McDonalds International Franchising

Kruger, Layne

Business Report

3-09-16

Dr. Hugo

1. Executive Summary

International franchising has had a major impact on the Hospitality Industry. Food and Beverage restaurants like McDonalds have had some major problems “going global”. They have faced economic, cultural, and political systems. They have overcome the challenges fast food restaurants have regarding global obesity. They have grown out of the 1960’s and have dominated revenue growth the past three years, even when the global market told them it wasn’t possible. They have met the standards other countries have set, and continue to introduce western civilization in to new worlds waiting to try a piece of America. McDonalds is a power house in the Industry and will continue to improve their franchises internationally.

1. Introduction

In 1940, two brothers started a restaurant known only for their classic American cuisine of burgers, shakes, and fries, and stumbled across a formula which would lead to one of the World’s most successful fast food franchises. McDonald’s successful formula was fast-friendly service, quality food at a cheaper price. However, the McDonald brothers weren’t expanding geographically or internationally until they hired Ray Croc a successful sales man with a knack for marketing, who knew right off the bat what a ground breaking company McDonalds could become (History, 2016).  According to McDonald’s website, McDonalds first went international in 1967, when they opened restaurants in Canada and Puerto Rico. This stretch forward was a giant leap for McDonalds and proved what empire the fast-food restaurant had become(History, 2016). International franchising hasn’t always been easy for McDonalds; however they have done a lot, to fix the problems they created (History, 2016).  

1. Problems

According to its own website McDonalds has expanded since their first international launch in Canada and Puerto Rico and now has more than 30,000 restaurants worldwide, in over 119 countries, and serve over 50 million customers a day (History, 2016).    It is astonishing that 80% of McDonald’s outlets are run by franchisees that have to meet standards set by the company (History, 2016).   American franchise’s like McDonalds didn’t expand internationally overnight; there were a lot of detrimental steps that were made, which allowed “going global” a possibility. In an article by Restaurant’s and Institutions one of those steps included charting into unfamiliar waters, and facing challenges including figuring out political, social and economic systems within each country they were trying to start a franchise in, so they wouldn’t strengthen hostility that was already there to begin with (Lowe, 2010). Along with cultural and taste differences, labor cost and real estate are examples of the hurdles McDonalds had to jump through. Although Outsourcing to other countries is where McDonalds makes over 50% of their profits, keeping up with the demand for western culture and American fast food in other countries continues to be an- issue (Lowe, 2010). Not only is keeping up with demand a challenge overseas for McDonald’s, global obesity has been an issue McDonalds has struggled with for years says Franchising world (Lowe, 2010). The World cannot blame McDonalds for the Worlds obesity, but they do contribute to a small percentage of the problems we face in society today (Lowe, 2010).

1. How to Fix it

Previously stated before, McDonalds has over 30,000 restaurants in 119 countries which means they obviously became successful even with all the hurdles (History, 2016).   McDonald’s across the globe had to overcome all these difficulties with one major fix, menu change. To meet cultural standards set by a country’s political, social and economic climates McDonalds creating menus that fit every standard set by each country (Lowe, 2010).  To fix internal problems other countries had maintaining their restaurants, McDonalds created contracts to ensure franchises, in other countries, follow proper guidelines. Keeping the building’s layout, and sanitation laws helps bring the classic American western lifestyle layout to places like India, Russia, And China (Johnson, 2011).

Global Obesity is still a major concern, but McDonalds has done a lot to turn their stigma away from America’s greasy burgers and fries to a much healthier alternative international menu (Johnson, 2011). For example India has “gone green” with a vegetarian style menu including the new McPaneer royal, loaded with paneer cheese, lettuce, tomato, jalapeno peppers, and a cheese-and-onion sauce (Taylor, 2015). McDonalds has gone back to smaller portions, and has allowed for their “kids meals” to have heathier choices: milk instead of soda, yogurt, instead of fries, apple slices and juice (History, 2016). McDonalds does not stop at healthier choices for just kids, they also incorporated healthier choices for adults. Besides their market fresh salads and grilled chicken sandwich, their most recent addition in the US is McDonalds Snack Wraps (La Monica, 2016).