Hi,
Thank you very much for your question. McDonald's has always been a
franchising Company and has relied on its franchisees to play a major
role in its success.
Approximately 70% of McDonald's worldwide restaurant businesses are
owned and operated by independent businessmen and women. McDonald's
continues to be recognized as a premier franchising company around the
world. Perhaps the fact that McDonald's management listens so
carefully to its franchisees has something to do with McDonald's being
perennially named as Entrepreneur Magazine's number one franchise. The
economic considerations pertaining to McDonald's:
The initial cash investment is a minimum of $175,000 for a
conventional purchase or $100,000 for a Business Facilities Lease.
Sometimes the fee could be as high as US$300,000. An investment that
only covers the part of furnishings, facilities and signboard, while
the rent for the store and the cost for labor are excluded.Consider
for example an outlet opening in China.
"McDonald's franchise store plan is a follow-up move to its rival
Kentucky Fried Chickens, which announced to launch franchise system in
China last year.KFC set the initial investment for its franchise store
here at 8 million yuan (US$967,352), requiring a contract of a minimum
of 10 years.Compared with KFC's requirements, thresholds to McDonald's
franchise stores seem lower. However, the actual sum of investment
could be much higher than US$300,000, according to analysts..."
McDonald's Franchise Fee: US$300.000, (06/24/2002)
http://ce.cei.gov.cn/enew/new_g1/fd00gfg1.htm
You can refer franchising information from
McDonald's(http://www.mcdonalds.com/)here at the link provided below,
an extract:
"Typically, new restaurant costs range from 455,000 to 768,500 USD.
The size of the restaurant facility, area of the country, pre-opening
expenses, inventory, kitchen equipment, signage, and style of decor
and landscaping will affect new restaurant costs...These costs are
paid to suppliers. In addition, at the time of opening, an initial fee
of 45,000 USD is paid to McDonald's Corporation for all new
restaurants..."
Source: McDonald's FAQs
http://www.mcdonalds.com/corporate/franchise/faq/index.html
To answer the part on revenues, You might want to check this out:
"Profitability varies depending upon a number of factors, including
sales, location, occupancy and operating costs and the ability of the
franchisee to manage and control the business. Questions related to
profit and loss are discussed during a later stage of the selection
process...."
Source: same as above.
Many people are beginning to realise the potential of a McDonald's
franchisee,
"Franchisees pay an initial fee of $45,000, due at the agreement
signing; between $332,000 and $441,650 for equipment, seating, golden
arches and other signs; $12,000-$22,000 for opening inventory, plus
miscellaneous opening expenses of as much as $33,000. Total price tag
for a typical full-size McDonald's is $413,100 to $672,200. After
opening, major expenses include labor, an 8%-of-sales fee, and rent --
McDonald's typically owns the land and buildings..."
"Lots of others want McDonald's restaurants, too. In the past year,
applications in the U.S. totaled about 1,000 -- more than 10 times the
number of outlets available. With the demand so far exceeding the
supply, a serious candidate needs substantial savings, extraordinary
enthusiasm and an impressive resume. Many are prepared to pack up and
move across the country, if necessary..."
About the market equilibrium, you will have to consider the location
and more importantly the nature of the customer base. This of course
depends on which country you intend to set up the joint.
McDonalds are present in close to 121 locations all over the world.
You can see a listing of these locations here,
http://www.mcdonalds.com/countries/index.html
"A McDonald's franchise isn't the sure thing it once was. The old
certainties about steadily growing sales, profits and market value
have given way to anxieties about disappointing new products,
disastrous marketing efforts and consumer surveys showing rival
burgers taste better..."
Source: "New Franchisees Plow Ahead Despite Barrage of Criticism" By
RICHARD GIBSON Staff Reporter of The Wall Street Journal.
http://www.startupjournal.com/franchising/franchising/199905011320-gibson.html
For information pertaining to Demand again you must look at any one
particular country where the outlets are located. Try Australia,
"McDonald's Australia was operating 715 restaurants at the end of
February 2002. As people continue to demand fast food and as their
spending power increases, demand for McDonald's product continues to
increase. It is not surprising, then, that 62 per cent of the
restaurants in the McDonald's system in Australia have been built in
the 1990s..."
Now for information pertaining to supply:
Sales For the year ended December 2000:
The total gross sales by all McDonald's restaurants in Australia was
AUD$1.74 billion.
Materials sourced in Australia
As an operator in the fast food business, McDonald's Australia uses up
enormous quantities of fresh produce from Australian farms and market
gardens each year.
Australia-wide, McDonald's purchase $500 million of food, paper and
packaging annually, including:
Buns and muffins 395 million
Potatoes 89 million kilograms
Eggs 58 million
Milk 22 million litres
Beef 23 million kilograms
Orange Juice 6.7 million litres
Chicken 8.8 million kilograms
Cheese 5.5 million kilograms
Lettuce 5.4 million kilograms
Tomatoes 910 000 kilograms
Coffee 402 000 kilograms
Fish 1.5 million kilograms
Sources: http://www.mcdonalds.com.au
www.austrade.gov.au/cda/mcdonaldscasestudy.pdf
www.mcdonalds.com.au/insideMcDonalds/didYouKnow.asp
From 19962001 McDonald's Australia has experienced considerable
growth and some Australian suppliers have more than doubled their
product volume. Many suppliers have expanded their production
facilities, undertaking new investment in order to meet the increasing
demand for their products by McDonald's. McDonald's have also
developed teamwork with local suppliers, establishing McDonald's
Lettuce Grower Teams at Gatton in Queensland and Werribee and Lindenow
in Victoria. These partnerships aim to achieve outstanding product
quality. Australian suppliers to McDonald's include the following
businesse
If you are interested in setting up a franchisee outlet, you can read
the success stories of previous owners who hit gold. One of them is
given here. IN this article you will find a detailed account of how
the franchisee was set up and the economic considerations that went
into its birth.
http://www.sandiegometro.com/2000/feb/coverstory.html
Additional Information:
According to GE Franchise Finance and QSR Magazine's annual report on
quick-service chains, McDonald's is still the leader in fast food. It
generated $20 billion in revenue systemwide. In comparison, Burger
King produced $8.5 billion, Wendy's $6.8 billion, and Taco Bell $5.1
billion. Pizza Hut came in at fifth place with $5 billion in
systemwide sales.
Source: http://www.usatoday.com
Search Strategy:
McDonald's Franchisee
McDonald's Franchisee Demand
McDonald's Franchisee Demand Supply
McDonald's Franchisee revenue
McDonald's Franchisee Australia
McDonald's Franchisee China
I hope you are satisfied with the information presented here. However,
if you have any clarifications regarding any part of this answer
please hit the "Request for Clarification" button before rating this
answer.
Thanks!
Regards,
Shiv Reddy |
Clarification of Answer by
shivreddy-ga
on
25 Nov 2002 10:54 PST
Hi,
Thank you for your request to clarify. I will be happy to provide the
details for you about McDonald's marketing strategy, their
demand/supply details and of course the type of market they engage.
However I must indicate to you that I have already considered the
demand/supply details as well as the type of market in the previous
answer. I will anyway give you a clearer picture of the same.
Working backward, the type of market Mc Donald's involves it self in
can best be exemplified by the following official statment made from
Mc Donald's
"We also have to have a thorough understanding of our competition. We
consider 3 basic areas: the Total Eating Out Market gives the broadest
competitive context and includes all restaurants, hotels, pubs, and
any other outlet where people eat. We also focus on the Quick Service
Restaurant sector. This includes all the obvious competition and also
fish and chip shops, and sandwich shops - any outlet where food is
served quickly. The final sector that we focus on is defined as the
Burger House Sector. This looks only at restaurants serving hamburgers
including Burger King, Wimpy, Wendy's and all independent burger
bars..."
McDonald's marketing strategy
http://www.bized.ac.uk/compfact/mcdonalds/mc25.htm
McDonald's menu is based on five main ingredients: beef, chicken,
bread, potatoes and milk. Their main products are hamburgers, chicken
sandwiches, french fries and beverages. In addition they serve a
variety of breakfast items and desserts.
Moving on, the supply part of your clarification request is listed
here. McDonald's gets its main supply from the following sources.
These sources have proved to be inexpensive and convenient for most
franchisees.
McKey Food Service Hamburger patties, bacon and pork
products
Golden West Foods Ltd Buns, ketchup, Coca-Cola products,
milk shake syrups, sundae toppings, multi-temperature distribution
Sun Valley Foods Chicken products
McCain Foods (GB) Ltd French fries and hash browns
Coldwater Seafood Ltd Fish products
Unigate Dairies Milk products
Ashby Dairies Milk products
Fisher Chilled Foods Lettuce, onions, tomatoes
Kitchen Range Foods Fruit pies, donuts, vegetable patties
Coca Cola Soft drinks
Dairy Produce Packers Cheese slices
The overall turn over of the company can be read off this table:
http://www.bized.ac.uk/compfact/mcdonalds/mc7.htm
Number of restaurants
21,022
23,132
24,800
26,309*
28,707*
It is evident from the table that as the years have gone by there has
been a slow but steady increase in the demand for McDonald's
restaurants worldwide. I am sure the demand will keep at this pace.
Read the table above as: If the number of restaurants are on the rise
along with the overall revenue, then the demand of McDonald's must be
good. Further McDonald's restaurants are family restaurants, and these
families make up by far the largest number of the 2.5 million
customers they serve every day in the UK. Expenditure by the company
on food in 1997 was £302 million. However you might want to consider
this ( latest news reports):
"...executives conceded that Wendy's International and Burger King
Corp. have eaten at McDonald's market share with new products and
strong sales..."
MCDONALD'S REPORTS DECLINE IN SAME-STORE SALES Analysts Press
Management on Marketing, Menu Plans
July 24, 2002 By Kate MacArthur
http://www.adage.com/news.cms?newsId=35556
"Following its sixth straight quarterly earnings decline, McDonald's
Corp. heads into its annual shareholders meeting May 23 with a mammoth
task -- to show it has the right strategy and the right team to
overcome operational struggles, marketing miscues and a saturated
industry landscape..."
MCDONALD'S STRUGGLES TO FIND NEW STRATEGY Retired Marketing Chief
Attends Exec 'Boot Camp'
May 20, 2002 By Kate MacArthur
Let us now examine their marketing strategy. this of course includes
their cost structure as well as their pricing strategy.Although
McDonald's has thousands of restaurants around the world, it
standardizes menus and operating procedures in these restaurants to
take advantage of economies of scale.
Take a look at the table from McDonald's official site:
http://www.mcdonalds.com/corporate/investor/financialinfo/factsheet/graph4/index.html
This should tell you something about the profit made from the
restuarants. The total income is already half the revenue made in the
previous year. All within six months!
The organization's overall objective is to increase market share. In
this instance, the focus is purely on localization with different
strategies for different countries. Pricing could not possibly be
standardized across the globe without alienating many countries with
poorer economies, thus defeating the initial objective. McDonald's set
an appropriate price for their product by looking at its competitors
in each country. McDonald's looks to localize marketing communications
due to the realization that it couldn't possibly appeal to all
countries at the same time. Here, more than anywhere, they see it
necessary to "brand globally, act locally". For example, in China it
was recognized that advertizing on television would be a waste of
money as commercials only appear in between programs and are generally
ignored. Instead, McDonald's uses newspapers and magazines to promote
its image. Similarly, in East Asia, McDonald's targets children in
order to gain optimum results. Of course, the ultimate message / brand
is the same, it is just the medium that is strategically modified.
I would recommend that you go through this research paper on
McDonald's strategies:
Details:
Title: McDonald's: "think global, act local" - the marketing mix
Author(s): Claudio Vignali
Journal: British Food Journal
Year: 2001 Volume: 103 Number: 2 Page: 97 -- p111
Publisher: Emerald
Abstract: Focuses on the marketing mix of McDonald's. Highlights how
the company combines internationalisation and globalisation elements
according to various fast food markets. Using the effect of
strategical and tactical models, the case illustrates the effect of
McDonald's on the global environment and how they adapt to local
communities. Describes future franchise plans for McDonald's.
Keywords:Globalization; Marketing Mix; Marketing Management; Fast-Food
Industry; Marketing; Franchising
Article Type:Case Study; Technical
You can find this paper here:
http://pippo.emeraldinsight.com/vl=28898819/cl=90/nw=1/rpsv/cgi-bin/cgi?body=linker&reqidx=0007-070x(2001)103:2L.97
Use the details above to find the paper is you are not linked to it
directly.
I looked up McDonald's marketing strategy and found a couple of
interesting facts:
At McDonalds, a small toy can be received with a child’s meal that is
called a “happy meal”. It can be Pokemon merchandise or toys of
characters from the latest Disney movie. Children enjoy these toys. It
is not the pricing that matters in this case, it is things like this
which creates an impression on customers.
Another marketing strategy which however ran into rough weather is
outline here:
"Under the promotion, known as Campaign 55, diners could buy a
featured sandwich, like the Big Mac in April, for 55 cents when
purchased with french fries and a drink. But the fast food giant found
that customers just weren't biting..."
McDonald's U.S. Marketing Plan in Question By Patricia Commins
http://www.mcspotlight.org/media/press/reuters_4jun97.html
Additional Links:
Frequently Asked Questions: Official responses
http://www.mcdonalds.co.za/mcd/faq.html
Testimonials of customers can be had at:
http://www.epinions.com/content_35483782788
http://www.epinions.com/rest-review-4074-378A108-3A23F730-prod1
Search Strategy:
Besides the same search terms in the answer above,
mcdonalds pricing strategy
mcdonalds costs prices
mcdonalds marketing strategy
mcdonalds cost structure
mcdonalds press releases
mcdonalds wendy's marketing
mcdonalds market share
Also please replace "mcdonalds" with "mcdonald's" in all of the above
search terms to get more results.
I think this answers all parts of your question. If you have any
further topics you want analysed you can post them as a new question
and I will be glad to help you.
Thank you.
Regards,
Shiv Reddy
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