Business memo

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Market research and analysis show the successful franchise adaptation of McDonald? s, a leader in the fast-food market for decades, around the world. Owning a McDonald’s franchise can be safer than lesser-known franchises. On the other hand, becoming its franchisee oftentimes ties up the entrepreneur’s hands. What challenges does a franchisee face to successfully establish the business in a foreign market? To help potential franchisees, following is a brief explanation of the benefits as well as the drawbacks of this type of business.

First off all, let? s mention the major advantages to buying a franchise: 1. Help with start-up – acquire all the equipment, supplies and instruction or training needed to start the business and running it afterwards from a single source. 2. Financial independence and buying power – immensely profitable because McDonald’s has international brand-name recognition and purchases raw materials and supplies in spectacularly large quantities.

Lower failure rate – according the statistics buying an established concept, franchisees stand an almost 80% chance of success compared to people who start independent businesses. 4. Efficient promotion – gives instant access to national marketing including high profile television advertising which keeps customers up-to-date with new products and promotions shared across the whole franchise network. From the other point of view, launching a new type of business definitely brings certain drawbacks:

Less autonomy – impossible to settle on own business decisions and your own ideas, all operations are required to comply with the franchisor’s operations manual. 2. No Absenteeism – for the sake of its fixed model, the franchisee needs to involved with the day-to-day operations of the restaurants. 3. Entrance costs and on-going costs – obtaining the franchise license demands a significant amount of capital as well as paying a royalty. 4. Pigeonhole – the vision in consumers’ eyes correspond to an obesity epidemic, which portrays McDonaldss in a highly negative light in the media.

Taking franchising into consideration from both sides as well as market analysis generally is the best way for new business owners to reduce risk. Buying a McDonald? s franchise may be an easy way to enter the fast-food industry but it is definitely not an easy walk. The advantages and disadvantages of setting up a franchise are not the only important factor. You have to consider whether the target country’s culture is receptive to a particular franchise’s brand image. Let? s introduce the challenges McDonald?

s may face in foreign markets, where cultural backgrounds are different: 1. Research of local culture and business practises is necessary to adopt a business model to suit local consumers and develop attractive stores. A solid analysis of regional business practices should prevent lack of awareness of local customs and norms that could cause the business to fail. 2. Become familiar with the legal system in a particular country – whether the country allows franchising at all since in some countries the regimes hampered foreign investors from establishing businesses.

3. Using local resources – consider using local resources, it would reduce superfluous transportation costs. 4. Willing modify the product offering by taking into consideration the national habits and tastes, as in case of Japan by offering a rice burger or special Japanese green tea, or in countries with strict meat restrictions. 5. Language barriers – even a bad translation into foreign language may depreciate the value of the franchisor image.

6. Consider the difference in perception – an example is McDonalds food in Japan where it is considered a snack because of the impossibility to share with others, as well as mixing bread and meat which is alien to them. Major important difference is lack of rice, seen as a good nutrition. All these problems are ones that the potential franchisee may think about before his decision to enter a foreign market. The excellent orientation on home market, the possibility to modify business plan with necessary changes to incorporate into a new environment is the only feasible way to turn the business into a successful one in a foreign market.

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