Term Paper on "Mcdonalds Macdonald's Is a Name"
Term Paper 5 pages (1574 words) Sources: 3 Style: MLA
[EXCERPT] . . . .
McDonaldsMacDonald's is a name that is globally associated with fast food and particularly hamburgers. What makes the company unusual is that it is not run by a single entity or person, but that it has many different managers and owners worldwide. This is made possible by McDonald's franchising system. The company has therefore expanded worldwide to become one of the largest and most successful companies in the world.
Many companies select the legal structure option of a subchapter s corporation. This has specific advantages, mainly in terms of taxes. Subject to certain conditions, a company has the option of applying for subchapter S corporation or C corporation status. Smaller companies generally choose the S corporation option.
A company qualifies for subchapter S corporation status when it has no more than 75 stockholders. As a very large company McDonald's certainly has more than 75 stockholders and can therefore not qualify for subchapter S status. On the other hand, overseas franchises beginning with a single restaurant operate as privately owned companies under the McDonald's name. Depending upon local legislation, as well as the franchise agreement, these businesses could then meet the requirements for a subchapter S corporation. The parent company in the United States however will classify as a C corporation.
MacDonald's is a many-faceted company run by many different franchisees all over the world. The franchisees, suppliers and managers that form part of the McDonald's team are all carefully trained to adhere to the international principles of the parent company. Once trained and running their own franchises, franchis
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One of the reasons is the company's history. McDonald's has been a franchising company since its establishment in 1955. Although initially owning all companies, McDonald's began recruiting independent franchisees in the mid-1980's. This has proved to be a successful strategy, as the company has rapidly expanded worldwide. Franchising provides the main advantage that an already successful concept is able to expand more rapidly than through company ownership. The reason for this is capital savings. Because franchisees operate from the basis of their own capital and personnel, the parent company can focus on local expansion opportunities while also rapidly expanding in other parts of the world. Relatively little capital expenditure is therefore needed by the franchisor in order to rapidly expand large territories via franchisees.
A possible disadvantage is the laws governing the franchise relationship. Termination and renewal rights of the franchisee may be affected by these laws, as well as the franchisee's right to cure a default under the agreement. Another potential disadvantage is that either the franchisor or franchisee may become disenchanted with the relationship, although they are then still obliged to honor the contract until its termination. The franchisee may for example begin to feel that the franchisor is intruding on his or her business, and resent the need to pay royalty fees for the franchise.
McDonald's approach focuses on making their relationships with franchisees as profitable and beneficial for all involved as possible. Franchisees for example receive continual support from the McDonald's system, in terms of training, advertising, marketing and other areas of running their business. Franchises are offered only to individuals and not to companies, groups or passive investors. Through this principle, the parent company is able to enter into a personal relationship with each franchisee.
McDonald's also ensures that the company's overall standards of quality and service are maintained by means of a nine-month training program for all franchisees. An individual who meets the initial requirements to be a franchisee must go through this program before being able to enter into a franchisee relationship with the company. Another company requirement is that franchisees must be actively involved in the operation of the restaurant on a daily basis, while also not being involved in any other business interests. In this way, the quality, uniformity and profitability of the business are ensured.
Elements of business drive such as recruiting, marketing, accounting, administration and all aspects of running the business is the responsibility of the franchisee. The way in which the brand is represented to the local community is also the responsibility of the franchisee. The advantage of this is the fact that, being from the local community, the franchisee understands the specific cultural and local nature of the community. In this way, marketing can be handled in a more targeted way than the case would be if managers from the parent company were to operate at these locations. Because local franchisers operating in their own countries understand their customer base on a cultural level, they can then be instrumental in rapidly expanding the McDonald's brand. This benefits not only the local franchisee, but also the business as a whole in terms of growth and revenue. In addition to the above, the franchisee's responsibilities include supplying raw materials, goods and services to their restaurants. To ensure consistency and quality, these items must be approved by McDonald's.
Under the franchise agreement, which lasts for a period of twenty years, the parent company holds the head lease to the property and buildings used. The equipment inside the buildings are purchased and owned by the franchisee. All buildings and decor must be maintained by the franchisee to ensure the high standard expected by customers. This is done under the fully-repairing lease from McDonald's, which lasts for the same length of time as the franchise period.
In terms of finance, McDonald's does not provide financing for the purchase of a franchise, and the purchaser is required to have at least 25% of the purchase price available in non-borrowed capital, while the rest can be supplied by a bank. This is another way in which McDonald's protects itself financially. Any losses in terms of business are then carried by the franchisee and the financing bank.
In general, McDonald's principle is to franchise one restaurant at a time. The aim is to choose franchisees who are able to expand to multiple restaurants within a period of three to four years. The franchisee must prove that he or she can develop the restaurant according to McDonald's existing excellent standards. On this condition, additional restaurant franchises are granted. This approach allows both franchisor and franchisee to protect themselves in terms of possible issues like those mentioned above. Being aware of the royalty and excellence requirements, the franchisee is not in a position to legitimately become resentful of any requirements later along the line. The nine-month training period, as well as the thorough and informed way in which franchisees are recruited and prepared, therefore protects both the company and its franchisees. At the end of the franchise term, the franchise can be renewed for another twenty years, depending upon the franchisees desire to do so and McDonald's assessment of the franchisee's performance.
McDonald's decision to continue with the franchising rather than ownership paradigm is beneficial in a number of major ways. Firstly, the fact that franchisees own local businesses empowers them not only in terms of business opportunity, but also in terms of expanding the business according to local expertise and requirements. Local business owners tend to be greatly motivated to make a success of their franchise. This offers McDonald's the opportunity not only for more rapid global expansion, but also for a targeted approach that means greater success.
In terms of revenue,… READ MORE
Quoted Instructions for "Mcdonalds Macdonald's Is a Name" Assignment:
Legal Structure of Business
In the introduction to this module, you learned that businesses (in general) are structured as sole proprietorships, partnerships, or corporations. In particular, we know that McDonald's is a franchisor that has franchisees. And we know that each franchise can be a sole proprietorship, partnership, or corporation.
Begin by examining McDonald's Home page:
http://www.mcdonalds.com/
Click on, and then click on .
Then research McDonald's so that you are prepared to discuss its business structure in detail.
Thinking in terms of McDonalds and what it offers is one approach. The other approach is to think in terms of how franchises are structured. So, I approached the issue by conducting a Google Search on. The following are the first 10 or so items listed.
*****¢ McDonalds Franchise
Own and operate your own McDonalds fast food restaurant franchise with the McDonalds Corporation. Multiple McDonalds franchise locations are available. http://www.franchiseopportunities.com/Zor_52/McDonalds.htm
*****¢ Franchising
This page redirects to /content/corp/franchise/franchisinghome.HTML. ... 2004-2005 McDonald's Corporation and Affiliates. All rights reserved. ... http://www.mcdonalds.com/corp/franchise.html -
Franchising Home
McDonald's has always been a franchising company and has relied on its ... McDonald's remains committed to franchising as a predominant way of doing ... http://www.mcdonalds.com/content/corp/franchise/franchisinghome.html -
*****¢ Franchise Info
Directly to McDonald's franchisees and franchising support staff. ... To a Panel made up of McDonald's franchisees, support and franchising staff. ... http://www.mcdonalds.co.uk/pages/companyinfo/franchiseinfo.html -
*****¢ Howstuffworks "How Franchising Works"
To do this, you have to buy a McDonald's franchise. ... You'll pay an initial franchise fee of $45000 directly to McDonald's. ... http://money.howstuffworks.com/franchising1.htm -
*****¢ McDonalds Franchise Opportunities at Franchise Advantage
Our free service provides you with the tools to search, research, and request additional information for any of the opportunities you are interested in ... http://www.franchiseadvantage.com/franchise_mcdonalds.ihtml -
*****¢ McDonald's Franchise
Own and operate your own McDonalds fast food restaurant franchise with the McDonald Franchise Corporation. Multiple McDonald's franchise locations are ... http://www.smallbusinessopportunity.com/business_274436/mcdonalds.asp -
*****¢ Franchise for Sale
Franchise for Sale contains the world*****s best directory of franchising. ... McDonalds franchise quiznos franchise car wash franchises ... http://www.franchiseforsale.com/ -
Trying to think through the Qs, I see that I have to decide the form of business that the hypothetical McDonald's Franchise I am to operate should be. I liked the initial comments in. (see above). I expect that this site will tell me everything there is know about Franchising including choosing the legal structure for the business. So I started there I kept hitting telling myself what I was reading was 'good stuff;' until I came to a page entitled Legal Structure. http://money.howstuffworks.com/franchising9.htm
I then clicked onhttp://money.howstuffworks.com/biz-structure.htm
After reading about the various types of legal structures, I remembered that I passed a page on creating a plan. Since I am interested in the starting the business, I figured that the legal structure might also be included in the planning process. http://money.howstuffworks.com/franchising8.htm
Then I clicked through the plan to legal structure http://money.howstuffworks.com/business-plans3.htm
This gave me a justification that I will reference for the legal structure that I will choose.
I then went back to some of the other references listed in my initial search to see if I could find out the ways in which existing McDonalds Franchises are structured.
Using the attached file, you are now ready to answer the following questions in a three to five page paper:
We know that McDonald's (the parent company) is a franchisor.
Make a case in favor or against the position that the legal business structure of McDonald's (the franchisor) is a Subchapter S corporation?
Some restaurant chains operate through individual restaurants that are owned by the parent company, others allow the individual restaurants to be operated be entities such as individuals, partnerships, or corporations. Why doesn't McDonalds own and operate all of its own restaurants? It may have needed the franchise fees to open restaurants quickly when the franchising initially was set up; but wouldn't owning and operating its own stores be more profitable for it than franchising them out?
McDonald's franchises are sole proprietorships? On its website, McDonald's says that: "McDonald*****s franchises restaurants to individuals who personally operate their restaurants and are involved in the day to day operation of their restaurants. We do not franchise to partnerships or allow investors." Build a case in favor of or against McDonald's continuing to only allow its franchisees to be sole proprietorship. In your answer, you might explain why it should continue not allowing the franchisees to be LLC or Partnerships.
How to Reference "Mcdonalds Macdonald's Is a Name" Term Paper in a Bibliography
“Mcdonalds Macdonald's Is a Name.” A1-TermPaper.com, 2007, https://www.a1-termpaper.com/topics/essay/mcdonalds-macdonald-name/69365. Accessed 6 Jul 2024.
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