Introduction Franchising is a form of marketing and distribution in which the franchisor grants to an individual or company (the franchisee) the

right to run a business selling a product or providing a service under the franchisor's business format and identified by the franchisor's trade mark or brand. A modern franchise includes a format for the conduct of the business, a management system for operating the business and a shared trade identity. One good example of a franchise is Mc Donalds. Mc Donalds humble beginnings started when Ray Kroc bought the franchise of a small burger joint owned by Dick and Mac McDonald, and opened his first restaurant in Des Plaines, Illinois, USA in 1955. As of today, McDonalds has more than 30,000 restaurants, serving nearly 50 million people in over 119 countries everyday, making it the number one quick-service restaurant in the world.1 In the Philippines, George T. Yang built the first Golden Arches in 1981. As of 2005, McDonalds Philippines is a 100% Filipino-owned company. From its first restaurant along Morayta, Manila in 1981, McDonalds has grown to become one of the leading fast food chains with close to 300 restaurants nationwide. With Kenneth S. Yang at the helm, McDonalds is now a multi-billion peso company that continues to expand and serve Filipinos all over the country.2

Discussion Investment in a Mc Donalds franchise guarantees financial success for a franchise. Market figures3 show that McDonald's continues to be recognized as a premier franchising company around the world. More than 80% of its restaurants worldwide are owned and operated by its franchisees. In the United States, the following publications consistently recognize McDonald's as a top franchisor: Entrepreneur Magazine Every year, Entrepreneur Magazine lists its Franchise 500. Over the last several years McDonalds has been recognized as one of the Top 10 Franchises. Franchise Times Magazine McDonalds has been ranked number one on its list of top 200 franchises. USA Today McDonalds has been selected by the National Minority Franchise Initiative (NMFI) as one of the 50 Top Franchises for Minorities. Black Enterprise Magazine McDonalds was listed as one of the 40 best Franchises for African Americans.

1 2 3

http://www.mcdonalds.com.ph/about Ibid http://www.entrepreneur.com/franchises/mcdonalds/282570-0.html

There are advantages4 that the franchisee wants to gain and eventually use. These are the following: Avoiding the unnecessary trial and error period in starting and operating a new business, lower financial risk, compared to other ventures, because investment costs are lower and profit margins are higher, Business Format Franchising complete packages ensure a ready to go turn-key franchised unit, managing a small business whilst depending on the power of the franchisor company which has a bigger organization, the franchisee has an opportunity to run a proven business concept with a successful operational track record, the opportunity to learn the latest developments and changes in the local and global market from the franchisor and focus entirely on developing the sales revenues, the benefit of operating under a recognized trade name/trademark, which can have better marketing results, the franchisee has access to accumulated business experience and technical know-how in managing the business, a unified store design which leverages the business reputation in marketing the concept and an easier purchasing, storing, and product display systems. However, like in every type of business, there are disadvantages for the franchisee. A franchisee is required to pay the franchise fees and royalty to the franchisor, which in some cases can be exaggerated. There is also a necessity for the franchisee to abide to the franchisors operating systems, standards, policies and procedures and having a franchise reduces corporate profit margin due to payment of royalties and levies to the franchisor.

Reaction McDonalds has always been a franchising company and has relied on its Owner/Operators to play a major role in its systems success. As observed, McDonalds remains committed to franchising as a predominant way of doing its business. Generally, one cannot go wrong in investing in a Mc Donalds franchise due to the companys standing in the global market and its status as one of the worlds top franchisor. Locally, although rivaled with Jollibee Foods, Mc Donalds remains to be one of the choices in franchising by businessmen and capitalists. As regards the advantages of selecting franchising as a strategy to expand a business, it is common knowledge that the advantages of franchising will outweigh the disadvantages or risks of using such franchising in expanding a business.

http://www.franexcel.com/resources.php?id=24