McDonalds in Kazakhstan - Essay Example

McDonald's generates revenues through company operated restaurants and franchisee restaurants. Of a total of over 31,000 restaurants, over 8000 are operated by the company and over 18,000 are operated by franchisees. The remaining restaurants are operated by affiliates. The company's revenue comprises sales from company operated restaurants and fees as well as rent from franchisees and affiliates. Under the franchise arrangement, the franchisees invest in the equipment, signage, seating and dcor, while the company owns or leases the land and building.

Franchisees pay the company service fees and rent for premises. Service fees are set as a percentage of sales, while rent and other terms of occupancy are stipulated in the franchise agreement, which is drawn for a period of 20 years. The company and its franchisees as well as affiliates purchase food, packaging, equipment and other goods from approved suppliers. The company maintains quality standards through assurance labs around the world. A quality assurance board, including the company's technical, safety and supply chain specialists, provides guidance on all aspects of food quality and safety.

The McDonald's business model is slightly different from that of most other fast food chains. In addition to ordinary franchise fees, supplies and percentage of sales, McDonald's also collects rent. As a condition of the franchise agreement, McDonald's owns most properties. Since rent is a fee that is not linked to sales, this practice allows McDonald's more control over its franchisees (Rumbelow, 1 February 2001).As the world's largest fast food company, McDonald's was the target of criticism on many grounds over the review period.

It has been accused of the exploitation of entry-level workers and ecological damage caused by agricultural production and industrial processing of its products with high levels of packaging waste. Critics claim it sells unhealthy or non-nutritious food with exploitative advertising targeted at children and contributes to the suffering and exploitation of livestock. McDonald's has also been criticised for its litigious and heavy-handed approach to preserving its image and copyrights. Consequently, McDonald's recorded its first ever global loss in the last quarter of 2002 and in Europe sales plunged 3.

8% in January 2003. To combat this, McDonald's underwent a fundamental revolution in its approach to menus, marketing and consumers in 2003. In the UK, McDonald's is improving its standards and continued to work with government and health officials to investigate improvements (Euromonitor, 29 November 2005).On the other hand, Kazakhstan is a relatively new nation as it gained independence from Soviet Union in 1991. McDonald's has is one of the countries it has to conquer. Kazakstan's 1,052,100 square miles (2,724,900 square kilometres) make it by far the largest state in Central Asia and the ninth largest in the world.

Between its most distant points Kazakstan measures about 1,820 miles (2,930 kilometres) east to west and 960 miles north to south. While Kazakstan was not considered by authorities in the former Soviet