Introduction
This section will provide an analytical perspective of different ways in which franchising has been able to contribute to the growth and expansion of McDonald’s food company. In addition, this section will also focus on scholarly perspectives of the role of franchising in the promotion of the public reputation of the franchisor and the franchisee in relation to customer satisfaction while assessing the products and services provided by McDonald’s company in the United Kingdom.
The effects of Franchising for McDonald’s in the UK
Since its establishment in 1940, McDonald’s food restaurant has grown to about 30,000 restaurants in about 119 countries. These restaurants serve more than 50 million customers per day making it one of the largest food service companies in the world today. The ability of the company to grow and establish major outlets on the international platform is attributable to the desire by the company through its management to achieve rapid expansion and boost its competitive advantage (Corporate Info 2014). This in the view of the management was only possible through franchising. This explains why about 70% of McDonald’ restaurants operate as franchises. In the UK there are about 1190 Mc Donald restaurants operating as Franchises. These restaurants employ about 70,000 people hence a major contributor to the decrease in unemployment rate in the UK (Corporate Info 2014).
The popularity of franchises in different countries such as the UK is attributable to the desire by the franchisee to acquire some form of connection and links with a highly performing company on the local and international platform. This association according to Alon (2012) allows the franchisee to engage in the sale and promotion of the franchisors products and services. This has been considered as a technique through which the franchisee is able to boost his reputation while upholding the standards of production as established by the franchisor. Garg et al (2013) argues that the franchisor is often in charge of major policy issues considering that any form of deviation in terms of the standards of the products sold will not only affect the reputation of the franchisor on the global platform but it will also affect the perceived notion of customer satisfaction (Ruddick 2014).
The decision by McDonald’s to engage in the franchising business in the UK has been attributed to the desire of establishing itself as a highly profitable and respectable food restaurant. Franchising was also intended to boost the customer base and the profit margins of the company (Frazer et al 2012). This is due to the realization that startup cost of franchising is relatively low for the franchisor and therefore, it would be an easier way of getting into and exploring a foreign market (Gerhardt et al 2012. In addition, through this exploration, the company would be able to reach out to customers separated by different geographical barriers (Beckmann & Zeyen 2014). The startup cost of franchising is relatively low for the franchisor because it is the responsibility of the franchisee to engage in market survey and determine the expectations of the potential and actual customers in relation to the products provided by the company (Beckmann & Zeyen 2014). Until 2006, McDonalds had been facing challenges with its franchisees due to high levels of competition from other food service companies such as Burger King. The dwindling performance of the company was attributed to poor marketing techniques that were employed by different franchisees on the UK market (Ruddick 2014). In addition, it was necessary for McDonald’s, as the franchisor to establish standardized procedures that would inform its marketing and promotional techniques within the UK. The marketing approach that the company employed was to focus on the communication strategy with the customers and the provision of actual and factual information about the foods that the company was producing. This was aimed at minimizing the possibility that the franchisees would deviate from normal operations and standards of the company (Garg et al 2013). In addition, the company also introduced bylaws that would define the modes of operations of the franchisees as a way of ensuring that they were focused towards the goals and objectives of the franchisor (Thompson et al 2010)
One of the greatest benefits of franchising for the franchisee is that it is relatively cheaper and less risky to buy a franchise than the cost and the risks involved in the establishment of a new business enterprise (Beckmann & Zeyen 2014). One of the main challenges for startup businesses that make franchising more cheaply is the complications involved in the establishment of a brand. The purchase of a McDonald’s brand according to Gerhardt et al (2012) is away through which the franchisee is provided with an internationally popular brand that consumers are familiar with. Such consumers are able to perceive the franchisee as having the capacity to satisfy their need by providing quality products and services as in the case of the franchisor. Other than the brand, the franchisor also has the ability to buy into well developed and tested systems and products (Gerhardt et al 2012). There is however, some threat associated with this approach to franchising. The threat in the view of Solis‐Rodriguez & Gonzalez‐Diaz (2012) emanates from the realization that the art of providing the franchisee with all the information concerning the systems of operations and the development of the franchisor’s product as a threat to its existence. This is because in situations of disagreement it is possible for the franchisee to establish an alternative business that operates in almost similar approaches hence, reducing the competitive advantage of the franchisor (Ruddick 2014).
Other than the perceived disadvantage of franchising, it is important to note that this approach to the establishment of business enterprises is a way through which an already established company helps startup companies to gain instant popularity in a highly competitive market (Garg et al (2013). Opening a McDonald’s brand for instance provides such a company with instant access to the international market with an inclusion of high profile marketing platforms such as television advertisement. One way through which such advertisements enhance the satisfaction of the customers is through the realization that they provide these customers with updated information of new products and outlets (Gerhardt et al 2012). This is because such information is often shared across that franchise network. It is also cheaper for the franchisees to participate in the advertising process due to the realization that they will be required to contribute some limited percentage of their extra revenue in promotional and marketing activities.
When perceived from the promotional advantages associated with advertising for a franchise network, Hodge et al (2013) argues that it would be relatively difficult for a franchisee to deviate from normal operations of the business. This is because any form of deviation would mean that the franchisee would be eliminated from engaging in any activities of the franchisor. In addition, it will also be possible for the franchisee to be denied the use of the brand name hence limiting its popularity in the UK market (Gerhardt et al 2012). This is therefore an indication that franchising is a major contributor to the growth and development of startup businesses. Furthermore, the franchisee is highly dependent of the franchisor to promote its reputation in the public domain. There is some form of mutual benefits generated from a franchise network. This is because through this network, a franchisee uses the brand to improve on its customer base and profits margins while the franchisor uses the presence of the franchisee to penetrate the market especially within the UK, explore different location in terms of customer interest and the ability to satisfy the desires of their customers through customization of its products and services (Gerhardt et al 2012).
One way through which a franchisor limits the ability of a franchisee to deviate from accepted norms and practices is through the introduction of a standardization process. This process enable the provision of a set of guidelines on franchisees and the company are supposed to cast their operations (Pride 2014). The products and services developed by McDonald’s possess some form of global popularity. This popularity arises from the understanding that these products and services have the ability to meet the desires of the customers, hence providing high level of customer satisfaction (Gerhardt et al 2012). However, it is important for the company to ensure that all the standardized procedures are maintained across the whole organization. The importance of standardization in a franchise according to Meiseberg & Dantis (2015) is a way through which the company ensures that quality procedures are understood and are definitive of the operations of the company across all the franchise networks. After the establishment of these procedures and standards of quality, it is necessary that the franchisor conduct regular checks. In the UK for instance, franchisees of McDonald’s operate on 20-year licenses (Sidhpuria 2009). One of the major requirements of these licenses is that these franchisees must maintain the standards defined by the company and in return, they are to receive different forms of support from McDonald’s. Failure to maintain the expected standards and procedures would mean that the franchisees lose the licenses hence loss of the brand and the esteemed customers (Gerhardt et al 2012).
According to Sherman (2004), it is important for the franchisor to realize that franchisees are potential threat to the existence of the business. This is because of their ability to damage the reputation of the franchisor whenever they fail to adhere to the expected standards. This explains why one of the requirements while engaging franchisees in a franchise is that they should perceive it as an ongoing commitment instead of a one-off deal (Pride 2014). This based on the realization that the franchisees act as ambassadors to the franchisor. The success of McDonald’s in the UK is based on the realization that the company has been able to establish legally binding links with the franchisees (Gerhardt et al 2012). These franchisees represent the company in different regions based on quality of products and services. In addition, the company also ensures that it conduct regular updates on the menus, arrangement of services, and other processes that are definitive of the company’s activities (Winsor et al 2012). For franchisees to be able to produce quality product as defined in the menus, it will be important that they acquire some form of support from the company. This support is often in the form of training activities for their staff and the provision of avenues on how to acquire and operationalize updated machinery to enable the franchises realized improvements in the business (Meiseberg & Dantis 2015). Other than the perceived improvements, regular changes in menus are also a way through which the company improves on its ability to satisfy customers and to maintain a positive reputation in the highly competitive UK market (Ruddick 2014).
It is often common practice for companies to measure success in terms of the size of turnover, the number of customers, the rate of customer satisfaction, profit margins sand customer loyalty to the brand. However, according to Antia et al (2013), from the perspective of the franchisor, taking up a franchise does not provide any form of guarantee that the franchisor will realize success in business. Success is only possible when the franchisee engaged in intensive work to boost its reputation and demonstrate its ability to provide quality products and services as the franchisor. According to Combs et al (2011), it is also important for the franchisee to be engaged in the activities of the local community as a way of promoting and enhancing its ability to understand the local market. One way through which the franchisee can ensure that its operation in the local market are in line with the expectations of the company is by accessing the possible support that it can receive from the nationally recognized brand of the franchise (Méndez et al 2014). The success of McDonald’ franchisees in the UK are founded on the ability of the company to embrace the operating procedure of the brand, which provides the right resources of operating a modern restaurant. Any form of deviation from these procedures would necessitates an almost immediate collapse of the franchisee minimizing its ability to realize success (Ruddick 2014).
The benefits of franchising according to Evanschitzky et al (2015) is founded on the economies of scale that allow the franchisor tonsure large scale output at lower unit costs compared to those of smaller companies. One of the essential economies of scale that McDonald’s derives its benefits from is in its ability to ensure specialization of labor and the use of updated machinery in the production process. The employees in McDonald’s franchises work with automated machines, which ensure some form of uniformity in the quality of their products (Love 2008). Products are generated in large quantities, which enable the cost of production to spread over larger units of outputs (Gerhardt et al 2012). An integration of the franchisees into the large production system provides them with the ability to ensure high profit levels. In the UK for instance, the success of the more than 1000 outlets has been attributed to the ability of the company to not only train the employees in the use of automated machinery, the company has also been able to provide its franchises with expert assistance on the operationalization of different machinery to ensure uniformity hence increasing the ability of the company to satisfy customers on a larger scale (Ruddick 2014).
The reputation that the company has been able to build on a global scale is attributable to the understanding that the only way of ensuring success is by involving McDonald’s, its suppliers and franchisees. This enables some form of unity in the realization of unified approach in ensuring high customer satisfaction (Love 2008). In the UK, the company has been able to experience high-level cooperation form its franchisees due to the development of a relationship that is founded on trust and openness. The main objective of this relationship in the view of Combs et al (2011)has been to ensure that the company operates on the provision of high quality standards at every stage in it supply chain.
It is the responsibility of the suppliers to work closely with McDonald’s as way of improving on the company’s production abilities and products. The franchisees are also expected to work with the company to ensure that proviso of high quality services that are in line with the expectations of the customer (Dent 2011). Through this form of relationship, the company has been able to enhance the reputation of the brand within the UK, and increase on the sales and profits of the suppliers, franchisees and the company in the highly competitive food service market (Gerhardt et al 2012).
Franchising is also an approach that different companies use to adapt to the prevailing cultural situations in their target markets. The problem in this case arises from the inability of companies to decide on whether to operate on the local or foreign cultures (Antia et al 2013). McDonald’s is an American company. This means that its procedures and regulations are often developed in accordance with the American culture. The UK is a multi-cultural society, which is an indication that the success of the company will be based on its capability to customize its products and services in ways that meet the interests and the desires of their customers in any local market (Mendelsohn 2004). One way by which the franchisee may deviate from the norms of the franchisor is through the decision to sell additional products other than those prescribed by the franchisor. It is also possible for the franchisee to operate on an organizational structure that deviates from that of the franchisor. This may alter essential procedures such as recruitment and selection of employees. Franchisees play an essential in helping the McDonald’s alter its menus in ways that reveal some form of flexibility in the realization of customer satisfaction. Through the franchisees, the company has been very successful in the identification and the isolation of local consumer tastes and preferences hence promoting the possibility that the company will attract and retain more customers compared to its competitors (Mendelsohn 2004). This is an indication that McDonald’s is highly dependent on the franchisees to provide services that are customized to meet the expectations and the desires of its customers. The decision by the franchisees to deviate from the common norm of operations may be detrimental to the wellbeing of the company in the UK market. This is because it will introduce the franchisor’s customer in the locality to different management’s structure, customer service plan and promotional strategies (Ruddick 2014).
One of the shortcomings of franchising in the view of Batik & Edwards (2012) is that the franchisees may generate numerous lawsuits against the franchisors as the owners of the brand. This has the effect of damaging the reputation of the company in the public domain considering that it exposes problems that are unique to different franchisees. Every franchisee operates under its own management with the franchisor as an overseer of its activities. This means that any lawsuit against the company will not only be directed to the management but also to the franchisor (Cumberland & Githens 2014). McDonald’s has been involved in numerous lawsuits within the UK. This emanated from the realization that many independent owners, franchisees, use the company’s trademark and brand names in ways that may be destructive to the reputation of the company.
The ability of different factions of the community to file lawsuits against the company due to the activities arising from the inability of the franchisees to act in accordance with the standards is disadvantageous to the company (Sherman 2004). This is because it may be techniques of populating a negative reputation of the company. This helps the company’s competitors in the UK market gain more popularity and competitive advantage. In addition, through such deviations, the company may experience losses through the fines and compensations arising from the deliberations of the law courts (Coade 2001).
In terms of areas of study, the dissertation will focus on different lawsuits within the UK against McDonald’s franchises. This will be aimed at assessing the contribution of franchisees to the unpredictable performance of the franchisor within the country. In addition, the study will also focus on different aspects of deviation by the franchisees and their effects on the wellbeing of McDonald’s within the UK and on the global platform. The UK is one of the major international outlets of McDonald’s in term of franchising and therefore a study on the relationship between the company and the franchisees will play a role in determining the effects of other franchisees in foreign nations to the franchisor
Conclusion
The relationship between the franchisor and the franchisee is often based on definite terms and conditions. These terms are in the form of agreement in terms of their operations. Despite these terms and conditions, it is often relatively difficult for the franchisor to ensure total control over the franchisee in relation to their operations (Alon 2012). This is based on the understanding that franchisees may deviate from the requirement of their agreements hence compromising the quality of the products and the ability to operate in accordance with the interest of the company and those of the customers. Mischievous activities of the company such as those that result in the development of different lawsuits against the franchisor can be perceived as ways of ensuring that the company experience loses. In the UK McDonald’s franchises operate on a twenty-year agreement. The franchisees must be perceived as a threat to the company considering that the franchisees might end up opening a business that competes with the franchisee upon the expiry of the period of franchising
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