The Golden Arches: International Franchising Essay

2427 words - 10 pages

ABSTRACT: International franchising plays an important role in McDonald's expansion strategy, as well as the company's financial performance. About 70 per cent of McDonald's restaurants worldwide are owned and operated by independent businessmen and women (McDonald's, 2001). This paper is going to focus on international franchising including the benefits and challenges in practising it. For illustration of a success case is McDonald's strategy in using international franchise operations to expand its business worldwide. The final part of the paper will include forecast and suggestion whether the company is going to continue implementing the current strategy to globalise further.Nowadays, it is not difficult to try to find a McDonald's restaurant whether in your home country or whether you are going on a trip to other country. "The Golden Arches" have become a distinct character of international business and popular culture. The sign and the special prefix "Mc" have been recognised and imitated everywhere over the world. As it is stated in the company's website, their vision is to be the world's best quick service restaurant experience, by providing outstanding quality, service, cleanliness and value to make every customer in every restaurant smile.As globalisation is driving business environment today, multinational corporations have to generate a global strategy that can be used to assist them in achieving their missions and objectives. McDonald's Corporation began expanding internationally in 1967 with the opening of restaurants in Canada and Puerto Rico. Today, the company operates more than 20,000 restaurants in 100 countries on six continents. "The Golden Arches" has been relying on international franchising as the mode of entry strategy to penetrate the global market. About 70 per cent of McDonald's restaurants worldwide are owned and operated by independent businessmen and women. McDonald's has found that its overseas operational is producing more revenue than domestic operation. In United States, where the market is very competitive, the sales figure has increased by 3 per cents in year 2000. Similarly, the overseas market such as in Europe, Asia/Pacific and Latin America has shown a 9 per cent increase in sales revenue last year (McDonald's, 2001).What is Franchising? Franchising is a common, low-risk way of distributing products and services globally in fast food and hotel/motel industry. It is an arrangement where one party (the franchisor) allows the other party (the franchisee) to operate the business and to utilise its product line, logo, trademark, management and operation methods, in return for a fee (Hogget & Luthans, 2000). At this point, the franchisor will have more control and provides support such as advertising, training and quality assurance program for the franchisee. Horovitz and Kumar (1998) have suggested that franchising is the appropriate market entry strategy in countries that are culturally distant to the home...

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