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McDonald's: Creating effective stakeholder relationships - Franchisees - 'A business partnership based on excellence'

Franchisees - 'A business partnership based on excellence'

Franchisees are crucial to McDonald's success; they deliver its brand promise straight to the customer. Nationwide, approximately 80 percent of their restaurants are franchised.

What does franchising mean? Franchising is a method of doing business. The franchisor (in this case McDonald's) allows the franchisee to trade under its licensed trademarks (e.g. using its logos and brand names) and to follow its proven methods of doing business in exchange for ongoing fees and/or a percentage of sales. There are benefits for both franchisor and franchisee, including:

  • The franchisor can expand their business without using their own capital
  • The franchisee owns their own business with the ongoing support of the franchisor
  • The franchisor usually provides ongoing and in-depth training on how to run and develop the business
  • The franchisee can operate with lower overheads than many new businesses as they are able to leverage the bulk purchasing opportunities available to them through the franchise network
  • The franchisee has access to an established brand and comprehensive business system without the risk of starting up a business from scratch
  • The franchisee will be more motivated to grow the business as they have their equity at risk
  • Franchisees become local experts operating in their community.

How does a McDonald's franchise work? In New Zealand, the franchisee has a close relationship with McDonald's NZ and they operate their business in accordance with the agreed systems and conditions. McDonald's NZ selects the sites for the restaurants and either owns or leases the land and buildings. The franchisee then, in turn, leases the building from McDonald's by paying a percentage of sales. The franchisee also purchases the cooking equipment, furniture, Playland and signage to complete the fit out of the restaurant.

This shared investment and therefore shared risk ensures both the franchisor and franchisee continue to work together to achieve sustainable profitable growth.

With approximately 80 percent of New Zealand restaurants owned and operated by franchisees, McDonald's NZ takes great care in the recruitment, training and retention of its franchisees. The key to success for McDonald's is a consistent quality of product and service, and the only way this can happen is if each and every franchisee has a clear understanding of that business model.

The franchisee selection process is very thorough. Potential franchisees may be required to participate in a three-day restaurant review where McDonald's can clearly see the skills and strengths that the applicant possesses and the applicant can get a good understanding of the restaurant environment. If the applicant is successful, then they go on to participate in a nine to twelve month full-time training programme at their own cost. Ninety-five percent of this training is completed in a McDonald's restaurant. The franchisees are the face of the McDonald's brand and the company sets very high standards to ensure applicants will be able to deliver the consistency of product and service essential to the business model and expected by McDonald's customers.

Support for franchisees

Franchisees receive ongoing support and training from McDonald's NZ, including the appointment of a Business Consultant who is available to assist with all aspects of running a small business. Operations are audited on a regular basis to ensure standards are maintained, and management levels within McDonald's NZ are also on hand to help, including the Country Management Team - a group of senior managers of each business function.

McDonald's NZ promotes the brand at a national level, giving franchisees the benefit of marketing campaigns and materials. Franchisee interests are upheld by nominated representatives on a national executive board.

One a broader basis McDonald's Restaurants (NZ) Ltd is responsible for setting business strategy and leveraging initiatives and innovations from McDonald's worldwide. This includes menu development, IT, restaurant design and best practice.


(Page 6 of 8)
Associated with:
Learning Area(s):
  • Business Environment | Developing organisational culture
  • Business Environment | Stakeholders
  • Business Environment | The external environment
  • Business Environment | Types of large organisations
  • Business Structure and Organisation | Forms of ownership of large organisations
  • Business Structure and Organisation | Franchising
  • Business Structure and Organisation | Organisational structures:overview
  • Communication | Effective communication models
  • Human Resource Management | Training and development systems and programs
  • Marketing | Product development
  • Marketing | Promotion strategies and their application
  • Operations Management | Materials management
From: Edition 7

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