McDonalds Franchises – History of a franchising success
Of all the many franchises operating around the world, there’s no denying that the best-known brand is McDonalds. One of the most famous companies of all time, McDonalds has around 36,000 branches in more than 100 countries around the world. The chain serves a staggering 69 million customers every day, dishing up more than 550 million Big Macs every year in the US alone. From its humble beginnings as a San Bernardino fast food outlet, the company has grown to become an international franchise empire that rakes in an estimated $24 billion every year.
So how exactly did McDonalds come to dominate the world of burgers? And how did the company utilise the franchise model so effectively? Keep reading to find out.
McDonalds franchising background
In 1954, 52-year-old salesman Ray Kroc visited the McDonalds fast food outlet in San Bernardino, California. Owned by brothers Dick and Mac McDonald, the eatery had come to Kroc’s attention because it used several of the multimixers that he sold.
The brothers happened to be on the lookout for a franchising agent at the time and Kroc soon spotted the huge potential the eatery had for national and international success. He envisioned a brand that would provide consistent, high quality, affordable meals to customers across the country. He wanted to create a chain that would serve burgers, buns, shakes and fries in New York that tasted exactly the same as in New Mexico.
Thanks to Kroc’s sales experience, he was able to sell his idea to both suppliers and franchisees. Soon Kroc had opened the second ever branch of McDonalds in Illinois, and before long golden arches were popping up across the country.
Why buy a franchise? In business for yourself, but not by yourself
For Kroc, the franchise was the obvious method with which to expand the business. Franchising allowed McDonalds to expand quickly and efficiently without huge financial investment. Soon McDonalds burgers were being sold in towns and cities across the country. In 1958, the chain sold its 100 millionth hamburger; by the end of the 1960s, there were more than 1,000 branches across the US; and in 1967, the company opened its first international branch in Canada, with a restaurant in Puerto Rico following soon after.
One of the main reasons that Kroc was able to build such a successful franchise so quickly was that he approached recruiting franchisees in a unique way. Instead of asking the franchisees to work for McDonalds, he asked them to work for themselves, together with McDonalds. To promote this idea, he created the slogan “In business for yourself, but not by yourself”.
This encapsulated the concept that franchisees would be responsible for their own success but heavily supported by the marketing, experience and training of the franchisor. Entrepreneurs across the US and around the world soon embraced this idea and very soon thousands of hungry customers were tucking into Big Macs, fries and McDonalds’ shakes.
Although McDonalds hasn’t always been in complete harmony with its franchisees, on the whole the brand has been able to work closely and productively with its thousands of franchisees around the world. This relationship has helped the business to become what it is today, so it’s essential that McDonalds continues to listen to, and value, its franchisees if it wants to continue its upward trajectory.
Creating a franchising system
The success of a franchise depends on a number of factors. Two of the most important are the brand name and the system. McDonalds had good brand recognition from quite an early stage and from day one, Kroc created a clear system for all franchisees to follow. This system included core values that had to be implemented, among the most important of which were quality, service, cleanliness and value.
Although franchisees had the freedom to add certain items to the menu – the Egg McMuffin and Filet-o-Fish were both created by franchisees – certain recipes also had to be followed to the letter to ensure consistency between all McDonalds restaurants around the world. One of the main aims of McDonalds was to offer customers food that tasted the same every time, so sticking to the prescribed way of cooking and preparing food was essential.
To ensure this system was followed exactly, Raymond Kroc created a training school in Elk Grove Village, Illinois. The school, later known as Hamburger University, taught franchisees the system that McDonalds had created and worked with local research and development labs to come up with new ways of cooking, freezing and preparing food.
McDonalds Influence on franchising
The influence that McDonalds has had on the world of franchising shouldn’t be underestimated. Due to the fact that the chain is instantly recognisable and incredibly successful, countless companies have looked to the brand for business inspiration. The rigid system that McDonalds created helped to propel the brand to success and made it an instantly recognisable household name.
Around 80% of McDonalds are run by franchisees and the franchise has been key to the rapid growth and continuing success of the brand. In fact, McDonalds is so universally known, that to 96% of US children Ronald McDonald is more recognisable than Father Christmas.
Since McDonalds created its system for success, many other fast food franchises have looked at ways of creating systems and improving consistency. Customers are drawn to franchises because they know exactly what they’re going to get when they walk through the door, so it’s not surprising that franchises with high levels of consistency generally fair better than those with a more individual approach.
As well as ensuring the customer is happy, being consistent across all areas helps franchises to create a strong brand identity and keep their marketing message uniform. The more standardised the approach, the more customers will see the company as one all-encompassing entity and the more faith they’ll put in the quality of the brand.
Adapting McDonalds to suit changing trends
One of the biggest benefits of the franchise model is that it allows franchises to respond to the individual needs of their customer base quickly and effectively. Franchisees in different parts of the world have added various items to their menus to ensure they appeal to their target audience. In India, customers can order the McAloo, in New England foodies can tuck into a McLobster, and McDonalds in Egypt and the Middle East serve up the mysterious-sounding McArabia.
Giving franchisees the freedom to create new products within a prescribed formula has allowed McDonalds to grow its global appeal and has ensured its food appeals to people from around the world. The only stipulation that the brand has when it comes to adding menu items is that the burger can be assembled quickly and easily enough for the McDonalds production line.
Showing what’s possible in franchising
Another way in which McDonalds has influenced the world of franchising is simply by showing what’s possible. Before the golden arches came along, there weren’t many restaurants or shops that could be found on every high street, in every town. Within just a few decades McDonalds changed that, demonstrating how franchises could expand and succeed in the process.
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