Understanding Franchising: A Look into McDonald's and Dunkin' Donuts, Study notes of Business and Labour Law

Download Understanding Franchising: A Look into McDonald's and Dunkin' Donuts and more Study notes Business and Labour Law in PDF only on Docsity! by Lee Ann Obringer What is Franchising? Imagine that you're opening your own McDonald's. To do this, you have to buy a McDonald's franchise. In order to qualify for a conventional franchise, you have to have $250,000 (not borrowed). Your total costs to open the restaurant, however, will be anywhere from $685,750 to $1,504,000, which goes to paying for the building, equipment, etc. Forty percent of this cost has to be from your own (non-borrowed) funds. You'll pay an initial franchise fee of $45,000 directly to McDonald's. The other costs go to suppliers, so this is the only upfront fee you pay to McDonald's. Then, you'll go through a rigorous nine-month training period where you'll learn about the McDonald's way of doing things -- things like their standards for quality, service, value, formulas and specifications for menu items, their method of operation, and inventory control techniques. You'll have to agree to operate the restaurant from a single location, usually for 20 years, following their guidelines for decor, signage, layout and everything else that makes McDonald's McDonald's. Once you've completed training and are ready to go, McDonalds will offer you a location they've already developed. The exterior of the building will be complete, but you will have to take care of interior additions such as kitchen equipment, seating and landscaping. You'll get constant support from a McDonald's Field Consultant, who can advise you on details and will visit regularly. You'll pay McDonald's a monthly fee of 4 percent of your sales, and either a flat base rent or a percentage rent of at least 8.5 percent of your sales. How much money you make depends on many things, including the location and its popularity, the efficiency of your operating costs, and your ability to manage and control the business. Think of franchising as paying someone for his or her business strategy, marketing strategy, operations strategy, and the use of his or her name. That's pretty much what franchising is -- you are establishing a relationship with a successful business so you can use its systems and capitalize on its existing brand awareness in order to get a quicker return on your own investment. You are using its proven system and name, and running it by its rules. Are you still your own boss? In some respects, no. You still have to answer to someone else and follow his or her direction. You don't really own the business; you own the assets you've purchased in order to establish the business. McDonald's Franchise Hamburgers, chicken, salads McDonald's brand is in 122 countries around the world. Thirty thousand locations serve 51 million customers each day. More than 70 percent of McDonald's restaurants around the world are owned and operated by independent local businesspeople. In addition, the company operates Boston Market. It also has a subsidiary, Redbox, which in 2003 started as 18-foot wide automated convenience stores, but as of 2005 has focused on DVD rental machines. Most standalone McDonald's restaurants offer both counter and drive-through service, with indoor and sometimes outdoor seating. The Drive-Thru, Auto-Mac, or McDrive as it is known in many countries, often has separate stations for placing, paying for, and picking up orders, though the former two steps are frequently combined. In some countries "McDrive" locations near highways offer no counter service or seating. In contrast, locations in high-density city neighborhoods often omit drive-through service. Please Note: The operators of McDonald's, may not have verified the accuracy of the franchise information contained within this website. For accurate up-to-date information, customers are strongly recommended to visit the official McDonald's website. Start-up Costs & Franchise Fees How much does it cost to open a McDonald's franchise? Total Investment: $655,750-$1,225,000 Initial Franchise Fee: $45,000 Royalty Fee: 12.5%+ Advertising Fee: N/A Term of Agreement: 20 years Renewal Fee: $45K Dunkin' Donuts Franchise Doughnut shop In 1946, William Rosenberg founded Industrial Luncheon Services, a company that delivered meals and snacks to workers in the Boston area. The success of Industrial Luncheon Services convinced Rosenberg to start the Open Kettle, a doughnut shop in Quincy, Massachusetts. Two years later Open Kettle changed its name to Dunkin' Donuts. Today, Dunkin' Donuts serves a variety of doughnuts, muffins, bagels, coffees and fruit drinks at its locations in more than 40 countries. Dunkin' Donuts is a subsidiary of Allied Domecq, parent company of Baskin-Robbins and Togo's. Franchisees may operate combination stores, co-branding Dunkin' Donuts with Baskin-Robbins or Togo's. Please Note: The operators of Dunkin' Donuts, may not have verified the accuracy of the franchise information contained within this website. For accurate up-to-date information, customers are strongly recommended to visit the official Dunkin' Donuts website. Start-up Costs & Franchise Fees How much does it cost to open a Dunkin' Donuts franchise? Total Investment: $255,700-$1,100,000 Initial Franchise Fee: $40,000-$80,000 Royalty Fee: 5.9% Advertising Fee: