Report on setting up a mcdonalds franchise in UK

McDonald ‘s has been proved as successful concern through the Earth for rather some clip now. This study aims at researching the concern potency in puting up a McDonald franchise by researching into its franchise construction. It gives information about the footings and conditions for going the McDonald ‘s franchise along with the brief history of its concern. It focuses on the strength and failing of the concern and discusses the macro environmental factors that may impact the franchise concern. I had further focused on any job that may originate during the operation of the franchise and performed a VRIO analysis to look into the sustainability of the concern. The study terminal with a brief decision about the full study suggestion whether it is good to travel in front with the undertaking.


The fast nutrient concern is fast turning concern in the UK and when speaking about fast nutrient most frequently the first name comes to the head is the McDonald ‘s. It has been a really successful concern in its class for a long clip now. This study discusses about puting up a franchise of McDonald ‘s in UK and the pro and cons of having a McDonald franchise. McDonald ‘s has been doing net incomes and is turning even in the current economic downswing. The figure below shows the growing of McDonald over the last twelvemonth.

Figure: McDonald ‘s Historical stock chart (, 2010 )

The above figure shows clear growing of the company selected to put in acquiring franchise for. The growing besides triggered an involvement in researching for acquiring an franchise for McDonald and acquire good returns on the investing.

This subdivision is divided in to two where the first give a brief history of McDonald ‘s concern history while the ulterior discusses the footings and status for puting up a franchise. The information aggregation is majorly done from the McDonald ‘s cooperate and associate web sites. The ulterior subdivisions discuss the SWOT analysis and the VRIO and eventually the study concludes with decision and recommendations.

McDonald ‘s brief history

McDonald ‘s was started by the Dick and Mac McDonald in 1940 in San Bernandino in California. It was a typical drive-in having a big bill of fare and auto hop services. It started as a barbecue eating house but in 1948 the existent McDonald ‘s was launched when McDonald brothers shut their eating house for changes. The bill of fare was reduced to nine points and basic of the bill of fare was the 15 cent beefburger. Within a twelvemonth the murphy french friess were replaced by the universe celebrated Gallic french friess. Through its history McDonald ‘s kept on germinating and capturing the outlooks of its clients. In 1954 a multi-mixer salesman Ray Kroc met Mc brother to sell his sociables but was fascinated by the operations. The undermentioned twelvemonth in 1955 he opened the first franchise of McDonald ‘s in Des Plaines, Illinois and by 1965 there were over 700 McDonald ‘s eating house through out United States. In 1958 McDonalds sold its 100 millionth beefburger and by 1959 the 100th McDonald eating house was opened. In 1965 McDonald celebrated its tenth anniversary with its first public stock offering at $ 22.5 per portion. 1966 saw the first Television commercial of McDonald having Ronald McDonald who became an blink of an eye hit. In 1967 first McDonald eating house opened in Canada and Puerto Rico and at present it is holding its presence in 118 states. Over clip McDonald kept establishing merchandises that gain single trade name images like the Big Mac, one-fourth pounder and happy repast. The first McDonald ‘s eating house in Britain opened in Woolwich, south-east London, in 1974 (, 2010 ) . In 1978 5000th eating house was opened in Japan and two old ages later it celebrated its twenty-fifth day of remembrance. In 1996 McDonald went on-line as its cyberspace site was launched. McDonald has been germinating rapid in footings of merchandise, engineering and organizational strength over the old ages.

McDonald Franchise operation

The fast nutrient industry has grown many creases in recent old ages with many new international and local ironss viing with each other. Operating a fast nutrient eating house has many factors to be considered right from its rivals to the demographics and socio- cultural factors refering its clients. In instance of McDonalds the large trade name name and monolithic advertisement may assist running the franchise but the most of import is obtaining a franchise licence. McDonald ‘s people are really concerned about their clients and hence really careful about whom they choose to function their clients. The fiscal footings and conditions affecting a McDonald franchise are as follows ;

“ The typical cost for having a McDonald ‘s eating house ranges from ?125,000 to ?325,000. The investor are required to supply at least 25 % of the value as unencumbered financess, the staying 75 % can be funded through a bank loan with favorable support footings ” (, 2010 ) .

“ There ‘s besides a one-off franchise fee of ?30,000 and a preparation sedimentation of ?5,000 which is refunded when you complete your preparation ” (, 2010 ) .

“ There are besides ongoing fees. These include:

– Monthly rent on the premises, based on gross revenues and profitableness ( normally runing from 10 % to 15 % )

– Service Fee for usage of the McDonald ‘s system – 5 % of gross revenues

– Contribution to the national selling spend, presently 4.5 % ” (, 2010 ) .

And the returns?

“ Cashflow ( before debt refund ) typically ranges from ?95,000 to ?200,000 per twelvemonth for each eating house but this is n’t guaranteed: it could be more, it could be less ” (, 2010 ) .

Apart from the above footings and conditions the common inquiries arise about the benefit the investors get. The investors get equipment and licence to run from a location for a fix term and investors buy the profitableness of the concern. The McDonald ‘s direction anticipate its franchise proprietors to actively take part in the day-to-day concern of the eating house and the franchise proprietors are non allowed to sell their ownership to other individual without the direction ‘s permission.

SWOT Analysis of McDonald ‘s

McDonald ‘s has been a successfully germinating concern since 1955 and about half of the top corporate staff employees started as a eating house degree employee. Fortune Magazine 2005 listed McDonald ‘s as the “ Best Topographic point to Work for Minorities. “ ( McDonald ‘s fact sheet, 2007 ) The franchise proprietors and their staff are besides required to undergo preparation in McDonald ‘s. Furthermore it invests around a billion USD in developing its staff every twelvemonth.


McDonald ‘s was ranked figure one in Fortune Magazine ‘s 2008 list of most admired nutrient service companies.

One of the universe ‘s most recognizable Son ( the Golden Arches ) and spokes character ( Ronald McDonald the buffoon ) . Attractive McDonald ‘s packaging are so popular among the kids that harmonizing to the Packard Children ‘s Hospital ‘s Centre research concluded that kids age 3 to 5 prefer nutrient given in McDonald packaging over the nutrient without packaging.

McDonalds bears a high corporate societal duty value. They own Ronald McDonald House installations supplying really low cost room and board, nutrient and sibling support for households with kids necessitating extended infirmary care.They besides sponsor Olympic jocks and local squads.

It is planetary company that operates more than 23,500 eating houses in 118 states. Their diversified presence gives them the ability to defy economic fluctuations which are localized by state.

They are really good in accommodating to local cultural entreaty and demands. For illustration, they do n’t sell beef merchandises in India and ease separate entranceto male and females in Middle East, every bit good functioning Halal meat in Muslim dominated parts in UK every bit good.

They are globally present in all major airdromes, and metropoliss, along the main roads, tourer locations, subject Parkss and inside shopping promenade. Locations are selected with careful consideration and choosing the busiest locations possible.

“ They have an efficient, assembly line manner of nutrient readying. In add-on they have a systemization and duplicate of all their nutrient homework processes in every eating house ” (, 2010 ) .

McDonald ‘s ensures rigorous conformity with the nutrient quality used in its eating houses and put bring forthing fresh farm merchandises.

The external merchandises used by McDonalds like cheese, yoghurt, mayo etc are from top trade names who guarantee rigorous quality steps like Kraft Cheese, Nestle Chocolate, Dasani Water, Newman ‘s Own Salad Dressings, Heinz Ketchup, Minute Maid Juice.

McDonald ‘s pioneered the proviso of printed nutrition fact of its merchandises on its bundles. McDonalds offers salads, fruit, roasted poulet, bottled H2O and other low fat and Calorie witting options.

McDonald ‘s has grown into a really large and trusty trade name worldwide and particularly in UK and US so opening a franchise in UK comes with the added advantage of the trade name name which help acquiring the clients easy.

McDonalds invests a big sum in advertisement in print and gesture media therefore doing life easier for its franchise.


McDonald ‘s venture into pizza doing failed severely impacting their ability to vie with fast nutrient pizza ironss.

They have yet to capitalise on the tendency towards organic nutrients.

McDonald ‘s have jobs with fluctuations in operating and net net incomes which finally impact investor dealingss.

From the position of franchisee the job they have to face is that they can non utilize their owned belongings to run a franchise if it nota site of involvement to McDonald ‘s. In that instance they have to bear an extra amount for leasing topographic point offered by McDonald ‘s.


The current UK coevals is more attracted towards healty or low Calorie nutrient therefore McDonalds has a really good opportunity introduce healthy or low Calorie beefburgers.

Provide optional allergen free nutrient points, such as gluten free and insignificant free.

It has a great range in introduce hot drinks along with healthy breakfast option assisting it compete with java stores and other fast nutrient eating houses.


Their selling to kids frequently attracts unfavorable judgment from parent advocator groups oppugning their moralss.

In Britain, McDonald ‘s has infamously registered itself in to the record books for contending the longest-ever libel suit in the state (, 2010 ) .

High nutrient safety criterions need to be maintained even a little taint issue can set down them in problem.

The other menaces are from major international fast nutrient eating house ironss like KFC, Burger King and Subway etc.

Apart from the large names it faces possible menace from the local fried poulet ironss.

In order to make up one’s mind on puting in the franchise a VRIO analysis of McDonald is done in the following subdivision to prove the sustainability of the venture.

VRIO Analysis for McDonald franchise in UK

VRIO stands for Value, rareness, Imitability and organizational support where Value is the steadfast ability to neutralize external menaces utilizing resources and capablenesss. Rarity is command if resources in the custodies of few while imitability is the trouble to copy in any manner.

Value: Mc Donald keep a high value in conformity to its trade name image and development of the available resources which had helped it evolved successfully for more than five decennaries.

Rarity: The public-service corporation of the resource may be franchise oriented and spread through its comprehensiveness but the chief control still remains in the custodies of the top 50 direction governments. The franchisee has to follow the company regulations strict to run a franchise of McDonalds.

Imitability: McDonald may non be hard to copy in facet of the merchandise but its functionality is really hard to accomplish.

Administration support: McDonald ‘s is ever ready to work new resource and evolve and the administration construction is good organized and provides a good support to its franchise operations.






Competitive deductions

Network substructure





Impermanent competitory advantage

Diversified gross base





Impermanent competitory advantage

Leading market place





Sustained competitory advantage

The VRIO model of McDonalds

Looking at the above VRIO frame it can be said that McDonald has a sustainable competitory advantage and therefore it seem to be frailty determination to put in the undertaking.


The study trades with the franchise operation of McDonald and UK was selected as the location for the franchise. UK was selected on footing of the trade name image and success of the franchise web of McDonalds. It has a really good client base in UK which are really loyal as good. McDonald has good organizational support to its franchise in footings of preparation and promotion. It besides operates a centralised enlisting thrust which helps the franchise to acquire coveted employees without holding a concern to run for them. The SWOT analysis reveals a big figure of strengths as good good chances to work on therefore big range to increase profitableness. The VRIO analysis besides indicates a competitory sustainability therefore it is recommended to put in the undertaking.