to the slowdown, the entrepreneurs can now start franchise business with cheaper investment," he added.
In the next five years, there would be at least 50,000 franchises in the Indian market, which would create an employment for at least 500,000 people," Sachdev said.
The IFA and Young FICCI Ladies Organization jointly held a one-day seminar, 'Empowering Women Entrepreneurs Through Franchising', in Kolkata to help understand the youngsters about the technical aspects of owning a franchise business as a successful carrier option.
"The franchise business has been very good mainly in food and beverage and education sectors. The food and beverage industry was up by nearly 38 percent while the education sector registered a growth of 32 percent last year," said Sachdev.
He added that the industry expected a good response from the service and health sectors this year.
"Many foreign companies are also showing interest in the Indian market, which is definitely a good sign for our industry," Sachdev said.
IFA is presently associated with a number of foreign nations like South Arabia, China, Thailand and Oman, where it is working to help Indian franchises to go and run their business successfully.
"Many Indian brands are growing in the Gulf countries but most of them are not doing very well in the European market," Sachdev said.
Indian business environment is gradually experiencing the changes and now the concept and essence of franchising is permeating into the Indian entrepreneurial mind.
In the past one decade International franchise brands like Pizza Hut, Mc Donald's, Gold's Gym, Kodak, Subway, Holiday Inn and many others understood the potential of Indian market and enter in the Indian market. Thanks to these brands today international franchising in India is one of the most exciting areas in the franchise industry.
Indian brands also do not stay much back from their international counterparts. They are also taking the franchising pathway to success and made significant growth in areas like retail, education, beauty etc.
Many new age Indian entrepreneurs has realized the scope of growth in franchising and thus many entrepreneurs already adopted the franchising route to entrepreneurship and many are in different phases of adopting.
For these entrepreneurs becoming a national or International franchise seems much easier, safer and profitable than struggling for brand identity while running a small enterprise of their own.
ABOUT MCDONALD
Mcdonlads operate through a franchising system. Mcdonalds franchising started in the year 1953. Owever, the companys business model is slightly different from that of others. In addition to ordinary franchise fee, suppliers and percentage of sales, agreement, the corporation owns the properties on which most mcdonladss franchises are located.
The golden arches of McDonalds are slowly becoming an integral part of the Indian landscapes. Everyone knows McDonalds is big, but very few know just how significant its impact on Indian business really is. The inside of McDonalds remains a mystery.
McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi.
But the most overlooked fact of McDonalds India is its contribution to the food processing industry. Six years prior to the opening of the first McDonald's restaurant in India, McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. Part of this development involves the transfer of state-of-the-art food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in todays international markets. McDonalds dedication to its suppliers has lead to their growth, beyond the boundaries of the India.
These aspects of McDonalds do not get covered and highlighted by the news hungry press. But when the false news of using beef tallow in the French fries hit the market, the press did not leave a chance to exaggerate it. Despite the fact that right form the beginning; no beef ingredients have been used in any of the products in India.
The marketing agency of McDonalds, Mudra comes to its rescue in such times. The advertisements created by Mudra are a rage all over the nation, especially amongst the children. Who can forget the little kid who gets nervous in the school competition, but becomes happy again when his father takes him to McDonalds?
McDonalds India has tried not to leave any stone un-turned in its objective to satisfy the Indian customer. But in Amit Jatias words, Customers are generally not forgiving. According to the survey conducted, customers demand low prices, more seating space, more variety, home delivery, and the list is endless.
The fundamental secret to McDonalds success is the way it achieves uniformity and allegiance to an operating regimen. McDonalds India has to adhere to many rules and regulations laid down by the parent company, and it still has to cater to the Indian customer and his needs. McDonalds India is a case study on how to mix conformity with creativity.
HISTORY
In 1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in San Bernardino, California, and envisioned a massive new industry: fast food. In what should have been his golden years, Raymond Kroc, the founder and builder of McDonald's Corporation, proved himself an industrial pioneer no less capable than Henry Ford.
He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, French fries, and milk shakes.
By developing a sophisticated operating and delivery system, he insured that the French fries customers bought in Topeka would be the same as the ones purchased in New York City. Such consistency made McDonald's the brand name that defined American fast food.
The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant.
The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having a puffed out costume legs.
McDonald's first filed for a U.S. trademark on the name McDonald's on May 4, 1961 with the description "Drive-In Restaurant Services", which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol.
The overlapping double arched "M" symbol logo was temporarily disfavored by September 6, 1962 when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years.
The modern double arched "M" symbol that continues to be in use today at McDonald's restaurants did not appear until November 18, 1968 when the company filed a U.S. trademark on the now famous symbol that continues to be in use through the end of the year 2009.
The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden in order of openings.
The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955 , the ninth McDonald's restaurant overall.
Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965.
Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument.
With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer.
WORLDS OLDEST MCDONALDS
This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants and the last one with red-and-white striped tile exterior.
After opening in 1953, it immediately became the standard for the fast food franchises across the country. The building and its 60-foot high neon sign with "Speedee the Chef" are eligible for listing on the National Register of Historic Places.
Employees wear 50's style uniforms of paper hats, white shirts and bolo ties. The restaurant serves the original menu of hamburgers, cheeseburgers, fries and old-fashioned milkshakes. Also available are more recent McDonald's items such as Big Macs and Happy Meals.
McDonald's reopened the facility as it was with walkup windows and outdoor seating. They also constructed and addition housing a museum, gift shop, restrooms and more outdoor seating.
MISSION STATEMENT OF MCDONALDS
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
GLOBAL OPERATIONS
COUNTRIES WITH MCDONALD'S STORES
McDonald's has become emblematic of globalization, sometimes referred to as the "McDonaldization" of society. The Economist magazine uses the "Big Mac Index": the comparison of a Big Mac's cost in various world currencies can be used to informally judge these currencies' purchasing power parity. Scandinavian countries lead the Big Mac Index with four of the five most expensive Big Mac's. Norway has the most expensive Big Mac in the world as of July 2008, whilst the cheapest country is Malaysia.
Thomas Friedman once said that no country with a McDonald's had gone to war with another. However, the "Golden Arches Theory of Conflict Prevention" is not strictly true. Exceptions are the 1989 United States invasion of Panama, NATO's bombing of Serbia in 1999, the 2006 Lebanon War, and the 2008 South Ossetia War.
Some observers have suggested that the company should be given credit for increasing the standard of service in markets that it enters. A group of anthropologists in a study entitled Golden Arches East[ looked at the impact McDonald's had on East Asia, and Hong Kong in particular.
When it opened in Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean restrooms, driving customers to demand the same of other restaurants and institutions. McDonald's have recently taken to partnering up with Sinopec, China's second largest oil company, in the People's Republic of China, as it begins to take advantage of China's growing use of personal vehicles by opening numerous drive-thru restaurants. McDonald's reached a deal with the French fine arts museum, the Louvre, to open a McDonald's restaurant and McCaf on its premises,by their underground entrance, in November 2009
MCDONALDS IN INDIA
McDonalds have stores, and franchises opportunities, all over the world, India included. McDonalds is classified as partnership operated by India.. McDonalds India, a subsidiary of McDonalds USA, has expanded its presence in India via 2 joint venture companies Connaught Plaza restaurants and Hardcastle restaurants. McDonalds (India) has a 50 per cent equity stake each in both joint venture companies. Connaught Plaza restaurants manages operations and expansions across North India (Delhi, Jaipur and Punjab) led by Vikram Bakshi and Hardcastle restaurants, which is headed by Amit Jatia, manages operations and expansions across Western India (Mumbai, Pune, and Gujarat).
McDonald's in India is a locally owned and managed company run by Indians, employing local staff, procures from local suppliers to serve its customers. McDonald's India opened its first family restaurant at Basant Lok in Oct, 1996; today it has 169 Restaurants across India. This vibrant decade has seen McDonald's evolve Indian menus, Indian sensitivities and yet remain as globally innovative as ever. This journey has seen McDonald's develop a rich brand identity amongst its customers and employees as well as partners alike.
At McDonalds India we have had a single mantra: providing 100% total customer satisfaction and the formula for achieving this goal in our restaurant operation is the long-standing commitment to the McDonalds Promise Around the world, McDonald's traditionally operates with local partners or local management. In India too, McDonald's purchases form local suppliers.
McDonald's constructs its restaurants using local architects, contractors, labour and - where possible local materials. McDonald's hires local personnel for all positions within the restaurants and contributes a portion of its success to communities in the form of municipal taxes and reinvestment.
Six years prior to the opening of the first McDonald's restaurant in India, McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. Part of this development involves the transfer of state-of-the-art food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in todays international markets
McDonalds worldwide is well known for the high degree of respect to the local culture.
McDonald's has developed a menu especially for India with vegetarian selections to suit Indian tasted and culture. Keeping in line with this McDonald's does not offer any beef and pork items in India. McDonald's has also re-engineered its operations to address the special requirements of a vegetarian menu.
The cheese and cold sauces used in India is 100% vegetarian. Vegetable products are prepared separately, using dedicated equipment and utensils.
Also in India, only vegetable oil is used as a cooking medium. This separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, cooking and serving.
The McDonald's philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force behind its service to the customers.McDonalds India serves only the highest quality products.
All McDonalds suppliers adhere to Indian Government regulations on food, health and hygiene while continuously maintaining their own recognized standards. All McDonalds products are prepared using the most current state-of-the-art cooking equipment to ensure quality and safety.
At McDonalds, the customer always comes first. McDonalds India provides fast friendly service- the hallmark of McDonalds that sets its restaurants apart from others. McDonalds restaurants provide a clean, comfortable environment especially suited for families. This is achieved through McDonalds stringent cleaning standards, carefully adhered to.
McDonalds menu is priced at a value that the largest segment of the Indian consumers can afford. McDonalds does not sacrifice quality for value rather McDonalds leverages economies to minimize costs while maximizing value to customers.
The company has invested Rs 450 crore so far in its India operations out of its total planned investment of Rs 850 crore till 2007.
McDonalds India Pvt. Ltd. has moved an application to the government seeking permission for payment and remittance of the initial franchise fee and royalty to Mc Donalds Corporation.
The permission has been sought on two grounds: McDonalds India would pay an initial franchise fee of $45,000 on each of the McDonalds restaurants already franchised or to be franchised, in the future, in India; and a royalty equal to 5 per cent of the gross sales from the operations of all its Indian restaurants on a monthly basis to McDonalds International. The company hopes to break even in 2008. They currently serve around 5 million customers a day and hope to grow at the rate of 50% to 70% a year.
CHALLENGES IN ENTERING INDIAN MARKETS
REGIOCENTRICISM:
Re-engineering the menu - McDonalds has continually adapted to the customers tastes, value systems, lifestyle, language and perception. Globally McDonalds was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. To survive, the company had to be responsive to the Indian sensitivities. So McDonalds came up with chicken, lamb and fish burgers to suite the Indian palate.
THE VEGETARIAN CUSTOMER
India has a huge population of vegetarians. To cater to this customer segment, the company came up with a completely new line of vegetarian items like McVeggie burger and McAlooTikki. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages.
CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION
Customer perception is a key factor affecting a products success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers minds. McDonalds being an internationally renowned brand brings with it certain expectations for the customers.
Target Segment
What is McDonalds for me?
A Family with children
A treat to children, a fun place to be for the children.
Urban customer on the move
Great taste, quick service without affecting the work schedule
Teenager
Hangout with friends, but keep it affordable.
Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. The customers expect the brand to enhance their self-image.
Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact that they connect strongly with the brand. However, fulfilling some of the customer expectations like a broader product variety provide McDonalds a great scope for improvement
MCDONALDS TO OPEN 40 OUTLETS BY 10
McDonalds India plans to open 40 new restaurants by 2010. As part of our expansion plans, we will open 40 new outlets across east and north India over the next two years, said Vikram Bakshi, joint venture partner and managing director (north and east India), McDonalds India.
Further, the company plans Rs 1.5 billion investment on expansion plan up to 2010. According to Bakshi, the focus of the expansion in the aforesaid period will be National Capital Region (NCR) of Delhi and Kolkata.
The US food giant has a joint venture with Vikram Bakshis Connaught Plaza restaurant for the east and north India. The north India operation also seeks to increase its head-count from the present 4,500 to 6,500 to staff the new outlets, said Bakshi. Currently, McDonalds operates 155 outlets across India.
MARKETING MIX
Logic: Marketers have four tools to use to develop an offering to meet the needs of their targeted customers. Collectively they are called the marketing mix.
You may have heard of the "four Ps" of marketing: product, price, place, and promotion. Collectively these are called the marketing mix. More comprehensively they are viewed as: product, service, or program - something of value you are offering the customer, client, or park visitor price - what the customer, client, or park visitor pays (direct costs are financial, indirect or alternative costs are such things as time it takes and the things people give up if they choose your offering) place, distribution, location, or accessibility - where the transaction takes place, perhaps in a park promotion or communication - this is how you inform the target market the benefits in your marketing mix.
Collectively these are the tools organizations uses to develop offerings to satisfy their target market(s) ... the only tools at their disposal. Remember: If your marketing mix doesn't meet their needs they will not be satisfied - and if they aren't satisfied you are unlikely to meet your objectives.
The marketing mix should be viewed as an integrated and coordinated package of benefits that reflect the characteristics of customers and various targeted publics and satisfy their needs, wants, and expectations. Note that the elements of the marketing mix should be integrated because each element of the mix usually has some impact, direct or indirect, on the other three.
For example, if you improve the product or service you probably have to change the price because it costs more to produce. Although you may not have to change where the product is delivered to the customer, you will almost certainly have to change the promotion or communication with the customer because you need to tell the customer about the changes you have made in the product and how the changes will make it more desirable and satisfying.
One problem in many organizations is that different divisions may be responsible for different elements of the marketing mix.
This happens even in well managed organizations. The result is that the offering is confusing to the target market. Lack of communication among divisions makes this problem worse. And if they don't share the same view of organizational objectives, the problem is worse still.
These variables are known as the marketing mix or the 4 P's of marketing. They are the variables that marketing managers can control in order to best satisfy customers in the target market. The firm attempts to generate a positive response in the target market by blending these five marketing mix variables in an optimal manner.
PRODUCT
The product, service, or program includes both tangible and intangible elements. The tangible, of course, are those things that the customer can see, touch, feel, taste, or smell.
The intangible include such things as the image of the offering ... which includes the image of the organization making the offering, the psychological aspects of pricing (high price to many customers is equated with high quality - and vice versa).
PRICE
The price is what the customer pays. It includes direct and indirect costs as well as opportunity costs. The benefits of the product have to be great enough to warrant the price. Price includes all costs associated with the product, service, or program.
PROMOTION
Promotion includes all forms of communication you use to communicate the benefits of your offering to the target market(s). The objective is to persuade the customer in such a way that he or she recognizes that your offering is uniquely qualified to meet his or her needs.
The term promotion mix is commonly used to refer to the types of communication that are available: advertising, public relations, personal selling, publicity, and sales promotion.
Some authors include direct marketing. Word of mouth, though seldom discussed, is powerful promotion.
PLACE
The place is where the customer receives the product, service, or program. The place of delivery, including all of its resources, is part of what the consumer buys. A place that meets his or her needs better may be worth more.
The place may be a park, a visitor center in the park, or an interpretive exhibit along a trail. In setting its strategy, the organization must determine how much the target market is willing to pay for atmosphere and physical resources of place.The marketing mix principles (also known as the 4 Ps.) are used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be carefully managed and must meet the needs of the defined target group.
The marketing mix is apart of the organizations planning process and consists of analyzing the defined:
How will you design, package and add value to the product? Product strategies.
What pricing strategy is appropriate to use? Price strategies.
Where will the firm locate? Place strategies.
How will the firm promote its product ?Promotion strategies
PRODUCT
BENEFITS OFFERED
We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer.
The vegetarian burger menu consists of the McAloo Tikki Burger. It is a vegetable burger with potato, peas, and spices, tomato, onion, and a vegetable-tomato mayonnaise.
McVeggie is another Vegetarian burger on the menu. It looks similar to the above McAloo Tikki Burger, but is made from mixed vegetables, peas, and spices, lettuce and veg mayonnaise (referred to as Veg Sauce in India).
Another new Menu Item added is the McSurprise burger. It contains a patty, onion, Italian mayonnaise. There is also a Pizza McPuff, consisting of a puff pastry stuffed with peas, sliced cheese etc.
McDonalds concentrated on studying the Indian culture, its value-systems and its influence in food consumption decision making.
It found that although a substantial proportion of the populations were non-vegetarians, they stuck to mostly fish, mutton and chicken. Muslim took beef but though pig meat to be dirty; Hindus preferred neither beef nor pork; Christian took both beef and pork. McDonalds decided, for the first time in their business history, to drop ham and beef burger from their menu.
Two years back, they even excluded mutton burgers from their offerings.McDonalds developed a menu especially for Indian with vegetarian selection to suite Indian taste.
It introduced products like McTikki Aloo for the Punjabi taste buds. McDonalds has also re-engineered its operation to address the special requirements of a vegetarian menu.
The cheese and cold sauces used in India is 100 % vegetarian. McDonalds are committed for giving customers wholesome, healthy, and delicious food.
They ensure that the cooking area as well as cooking equipment for vegetarian products is visibly segregated from the non Vegetarian sections. Whats more- their crew members cooking vegetarian food items are identifiable by their green aprons.
MCDONALDS MAIN INDIAN MENU
VEGETARIAN NON VEGETARIAN
McVeggieChicken Maharaja Mac
McAlooTikki McChicken Burger
Paneer Salsa Wrap Shahi Chicken McCurry
McCurry Pan Wrap Chicken Mexican
Pizza McPuffFillet-O-Fish
PRICING
Pricing is the only mix which generates a turnover for the organization. The remaining 3ps are the variable cost for the organization. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship.
SHAPE \* MERGEFORMAT
The customer's perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer.
The danger of using low price as a marketing tool is that the customer may feel that quality is being compromised. It is important when deciding on price to be fully aware of the brand and its integrity.
A further consequence of price reduction is that competitors match prices resulting in no extra demand. This means the profit margin has been reduced without increasing sales.
Hence McDonald uses as a part of its business strategy to penetrate deeper into the new and existing markets, the forever young brand McDonalds introduced Happy Price Menu at Rs.20/- in the year 2004 in India.
This value for money proposition has been well accepted by the discerning customers. The communication towards his proposition has gradated over the years, but the Happy Price Menu platform has been consistent.
A very popular punch line of McDonalds-Aap ke zamane mein, baap ke zamane ka daam. The main reason of this price strategy was to attract the middle class & the lower class of people in India. After this not only the upper class prefers going there but all class of people go there.
VALUE PRICING
Happy meal small burger ,fries ,coke + toy
Medium Meal Combo- burger ,fries, coke-veg Rs:75 ,Maharaja Mac Meal Rs: 95
Family Dines under Rs: 300
Price lowers than Pak, Srilanka, and 50% lower than U.S.
PROMOTION
The various promotion channels being used by McDonalds to effectively communicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending.
There are three main objectives of advertising for McDonalds are to make people aware of an item, feel positive about it and remember it. The right message has to be communicated to the right audience through the right media. McDonalds does its promotion through television, hoardings and bus shelters. They use print ads and the television programmes are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonalds are:
You Deserve a break today, so get up and get away- To McDonalds
Aap ke zamane mein, baap ke zamane ke daam.
Food, Folks, and Fun
Im loving it.
PLACE
The place mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonalds outlet.
There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs.
McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centers and they have been playing music through radio instead of the normal music.
There are certain dedicated areas for children where they can play while their parents can have some quality time together.
Direct Distribution Indirect Distribution
IMPORTANCE OF PLC IN MCDONALDS
The requirements of customers change over time and thus the product offering has to be changed accordingly. What is the fashion today may be out of market within few weeks. Thus continuous innovation is required.
To counter these changes McDonalds has continuously introduced new products and has phased out the old ones which were at the decline stage of their PLC. The introduction is timed such that the new product does not cannibalize the product already in the maturity or growth stage. Thus the secret lies in getting profits with different products in the different stages of the PLC.
SWOT ANALYSIS
STRENGTH
McDonalds has a strong market presence with its nearest domestic competitor being only half its size, McDonalds is the market leader in both the domestic and international markets. McDonalds benefit from cost reduction through economics of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries.
In Indian markets, McDonalds is well placed to expand and take advantage of long term economic growth. McDonalds also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company.
WEAKNESS:
The food industry is really saturated. Because of this, McDonalds has to deal with the prospects of looming market saturation, which could make it difficult to add new outlets. The market is forecast to grow by around 2% per year. There is also an increasing price competition driven by too many competitors, which reduces the companys ability to increase revenue.
Nevertheless, the swift of the companys focus from a value menu to a more diverse one has recently limited the negative effect of the intense price competition that was traditionally taking place among the industry leaders. Lack of product innovation is another weakness of McDonald.
OPPORTUNITIES:
McDonald in addition, to increase profitability has slowed its explanation of McDonalds restaurants to refurbish and change the image of current restaurants and adding new features such as internet access. McDonalds still has plans for more international expansion. McDonalds still needs to penetrate in many countries by introducing new products in the market considering the eating habits of the people.
THREATS:
McDonalds is exposed to changes in the global economy. The companys aggressive international expansion has left it extremely vulnerable to other counties economic slowdown.
The Fast Food industry is becoming an increasingly competitor sector. McDonalds keeps up with competitors through expensive promotional campaigns which leads to limited margins to gain market share. McDonalds is attempting to differentiate itself, with new formats and new menu items, but other fast food industry are doing the same too.
McDonalds just like other fast food industry often receives bad press because of its link obesity. Increased concern such as this has led the food standards agency and the department of health in the UK to review the advertising of junk foods such as McDonalds to children. Top competitors for McDonalds include Yum! Brands.
ANALYSIS OF THE RESEARCH
Graphical re-presentation of survey done with public through questionnaire Survey is done by taking the sample size of 30 consumers.
SURVEY QUESTIONNAIREQ. Do you visit McDonalds?
Yes
No
Q. Which is your favorite product at McDonalds?
Favourite Product
6%
18%
12%
34%
12%
8%
10%
MAHARAJ MAC
MC CHICKEN
BURGER
MC VEGGIE
BURGER
FRENCH FRIES
MC CURRY PAN
FILETO FISH
OTHERS
Q. Is the product line in McDonalds adequate?
Is the product line adequate?
28%
34%
38%
YES
NO
AVERAGE
Q. What is the main problem you faced at McDonalds?
Problems Faced in McDonald's
24%
4%
16%
16%
40%
Long Queues
Rude Behavior of
Employees
Congestion
Other
No Problem
Q. What do you think about their pricing strategy?
Ok
Good
Excellent
Q. Which area do you think needs the most improvement?
Improvement Required
10%
6%
30%
24%
20%
10%
Delivery Time
Capaciousness
Product Variety
Prices
Offers and
discounts
Others
Q. What is the first thing that strikes your mind about McDonalds?
First Thing About McDonald's That
Strikes Customer's mind
30%
26%
18%
4%
22%
Burger
Golden Arches
Service
Value for Money
Fun
CONCLUSION
The franchising can give you a good start into the entry of the business for some people, sometimes entirely new running any business of their own.All you need to do is to follow the already existing formula with the training, advice and marketing.
But, you are still investing some of your life savings. So it is best to do research before you invest and take the advice of experienced professionals.
For the franchisors, to be this experienced advice is as least beneficial, for without it, they may have an unsuccessful franchise but they will also put their whole business in a bad position and place their livelihoods, lifesavings and all of their franchisees in danger.
The growth of franchising in India is inevitable, because of its unique style of business proposition and presence of several other factors acting as positive role concurrently. Entrepreneurs realize this fact and look forward to gain the best from this business option. As a result, the acceptability of franchising as a business option has increased.
Now people show keen interest in franchising matters. For them, it is a much flexible business options in terms of - choice of sector, franchisors-, degree of engagement (full time / part time) and even in the amount of investment. Franchising system has a great impact on the society also. It creates a synergy in the society and unveils a unique kind of win win proposition.
The Franchisor wins by having a presence, whereas the franchisee wins by owning a profitable business and the society wins at large by emergence of numerous entrepreneurs and having superior products and services.
McDonalds is a company that operates, franchises, services, and continually grows in the quick service restaurant business. According to McDonalds, approximately 80% of McDonalds restaurants are in nine markets: India, Australia, Brazil, Canada, France, Germany, Japan, the United Kingdom and the United States.
McDonalds has restaurants all over the world in 121 countries serving 46 million customers each day. McDonalds also has other partner restaurants with brand names such as: Aroma Caf, Boston Market, Chipotle and Donatos Pizzeria generating $1 billion in annual sales collectively.
McDonalds is comprised of many restaurants that are operated by the company, however they also have a large amount of franchises. Under the terms of the franchise arrangements, the franchisees are operated under joint-venture agreements.
McDonalds relies heavily on its franchising activities with approximately 70% of the restaurants being owned and operated by independent business people all over the world. The company is an equal opportunity franchiser with a proven 34% of franchiser and 70% of applicants being US minorities and women (McDonalds, 2002). McDonalds offers support in all areas of franchising from operation.
McDonalds is the leading fast food chain in India where consumers rely on product advertisements and food labels for nutritional education. The America association advertising agencies states that responsible food marketing strategies should, avoid vague, false, misleading or exaggerated statements, incomplete or distorted interpretation of claim made by professionals or scientific authorities, and unfair product comparisons.
McDonalds is attracting mainly the teen age group. In India markets, McDonaldss is well placed to expand and take advantage of long-term economic. McDonalds keep up with competitors trough expensive promotional campaigns which lead to limited margin to gain market share.
Lastly franchising business in India has raised the standard of leaving of the people.
Mr. Jatia and Mr. Bakshi
Pricing Strategies
Penetration
Skimming
Competition
Product Line
Bundle
Psychological
Manufacturer
Manufacturer
Retailer
Consumer
Consumer
80%
20%
10%
50%
40%
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