Franchising and Entreprenuership - McDonalds - Case Study Example

Franchising and Entreprenuership Name: Class: Unit: Table of Contents Table of Contents 2 Introduction 2 Brief description of the fast food industry and market 2 Interest in becoming an entrepreneur 3 Market positioning for fast food 4 Options for resourcing the business 7 Recruitment and selection 8 Using schools and colleges 8 Advertising 9 Employment agencies 9 Networking 9 Internet 9 Financial resources 10 Recommendations and conclusion 10 References 12 Introduction Brief description of the fast food industry and market This report is based on buying a fast food franchise from McDonalds. The fast food industry is estimated to generate about $570 billion which is a value higher than most of the countries’ economies (McDonald’s , 2016). For the fast food customers, their main focus is on the price, taste and quality. The fast food restaurants make up the restaurant industry division known as the Quick Service Restaurants (QSR). This is a segment which makes over half of the sales in the restaurant industry. The fast food industry has consistent and simple look in each of the location (McDonald, 2004). The menu is same in all locations with little variations based on culture and context. The menu offers cheap meals which are customised with customer tastes. McDonalds is one of the most successful fast food restaurants in the industry. This is a restaurant whose success is based on everyone working towards a common cause. The restaurant has over 35,000 outlets in 120 countries and serves approximately 70 million customers (McDonald’s, 2016). The organisation has one of the best franchising opportunities (Djordjevic, 2015). According to McDonalds, they believe that franchising is their predominant way of doing business (Gerhardt, Dudley and Hazen, 2012). Interest in becoming an entrepreneur Becoming an entrepreneur has been motivated by the advantages that are associated with starting a business. First, becoming an entrepreneur in the fast food industry will lead to independence. In this case, one is able to become own boss. I have gained experience from working as assistance to a business start-up in the food industry. Other experience has been gained working as a crew member in a fast food franchise. According to Xie (2014), this is an opportunity that offers higher achievement in financial rewards than employment. When working for someone else, there are lower financial rewards and more bureaucracies. Franchise offers one an opportunity to be own boss through owning the business. In this case, one becomes responsible for own success (Katz and Shepherd, 2003). Entrepreneurship offers a chance to be involved in making the business decisions. It also makes it possible to be fully involved in business operations from the design, creation, sales and customer service. This would not be possible when working for someone else. In fact, entrepreneurship offers the prestige of being in charge of the business. Through working as an entrepreneur, one is able to build equity which can be kept, sold or transferred to another generation (Drucker, 2002). Drucker (2002) points out that the desire to become an entrepreneur can be analysed based on trait approach. I possess traits which makes it possible to drive an own business. First, there is risk taking propensity which is a distinctive feature among the entrepreneurs. Entrepreneurs are inherent risk takers through investing in new ventures. Franchising is a risk which is moderate, achievable and controlled (Gerhardt, Dudley and Hazen, 2012). This is a risk that has been assessed and calculated carefully before engaging in the venture. Thus, it is evident that venture in franchising is based on moderate risk taking. The need for achievement is another drive towards entrepreneurship. Entrepreneurs have a higher need for achievement which leads to the need for venturing into business. This is associated with the propensity to start the business through franchising. Being an entrepreneur is also based on the higher internal control and tolerance to ambiguity (Drucker, 2002). Franchising is an activity that is yet to be performed but there is willingness to undertake it. With the knowledge and skills in gained in working environment, it is possible to venture into fast food business through franchising. The skills will also help in further development for the opportunity. Market positioning for fast food Chen and Uysal (2002) assert that market positioning involves a strategy that will explain who the product is being sold to, the business scope and how to create value to the customers. Fast food restaurant requires having a clear and competitive positioning due to the market conditions. The target market is narrowed down to the families with the focus made on low delivery time and reduced costs. The restaurant utilises modern and technologically advanced equipment with an aim of making the production easier. Through use of computers, the restaurant is able to keep the costs down and reduce the labour costs. This also makes it possible for the available employees to do their tasks quicker. McDonalds has drive-through which in most cases is dual with an aim of reducing the waiting time. This works in helping the brand position to maintain quick, efficient services. The fast food is supposed to be fun and family friendly. This has made McDonalds to include playgrounds in their outlets with the term “Happy Meals”. This makes McDonalds to gain a competitive advantage through positioning. Fast food is also positioned as a culture friendly food. Based on the location, fast food outlets offers products which are culturally appropriate. This requires being able to change the menu based on the outlet context (Gammoh, Koh and Okoroafo, 2011). Fast food positioning is an integral part of the marketing strategy. Through positioning, it becomes possible to select the most appropriate marketing mix for the target market (Thomadsen, 2007). In addition, fast food requires use of adaptive product positioning and periodical repositioning. The periodical repositioning is aimed at the changes in the market segments. To succeed in positioning, the brand thoughts, feelings and perceptions have been put in customers mind. This is done through creation of associations which can be explained using the network associative models (Chen & Uysal, 2002). The consumers are able to activate the associations which are vital during their decision making process. There are primary and secondary associations to a brand. The primary associations are those that first come to mind when one is thinking of a particular brand. The primary associations are linked to other associations which might also be inferred and are known as the secondary associations (Chen & Uysal, 2002). Fast food primary associations are quick, efficiency, quality, tasty, value, and social involvement, hygienic and healthy. Secondary associations are family friendly, socially responsible and uniformity. Product related attributes for the fast foods are price, packaging, imagery and usage. In addition, the benefits that are associated with the fast food are functional, symbolic and experiential. The functional benefits are the advantages that are associated with the consumption of the fast food. This includes the convincing, safe and nutritional value. Through the experiential benefits, fast food leads to a sensory experience. This includes pleasure, variety and taste. Fast food leads to symbolic benefits which includes group membership and socialisation (Chen & Uysal, 2002). This is the reason most of the fast food outlets have children amenities and coffee shops. During positioning, the fast food restaurants have made a lot of efforts to differentiate themselves from the competitors. This is through use of varying tactics to position their products. Positioning the product as a healthy alternative and using low cost has been a major tactic in the industry (Davis and Carpenter, 2009). Positioning has in most cases been based on what the customer needs and their wants. The brand positioning statement used by the fast food industry is based on the target audience and the product benefits. In this case, the products are positioned as unique and competitive in the industry (Thomadsen, 2007). Chen and Uysal (2002) assert that attitudes in fast food play a major role since they influence feelings and have an affective function. Recently, fast food industry have suffered negative image due to their products being associated with obesity and poor health (Davis and Carpenter, 2009). Most of the consumers have been avoiding fast food joints which fail to provide nutritional information on their products. In fact, some of the fast food restaurants such as McDonalds have faced negative publicity which has affected their positioning. The negative associations have made it hard to position the products as healthy. This has led to a campaign to reposition fast food products as health friendly. This includes measures such as reduction of sugar, display of nutritional information and a shift to healthy alternatives (Adams, 2007). The main challenge in positioning the fast food is their association with poor health. This is a challenge that a franchise will face as it ventures into the industry (Adams, 2007). Junk food have for long time been associated with obesity due to the excess calories, sodium and unhealthy fats (Davis and Carpenter, 2009). The industry faces a lot of pressure to come up with healthy alternatives. To position the products as healthy alternatives is not an easy task as McDonalds have proved. This is due to fact that the industry image is already being associated with the junk food. This overshadows the industry efforts to reposition themselves as healthy food restaurants. The customers are still sceptic on the industry efforts on positioning themselves as healthy food providers through changing their menu (Adams, 2007). Options for resourcing the business Franchising makes it possible franchisee to enjoy the HR benefits of the parent organisation (Djordjevic, 2015). Despite this, the franchise is supposed to give attention to human resourcing. Being an employer, the franchise is supposed to be responsible for the acquisition of the human resource. The franchise is also expected to comply with the government regulations set by the respective government. Based on the franchise agreement, the business is expected to hire workers and manage the payroll. This also includes having health, welfare and retirement benefits as stipulated by the parent organisation. The franchise is responsible for hiring employees who are then trained by the parent organisation. McDonalds trains all employees from the franchises operating under their name (Gerhardt, Dudley and Hazen, 2012). Most of the new employees for the franchise are the crew members (Djordjevic, 2015). These are mostly students who work in a flexible schedule. In this case, the franchise will require hiring about three quarter of their employees as part time workers. The wages paid to the crew members are low. Apart from the crew members, the franchise will be required to hire the Swing managers who have a higher hourly wage than the crew members. Others will be the assistant managers and managers who will require a higher pay (McDonald, 2004). The training programs are well structured by McDonalds where every employee undergoes basic training. This includes the vocational training and new skills being given. The main aim of training human resources by headquarter is to ensure uniformity. After selection of the new employees, orientation begins which is then followed by training (Gerhardt, Dudley and Hazen, 2012). Recruitment and selection Hoque (2013) points out that recruitment and selection is a fundamental function of the human resources department. There are a range of recruitment strategies available to the franchise for the positions available. The strategy to be used must be able to give equal opportunity to all applicants. The options available for the franchise are: Using schools and colleges This involves recruiting the schools that are in close proximity to the franchise. This involves knowing whether the selected schools have required skills and knowledge. The franchise will have to identify the schools in time for successful recruitment (Phillips & Gully, 2015). Advertising This includes advertising using the local newspapers, magazines and trade journals. This is advantageous due to fact that they have a specialised section for recruitment advertising. In this option, it is important to make the advertisement clear to ensure that only the eligible candidates apply (Phillips & Gully, 2015). The essential and desirable job requirements must be well by the franchise. Employment agencies These are agencies which offer recruitment services. The agencies looks at the areas of expertise while recruiting. The franchise is supposed to register with the agency for them to do preliminary recruitment for the organisation. This makes it possible to sort out the applicants and provide the franchise with the shortlisted candidates based on the job description. The agencies are paid a fee based on successful placement of the applicants which is based on a percentage of starting salaries and expenses (Phillips & Gully, 2015). Networking This is based on having an extensive network of contacts. The contacts may come from the unions, academic acquaintances and friends (Phillips & Gully, 2015). Networking is a vital source of information on potential candidates for the franchise. Internet Internet has changed the way business is conducted globally. The turnaround from internet recruitment can be as low as a few minutes from posting the advertisement. Recruitment via internet involves use of online platforms for recruitment. Most of people have access to internet and a lot use internet to read classifieds. The internet is inexpensive and has a wide coverage. There is also a wide range of information online (Phillips & Gully, 2015). There are a lot of recruitment sites online and candidates can be communicated through emails (Bartram, 2000). Financial resources Acquiring a franchise requires a fee of between $400,000 and $700,000. This is a fee handled by the licensing department based on case. The license fee is determined by the property and equipment costs (McDonald, 2004). Other costs include the infrastructure, equipment and local licensing fees (Gerhardt, Dudley and Hazen, 2012). Recommendations and conclusion Based on the analysis, it is viable to acquire a franchise from an existing business. The franchises have well established brand names hence have high recognition among the customers. The strong brand association will lead to better positioning in the customer mind. Also, a franchise will offer a better chance of accessing the financing sources. Research shows that a franchise has an increased barrier to entry to competitors (Djordjevic, 2015). Through franchising, it will be possible to have a strong brand image compared to other business approaches. Franchisees have system wide marketing support which will be offered by the franchisees. This form of business entry has a reduced legal exposure compared to other business models. Registering as a franchise also helps a lot in eliminating other forms of business registrations in most countries (Klein, 1995). The analysis shows that acquiring a franchise will lead to a lot of benefits which includes the ability to have control of the business and a chance to engage in entrepreneurship (Klein, 1995). The entrepreneurship strengths that are possessed will be used to ensure that the business is a success. Fast foods are positioned as quick, efficient, cost effective and family friendly. This has to be maintained on the new franchise through upholding the parent company standards. Being a McDonald franchise, the business should be positioned as a family friendly and low cost fast food outlet. This will involve using the low cost strategy to target the customer base. The outlet should be ready to make their menu healthy due to rising health concerns (Davis and Carpenter, 2009). Fast food restaurants require to be positioned not only as a place to eat but also a place to be enjoyed by the customers. To enable fast food to be positioned this way, there is need for having motivated and committed workers. Based on the market position of the fast food, the franchise should work to improve the image. The analysis shows that the fast food restaurants are associated with unhealthy food. There has been a lot of criticism on fast food due to their contribution to obesity among other health concerns (Boutelle et al., 2007). The acquired franchise must be ready to offer healthy alternatives on the menu. Consumers in most countries have already shifted to healthier options which make it vital to adopt the trend (Davis and Carpenter, 2009). The business will resource workers through use of schools and colleges, advertising, employment agencies and internet. The combination of these methods should be able to give the business the best candidates’ pool (Phillips & Gully, 2015). It is evident that most of the crew members will be students hence colleges will help a lot in resourcing. Internet has led to a lot of changes in the way business is conducted. Embracing internet during hiring will broaden the pool of eligible candidates especially in the senior positions. The medium is also less expensive and has a wider reach (Bartram, 2000). The finances required for the business which includes the franchise license fee will come from the entrepreneur personal savings. Based on the analysis, it is thus recommendable to buy a franchise from an existing business. References Adams, C 2007, ‘Reframing the obesity debate: McDonald's role may surprise you’, The Journal of Law, Medicine & Ethics, 35(1), pp.154-157. Bartram, D. (2000) ‘Internet recruitment and selection: Kissing frogs to find princes’, International journal of selection and assessment, 8(4), pp. 261-274. Boutelle, K. N., Fulkerson, J. A., Neumark-Sztainer, D., Story, M., and French, S. A 2007, ‘Fast food for family meals: relationships with parent and adolescent food intake, home food availability and weight status’, Public health nutrition, 10(01), pp.16-23. Chen, J and Uysal, M 2002, ‘Market positioning analysis: A hybrid approach’, Annals of Tourism Research, 29(4), pp. 987-1003. Davis, B and Carpenter, C 2009, ‘Proximity of fast-food restaurants to schools and adolescent obesity’, American Journal of Public Health, 99(3), pp.505-510. Djordjevic, B 2015, ‘The significance of franchise’, Archives of Business Research, 3(2). doi: 10.14738/abr.32.612. Drucker, P.F 2002, Innovation and entrepreneurship: Practice and principles, New York, HarperCollins e-books. 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