Project Matter

Franchising Business in India McDonalds
INTRODUCTION
HISTORY
Franchising dates back to at least the 1850s; Isaac Singer, who made
improvements to an existing model of a sewing machine, wanted to increase the
distribution of his sewing machines. His effort, though unsuccessful in the long run,
was among the first franchising efforts in the United States. A later example of
franchising was John S. Pemberton's successful franchising of Coca-Cola.[1] Early
American examples include the telegraph system, which was operated by various
railroad companies but controlled by Western Union, and exclusive agreements
between automobile manufacturers and operators of local dealerships.[3] Earlier
models of product franchising collected royalties or fees on a product basis and not on
the gross sales of the business operations of the franchisees.
Modern franchising came to prominence with the rise of franchise-based food
service establishments. This trend started before 1933 with quick service restaurants
such as A&W Root Beer.[4] In 1935, Howard Deering Johnson teamed up with
Reginald Sprague to establish the first modern restaurant franchise. [5][6] The idea was
to let independent operators use the same name, food, supplies, logo and even
building design in exchange for a fee.
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In the late 1800's and early 1900's many other forms of franchising took place.
Some examples included monopolized franchises for several utilities as well as street
car companies. Then as oil refineries and auto manufacturers found that they could
sell their products over a larger geographical area, they began to franchise.
Transportation and increasingly mobile Americans were the basis for the
establishment of retail and restaurant chains/franchises. As time went on a large
number of establishments began to franchise. Some of the well-known franchises
include Kentucky Fried Chicken in 1930, Dunkin Donuts in 1950, Burger King in
1954, and McDonald's in 1955.
The growth in franchises picked up steam in the 1930s when such chains as
Howard Johnson's started franchising motels.[7] The 1950s saw a boom of franchise
chains in conjunction with the development of the U.S. interstate highway system.[8]
Fast food restaurants, diners and motel chains exploded. In regard to contemporary
franchise chains, McDonald's is arguably the most successful worldwide with more
restaurant units than any other franchise network.
According to Franchising in the Economy, 1991-1993, a study done by the
University of Louisville, franchising helped to lead America out of its economic
downturn at the time.[9] Franchising is a unique business model that has encouraged
the growth of franchised chain formula units because the franchisors collect royalties
on the gross sales of these units and not on the profits.
Conversely, when good jobs are lost in the economy, franchising picks up
because potential franchisees are looking to buy jobs and to earn profits from the
purchase of franchise rights. The manager of the United States Small Business
Administration's Franchise Registry concludes that franchising there is continuing to
grow and that franchising is growing in the national economy.
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MEANING
The dictionary meaning of franchise is right to
vote, the citizenship and authorization to sell the
companys products.
Franchising is one form of marketing channel; rather it is the fastest growing

form of retailing. it is extended version of license. Franchisee invests his own capital,
runs the business and enjoys the profits or the losses.
The franchisee is normally appointed to save the resources or to benefit from
franchise expertise in the field. Franchising is a marketing format, a very powerful
way of retailing goods and services. It is a business partnership. Like all business
partnerships it involves two parties, the franchisor and the franchisee.
The franchisor provides the know-how, training, system and the brand,
whereas the franchisee forms the front end and is responsible for managing his
business unit. In the US, almost a third of the retail sales come from franchised
business. Globally, there are over a nine hundred thousand franchised outlets with
sales exceeding a couple of trillions of dollars.
In India, the industry is a little over ten million ($). There is limitless potential,
as this industry is at a very nascent stage.
Franchising is the practice of using another person's business model. The
franchisor grants the independent operator the right to distribute its products,
techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.
Various tangibles and intangibles such as national or international advertising,
training, and other support services are commonly made available by the franchisor.
Agreements typically last from five to thirty years, with premature cancellations or
terminations of most contracts bearing serious consequences for franchisees.
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Franchising has been around for many centuries but did not come to
prominence until the 1930s in the United States, when the establishment of electricity,
vehicles, and, in the 1950s, the Interstate Highway system helped propel modern
franchising, most notably franchise-based food service establishments.
According to the International Franchise Association approximately 4% of all
businesses in the United States are franchises.
Franchising offers an excellent opportunity for you to be in business for
yourself. When you hear the word "franchise" you probably think of fast food
restaurants such as Burger King, McDonald's or Subway.
But the truth is franchising is so much wider than that. In simple terms,
franchising is where a successful business format is replicated. This involves
developing all the systems and procedures the franchisor has found to be most
successful. Anyone joining the franchise will be expected to operate the business
using these tried and true systems.
There are franchises available in almost every business category that you can
think of, and across all price ranges.
In addition, because franchising has such a low failure rate, especially when
compared to starting a business from scratch, a franchisees chance of success is
extremely good.
Compared to starting your own business from scratch, franchising can provide
a relatively safer route into self employment. The franchisor has established a tried
and tested path through the maze, and will have eliminated many of the mistakes that
are often made when starting a business.
It is this experience and system that you are paying for when you buy a
franchise.
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While franchising is a safer route into becoming an entrepreneur, it is not just

a question of signing up, paying your money and being successful.
The franchisor will not do your work for you and cannot be expected to. What
is supplied is a proven format, a brand name, support and guidance. It will still be
your hard work and skills that make your business successful.
As a franchisee you will have access to market knowledge, established name
awareness in the business sector that you will be operating in, training and marketing
help. You will often take part in and contribute to national advertising campaigns
which would otherwise be outside your reach.
Financially, you will pay the franchisor an initial franchise fee and the costs of
establishing the business, including any equipment, facilities and supplies necessary,
together with the costs of operating the business until it is cash flow positive. Once
established, you will normally pay the Franchisor a monthly payment based on your
sales.
This is known as royalties or monthly management fees. Effectively this is
where you are paying for the ongoing support of the franchisor and his team.
As the royalties are based on your revenues, it can be clearly seen that it is in
the Franchisor's interest to help you succeed.
A successful franchise relationship is like a partnership. It combines your
talents with the experience and knowledge of the franchisor.
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DEFINITION
According to the international franchise association of america,a franchise

operation is the contractual relationship between the franchisor and the
franchisee in which the franchiser is obligated to maintain a continuing
interest in the business of the franchisee in such areas as know-how and
training, where in the business operates under a common trade name or
procedure owned and controlled by the franchisor and in which the franchisee
has or will make a substantial capital investment in his business from his own
resources.
A continuing relationship in which a franchisor provides a licensed privilege

to the franchisee to do business and offers assistance in organizing, training,
merchandising, marketing and managing in return for a monetary
consideration. Franchising is a form of business by which the owner
(franchisor) of a product, service or method obtains distribution through
affiliated dealers (franchisees).
Arrangement where one party (the franchiser) grants another party (the
franchisee) the right to use its trademark or trade-name as well as certain
business systems and processes, to produce and market a good or service
according to certain specifications. The franchisee usually pays a one-time
franchise fee plus a percentage of sales revenue as royalty, and gains (1)
immediate name recognition, (2) tried and tested products, (3) standard
building design and dcor, (4) detailed techniques in running and promoting
the business, (5) training of employees, and (6) ongoing help in promoting and
upgrading of the products. The franchiser gains rapid expansion of business
and earnings at minimum capital outlay.
Franchising can be described as a pooling of resources and capabilities; the

franchisor contributes the initial capital investment, know-how and
experience; the franchisee contributes the supplementary capital investment,
motivated effort and operating experience in a variety of markets. Franchising
is a comprehensive business relationship, not just a buyer-seller relationship.
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There is considerable interdependence between the franchisor and the

franchisee.
OBJECTIVES OF FRANCHISING
Achieving a certain level of sales.
Gaining a number of new customers.
Expanding your franchises territory.
Making a minimum amount of profit.
Improving your personal finance situation.
TYPES OF FRANCHISING
In simple terms there are four ways in which it can be used.
1. AN ENTIRELY NEW PRODUCT OR SERVICE CAN BE CREATED
SPECIFICALLY FOR FRANCHISING.
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This has been done with businesses such as Snappy Snaps in the UK - which
provides 1 hour film processing services and retails associated products such
as picture frames and the like in the high street.
Dublcheck is another example; it operates a contract cleaning business. Very
often a local businessman identifies a successful franchised concept in another
market such as the USA, and decides to create a similar concept in his own
jurisdiction.
2. DEVELOPMENT OF AN EXISTING BUSINESS
This is perhaps the most usual way of evolving a franchise. An existing
product or service is further developed by use of the franchising method. Such
businesses include the Dyno-rod drain cleaning business, the restaurant
businesses and so on.
3. CONVERSION OF EXISTING BUSINESS TO THE FRANCHISE
FORMAT
Sometimes an established business can decide to convert its managed outlets
to franchised outlets. The Thresher off-license chain in the UK is a good
example of this. Such decisions are usually taken because of a desire to
accelerate growth and reduce overheads without sacrificing quality control.
4. IMPORTATION
This is a very common method of evolving a franchise in the specific territory.
The United States is the great exporter of franchise concepts around the world.
Brands such as KFC, Holiday Inns, Hilton Hotels, Pizza Hut and McDonalds
are all American exports. Body Shop is an example of a British franchise that
has established itself around the world.
5. JOINT-VENTURE
This method is also applicable in franchising territory. When a company wants
to expand its presence in a particular company so through joint venture helps
to expand its business and presence
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ADVANTAGES TO THE FRANCHISERS:
They can cover more territories

They get the marketing support from the entrepreneurs.
Franchising is the key to rapid growth as franchisees cover wide areas and
expand market.
Once the network of franchisees as set up, company enjoys regular income in
form of royalty without much fresh investment and additional efforts.

Franchisees, familiarity with local market and prevailing terms and conditions
helps franchisor in establishing brand quickly with less risk for budding efforts
Generally big giants through franchising can create entry barriers for
competitors
Franchisers need not invest heavy amount, which is otherwise extremely
essential in the areas like sales force, management costs, etc. franchises being
independent business organization involve and invest in these activities they
try to carry out these activities more effectively.

Many cos. find it difficult to control the enterprise as they grow and many of
them find it comparatively easier to influence, manage and control each
franchisee.
Franchisee works more as more consultant who works out some solutions for
franchisers problem and generates new ideas. E.g. most of the successful
product ideas of todays McDonalds were generated by franchisees.
FOR FRANCHISEES
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EMPLOYMENT
Opening a franchise is a way of owning a business.
QUICK START
As practiced in retailing, franchising offers franchisees the advantage of
starting up a new business quickly based on a proven trademark and formula
of doing business, as opposed to having to build a new business and brand
from scratch (often in the face of aggressive competition from franchise
operators). A well run franchise would offer a turnkey business: from site
selection to lease negotiation, training, mentoring and ongoing support as well
as statutory requirements and troubleshooting.
EXPANSION
With the help of the expertise provided by the franchisors, the franchisees may
be able to take their franchised businesses to a level which they wouldn't have
been able to without the expert guidance of their franchisors.
TRAINING
Franchisors often offer franchisees significant training, which is not available
for free to individuals starting their own business. Although training is not
always free for franchisees, it is sometimes supported through the traditional
franchise fee that the franchisor collects and tailored to the business that is
being started. When training fees and travel expenses, etc. are required beyond
the initial franchise fee, these fees are deductible as part of the startup
expenses of the business.
Many franchisors nowadays also have an online Corporate University to help
franchisees with both initial and ongoing training. An online Corporate
University has the advantage of enabling anytime, anywhere learning and is
generally made available free of charge to the franchisee.
FRANCHISEE-FRANCHISER RELATIONSHIP
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Franchiser
and
franchisee
both
should
avoid
all
such
acts
and
misunderstanding which may cause any conflicts between them

None of them should do any such activity that goes against each others
interest.
Both the end should strive to keep the relation in order.
There has to be mutual understanding that will help each other to grow.
Agreement should not create any ambiguity and should clearly mention
responsibility and demarcation of areas of activity.
They should share the cost and carry out advertisements and promotional
activities jointly to avoid duplication of work and cost
They should consider each other as business partners and no one should
behave like dictator and try o rule other.
Franchisee can quickly en-cash the market opportunities being connected with
reputed brand and can expect good returns in a short period.
Franchising provides excellent business opportunities to the entrepreneurial
ambitions individuals having sincere urge for business, certain in amount of capital
and capacity to bear some risk, but lack experts advice and management support.
Franchiser personnel assist, traits, motivate, share and work with franchisees. Thus,
franchising can solve all start-up problems of business aspirants and thus leads to
entrepreneurship development
FRANCHISING LAW IN INDIA
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INTRODUCTION
There is no specific legislation regulating franchise arrangement in India,
reason being the complexity of the relationship and the vast areas of law which such
relationship involve.
The laws regulating franchising in India includes law relating to contract,
agency, distribution, leasing, assignment, securities, financial investments, intellectual
and industrial property, competition, companies, immovable and movable properties,
labour, foreign investment, insurance, banking, import-export, technology transfer,
and other legislations which may become applicable in particular case.The
applicability of laws depends precisely upon the modes of franchising which may be
domestic or transborder.
ROYALTY REMITTANCE
The FEMA and RBI regulate the terms of payment under Franchise
Agreements(such
as
franchise
fees,
management
fees,
development
fees,
administrative fees, royalty fees and technical fees) where one party is a non-Indian
entity including the amount to be paid and procedure for remittance of these payments
outside India.
The RBI prescribes certain requirements such as furnishing of tax clearances
and chartered accountant certificate at the time of remittance of royalty payments by
the franchisee to franchisor outside India.
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The Indian government permits foreign franchisors to charge royalties up to

1% for domestic sales and 2% on exports for use of the foreign franchisors brand
name or trademark, without transfer of technology.
The laws in India also permit lump sum and royalty payments to be made by
Indian franchisees to their foreign counterparts for use of foreign techno logy, which
includes manuals, systems etc.
Lump sum payments up to US$ 2 million are permitted and royalties of 5% on
domestic sales and 8% on exports can be paid to the foreign franchisor. In addition,
foreign companies can enter into consulting agreements and receive up to US$ 1
million per project.
Amounts in excess of these can also be received but with the permission of the
Indian Government. These rules allow a foreign franchisor to structure its business in
India in such a way so as to ensure that it can repatriate the maximum amount from
India.
The Government has specified formula for calculation of royalties which must
be adhered to before the foreign company can remit funds out of India. If the
franchise agreement proposes royalties or lump sum fees beyond the specified limits,
the approval of the Foreign Investment Promotion Board is required.
TAXATION
Taxation is another issue which deserves due consideration. It is important to
know the local sales tax, property tax, and withholdings tax applicable in certain area.
Further, how the franchise arrangement is structured and the existence of treaties
between the countries involved may have considerable influence on the structure
adopted.
Where the franchisor receives royalties, service or franchise fees, tax has to be
paid under the income tax Act (as income arising and accruing in India), whether the
franchisor is an Indian or foreign.
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In case where the foreign franchisor sends training personnel and supervisors
to India, the salaries payable to these persons may be subject to personal income tax,
whether an arrangement is made to deduct the tax at source or they are taxed as selfemployed persons (professionals).
In calculating the amount of tax payable by the franchisor or the franchisee
company, the deduction available in tax laws of India can be important for tax
planning purposes.
Sometimes of these relate to rent, repairs and insurance in respect to premises
used for business; depreciation and expenditure on research; and, expenditure of
capital nature on acquisition of patent rights or copyrights.
However, the availability of tax advantages depends on the type of franchise,
the product of the franchise and unit locations
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FRANCHISING IN INDIA
India is a geographical diverse country. Franchising in India is at a very

nascent stage. However, this industry has clocked the growth rate of 25-30%, the
second fastest growing industry.
In the US, 45% of the sales come from franchised business, India is still to
reach that stage, where franchised business are as widespread as the local grocer.
Franchising, as a dynamic and ever changing industry will firmly establish
itself in a couple of years. It is not difficult to spot malls. Organized retailing though
only at 2% of the retailing, will take off in a very big way.
The Indian middle class has been slowly expanding; it now buys consumer
appliances, thanks to the economy growth of over 8, the stock market crossing 6,000,
forex reserves surpassing 100 Billion USD, and the increase in disposable income.
Today, over 33 million Indians can afford the best services and products and over 310
million Indians buy consumer appliances.
India offers lot of potential for the franchising community. Apart from Indians
being very entrepreneurial, franchising as a way of doing business has been well
accepted.
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FRANCHISING TAKE IN INDIA

In India, the concept of franchising started around seventies but didnt get much
acceptance till nineties. Traditionally it was limited to few sectors like IT training,
clothing and footwear sector etc. Today in India, the acceptability for franchising
system is much stronger, which helps franchising in India to touch a new height. It has
forayed into all industries from Food and Fuel to health and travel. The franchising
trend in India includes domination of service sector, growth in retail franchising,
introduction of many master franchisees by international franchisors etc. Today
franchising spread across the country, providing immense opportunity to the
Entrepreneurs.
FRANCHISING
FACTS AND FIGURES IN INDIA:
There are more than 800 active franchising systems currently operating in the
country which are spread across the different sectors.
More than 5,000 franchisees (across the sectors) are involved in the system.
The annual turnover achieved by franchised business in India touches Rs.

12,000 13,500 crores approximately.
The total investment (annually) made by the franchisees is over Rs. 7,000
crores and rapidly growing at the rate of 25-29%.
More than 650,000 people are directly employed by franchised business.
Around 180 foreign franchisors are already exist and operational in India and
many are Coming or planning to come shortly.
Variety of franchising formats (retail franchising non retail franchising / pure
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THE FRANCHISING ASSOCIATION OF INDIA

The very first Indian organization committed to promote franchising in India
The Franchising Association of India (FAI) is a membership organization of

franchisors, franchisees, vendors, consultants, financial institutions, potential
franchisees, students and others.
Our services are dedicated to provide a one-stop shopping experience for
franchising business and with membership of the prestigious World Franchise Council
(WFC) we have ongoing access to knowledge of the world accepted best practice
related to franchising in different areas of business activity as also networking
contacts with the WFC member franchising associations in different parts of the world
for generating new business opportunities for Indian entrepreneurs.
FAI was formed about 5 years ago the growing list of FAI members include
many renowned companies like Aptech, Pepsi, McDonalds, Subway, Kodak, Vitesse,
Apollo Healthcare, Lakme, NIIT, The Bombay Store, Golds Gym, Moginis and many
more.
FAI is registered as Non- Profit organization under the Companies Act 1956,
FAI has been admitted as a member of the prestigious World franchise council and is
thus link into all the knowledge and opportunities available in this area at the
international level.
We have a mission: tapping the vast entrepreneurial energy available in the
country by promoting the concept and practice of franchising in India.
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FOUR MAIN OBJECTIVES:

1. Exchange and safeguard the business environment for franchising, both with
regard to franchisors and franchisees
2. Act as the resource centre for current and prospective franchisors, franchisees,
the media and the Government.
3. Disseminate knowledge to promote the concept of 'franchising' and propagate
it as a healthy business practice
4. Establish a forum for discussion and deliberation on franchising related
matters and problems and help promote the interest of members by organizing
seminars, conferences and meetings.
The act for the creation of appropriate forums for discussion of issues and
problems related to franchising and we provide international linkages to promote bringing in of foreign franchisors and best practice for doing business in India through
marketing India at international expos and otherwise.
We also work to make representations to the Government with regard to
legislative and other measures affecting the promotion of concept and practice of
franchising. We encourage bank and venture capital funding for franchisees and we
act for publication of franchising successes.
FAI has its own quarterly publication, Franchising Focus, covering the
franchise industry in India. Franchising Focus articles are produced in collaboration
with the experienced industry experts and it provides you with all the knowledge and
contacts you need to succeed in franchising.
Franchising Focus is distributed primarily amongst the potential franchisees,
franchisors, franchise consultants, retail companies, suppliers to the franchise industry
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and also at international expos and seminars and other shows, and its readership is
25,000.
FAI also acts to organize and promote exhibitions in India. The most popular
and highly attended is IFE. IFE 2007, to be held from 2nd 4th March 2007 is an
upcoming event, co-organized by FAI, where around 100 franchisors are expected to
participate.
This event will include an evening on franchising awards, a two-day
conference, where existing Franchisors and franchisees will provide their knowledge,
experience and insights. This conference shall include leading Indian and international
speakers.
IFE exhibition will focus on quality national and international franchises
wanting to sell their franchises.
An unique opportunity to interact, explore, learn and expand the franchising
business. It will be attended by a large number of high quality potential franchisees.
This event will provide a valuable connect with the franchising community at large.
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LEGAL ISSUES OF FRANCHISING

A good relationship between the franchisor and franchisee is critical for the
success of both parties.
Since franchising establishes a business relationship for years, the foundation
must be carefully built by having a clear understanding of the franchise program.
Unfortunately, understanding the legal language of franchising can be daunting.
The advice of an experienced franchise attorney should be sought to help a
prospective franchisee understand the legal issues and to protect them from making
costly mistakes.
Franchising is governed by federal and state laws that require franchisors to
provide prospectivefranchisees with information that describes the franchisorfranchisee relationship.
THE TWO MAIN FRANCHISING LEGAL DOCUMENTS ARE THE:
UFOC
franchise agreement
THE UFOC
The purpose of the UFOC is to provide prospective franchisees with
information about the franchisor, the franchise system and the agreements they will
need to sign so that they can make an informed decision.
In addition to the disclosure part of the document, the UFOC includes the
actual franchise agreement as well as other agreements the franchisee will be required
to sign, along with the franchisors financial statements.
The UFOC is designed to give you some of the information you need in order
to make an informed decision about investing in a particular franchise.
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THE IFA EDUCATIONAL FOUNDATION

By law, a franchisor cannot offer a franchise until the franchisor has presented
the prospective franchisee with a Disclosure Document.
In fact, 14 states require franchisors to register their UFOCs with the state or
to notify them that they will offer franchises before they begin to conduct any
franchising activity in the state.
The UFOC includes information about:
The franchisor
The companys key staff
Managements experience in franchise management
Franchisors bankruptcy and litigation history
Initial and ongoing fees involved in opening and running the franchise
Required investment and purchases
Territory rights
Responsibilities of the franchisor and franchisee
Other franchisees in the system with contact information

Receipt of the UFOC is governed by the ten-day rule. This is a cooling-off
period in which franchisors must give prospective franchisees 10 business days to

think about their decision before they are allowed to sign the franchise agreement
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THE FRANCHISE AGREEMENT

The franchise agreement is more specific than the UFOC about the terms of
the relationship between the Franchisor and franchisee. A typical franchise agreement
may include specifics about:
The franchise system, such as use of trademarks and products
Territory
Rights and obligations of the parties: standards, procedures, training,

assistance, advertising, etc.
Term (duration) of the franchise
Payments made by the franchisee to the franchisor
Termination and/or the right to transfer the franchise

The franchise agreement is the legal, written document that governs the
relationship and specifies the terms of the franchise purchase. Like the UFOC,the
franchise agreement also enjoys a cooling off period.
Prospective franchisees are legally entitled to have the final franchise
agreement for at least 5 business days before they are allowed to sign. This gives them
time to review and consider the terms of the agreement
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'FRANCHISE BUSINESS IN INDIA SET TO GROW'
The franchise business industry in India is hopeful of high growth in the

coming years despite the global economic downturn, an industry representative said
here Thursday.
"The franchise business in India has huge potential and we think it will grow
to a large extent in next five years," Indian Franchise Association (IFA) executive
director Upendra Sachdev told IANS on the sidelines of a seminar.
"We can see the franchise industry growing in India, even during these times
of recession and lay-offs. With the property rates lowering due to the slowdown, the
entrepreneurs can now start franchise business with cheaper investment," he added.
In the next five years, there would be at least 50,000 franchises in the Indian
market, which would create an employment for at least 500,000 people," Sachdev
said.
The IFA and Young FICCI Ladies Organization jointly held a one-day
seminar, 'Empowering Women Entrepreneurs Through Franchising', in Kolkata to
help understand the youngsters about the technical aspects of owning a franchise
business as a successful carrier option.
"The franchise business has been very good mainly in food and beverage and
education sectors. The food and beverage industry was up by nearly 38 percent while
the education sector registered a growth of 32 percent last year," said Sachdev.
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He added that the industry expected a good response from the service and
health sectors this year.
"Many foreign companies are also showing interest in the Indian market,
which is definitely a good sign for our industry," Sachdev said.
IFA is presently associated with a number of foreign nations like South Arabia,
China, Thailand and Oman, where it is working to help Indian franchises to go and
run their business successfully.
"Many Indian brands are growing in the Gulf countries but most of them are
not doing very well in the European market," Sachdev said.
Indian business environment is gradually experiencing the changes and now
the concept and essence of franchising is permeating into the Indian entrepreneurial
mind.
In the past one decade International franchise brands like Pizza Hut, Mc
Donald's, Gold's Gym, Kodak, Subway, Holiday Inn and many others understood the
potential of Indian market and enter in the Indian market. Thanks to these brands
today international franchising in India is one of the most exciting areas in the
franchise industry.
Indian brands also do not stay much back from their international counterparts.
They are also taking the franchising pathway to success and made significant growth
in areas like retail, education, beauty etc.
Many new age Indian entrepreneurs has realized the scope of growth in
franchising and thus many entrepreneurs already adopted the franchising route to
entrepreneurship and many are in different phases of adopting.
For these entrepreneurs becoming a national or International franchise seems
much easier, safer and profitable than struggling for brand identity while running a
small enterprise of their own.
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ABOUT MCDONALD
Mcdonlads operate through a franchising system. Mcdonalds franchising

started in the year 1953. Owever, the companys business model is slightly different
from that of others. In addition to ordinary franchise fee, suppliers and percentage of
sales, agreement, the corporation owns the properties on which most mcdonladss
franchises are located.
The golden arches of McDonalds are slowly becoming an integral part of the
Indian landscapes. Everyone knows McDonalds is big, but very few know just how
significant its impact on Indian business really is. The inside of McDonalds remains a
mystery.
McDonald's India is an employer of opportunity, providing quality
employment and long-term careers to the Indian people. The average McDonald's
restaurant employs more than 100 people in 25 different positions from cashier to
restaurant manager. McDonald's world class-training inputs to its employees can be
seen in the present close to 2000 employees currently in Mumbai and Delhi.
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But the most overlooked fact of McDonalds India is its contribution to the
food processing industry. Six years prior to the opening of the first McDonald's
restaurant in India, McDonald's and its international supplier partners worked together
with local Indian Companies to develop products that meet McDonald's rigorous
quality standards. Part of this development involves the transfer of state-of-the-art
food processing technology, which has enabled Indian businesses to grow by
improving their ability to compete in todays international markets. McDonalds
dedication to its suppliers has lead to their growth, beyond the boundaries of the India.
These aspects of McDonalds do not get covered and highlighted by the news
hungry press. But when the false news of using beef tallow in the French fries hit the
market, the press did not leave a chance to exaggerate it. Despite the fact that right
form the beginning; no beef ingredients have been used in any of the products in
India.
The marketing agency of McDonalds, Mudra comes to its rescue in such
times. The advertisements created by Mudra are a rage all over the nation, especially
amongst the children. Who can forget the little kid who gets nervous in the school
competition, but becomes happy again when his father takes him to McDonalds?
McDonalds India has tried not to leave any stone un-turned in its objective to
satisfy the Indian customer. But in Amit Jatias words, Customers are generally not
forgiving. According to the survey conducted, customers demand low prices, more
seating space, more variety, home delivery, and the list is endless.
The fundamental secret to McDonalds success is the way it achieves
uniformity and allegiance to an operating regimen. McDonalds India has to adhere to
many rules and regulations laid down by the parent company, and it still has to cater
to the Indian customer and his needs. McDonalds India is a case study on how to mix
conformity with creativity.
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HISTORY
In 1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger

stand in San Bernardino, California, and envisioned a massive new industry: fast
food. In what should have been his golden years, Raymond Kroc, the founder and
builder of McDonald's Corporation, proved himself an industrial pioneer no less
capable than Henry Ford.
He revolutionized the American restaurant industry by imposing discipline on
the production of hamburgers, French fries, and milk shakes.
By developing a sophisticated operating and delivery system, he insured that
the French fries customers bought in Topeka would be the same as the ones purchased
in New York City. Such consistency made McDonald's the brand name that defined
American fast food.
The business began in 1940, with a restaurant opened by brothers Dick and
Mac McDonald in San Bernardino, California. Their introduction of the "Speedee
Service System" in 1948 established the principles of the modern fast-food restaurant.
The original mascot of McDonald's was a man with a chef's hat on top of a
hamburger shaped head whose name was "Speedee." Speedee was eventually replaced
with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a
clown shaped man having a puffed out costume legs.
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McDonald's first filed for a U.S. trademark on the name McDonald's on May
4, 1961 with the description "Drive-In Restaurant Services", which continues to be
renewed through the end of December 2009. In the same year, on September 13,
1961, the company filed a logo trademark on an overlapping, double arched "M"
symbol.
The overlapping double arched "M" symbol logo was temporarily disfavored
by September 6, 1962 when a trademark was filed for a single arch, shaped over many
of the early McDonald's restaurants in the early years.
The modern double arched "M" symbol that continues to be in use today at
McDonald's restaurants did not appear until November 18, 1968 when the company
filed a U.S. trademark on the now famous symbol that continues to be in use through
the end of the year 2009.
The first McDonald's restaurants opened in the United States, Canada, Costa
Rica, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden in
order of openings.
The present corporation dates its founding to the opening of a franchised
restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955 , the ninth
McDonald's restaurant overall.
Kroc later purchased the McDonald brothers' equity in the company and led its
worldwide expansion and the company became listed on the public stock markets in
1965.
Kroc was also noted for aggressive business practices, compelling the
McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc
feuded over control of the business, as documented in both Kroc's autobiography and
in the McDonald brothers' autobiography. The site of the McDonald brothers' original
restaurant is now a monument.
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With the expansion of McDonald's into many international markets, the

company has become a symbol of globalization and the spread of the American way
of life. Its prominence has also made it a frequent topic of public debates about
obesity, corporate ethics and consumer.
WORLDS OLDEST MCDONALDS
This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants
and the last one with red-and-white striped tile exterior.
After opening in 1953, it immediately became the standard for the fast food
franchises across the country. The building and its 60-foot high neon sign with
"Speedee the Chef" are eligible for listing on the National Register of Historic Places.
Employees wear 50's style uniforms of paper hats, white shirts and bolo ties.
The restaurant serves the original menu of hamburgers, cheeseburgers, fries and oldfashioned milkshakes. Also available are more recent McDonald's items such as Big
Macs and Happy Meals.
McDonald's reopened the facility as it was with walkup windows and outdoor
seating. They also constructed and addition housing a museum, gift shop, restrooms
and more outdoor seating.
MISSION STATEMENT OF MCDONALDS

"McDonald's vision is to be the world's best quick service restaurant
experience. Being the best means providing outstanding quality, service, cleanliness,
and value, so that we make every customer in every restaurant smile."
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GLOBAL OPERATIONS
COUNTRIES WITH MCDONALD'S STORES

McDonald's has become emblematic of globalization, sometimes referred to as
the "McDonaldization" of society. The Economist magazine uses the "Big Mac
Index": the comparison of a Big Mac's cost in various world currencies can be used to
informally judge these currencies' purchasing power parity. Scandinavian countries
lead the Big Mac Index with four of the five most expensive Big Mac's. Norway has
the most expensive Big Mac in the world as of July 2008, whilst the cheapest country
is Malaysia.
Thomas Friedman once said that no country with a McDonald's had gone to
war with another. However, the "Golden Arches Theory of Conflict Prevention" is not
strictly true. Exceptions are the 1989 United States invasion of Panama, NATO's
bombing of Serbia in 1999, the 2006 Lebanon War, and the 2008 South Ossetia War.
Some observers have suggested that the company should be given credit for
increasing the standard of service in markets that it enters. A group of anthropologists
in a study entitled Golden Arches East[ looked at the impact McDonald's had on East
Asia, and Hong Kong in particular.
When it opened in Hong Kong in 1975, McDonald's was the first restaurant to
consistently offer clean restrooms, driving customers to demand the same of other
restaurants and institutions. McDonald's have recently taken to partnering up with
Sinopec, China's second largest oil company, in the People's Republic of China, as it
begins to take advantage of China's growing use of personal vehicles by opening
numerous drive-thru restaurants. McDonald's reached a deal with the French fine arts
museum, the Louvre, to open a McDonald's restaurant and McCaf on its premises,by
their underground entrance, in November 2009
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MCDONALDS IN INDIA
McDonalds have stores, and franchises opportunities, all over the world, India
included. McDonalds is classified as partnership operated by India.. McDonalds
India, a subsidiary of McDonalds USA, has expanded its presence in India via 2 joint
venture companies Connaught Plaza restaurants and Hardcastle restaurants.
McDonalds (India) has a 50 per cent equity stake each in both joint venture
companies. Connaught Plaza restaurants manages operations and expansions across
North India (Delhi, Jaipur and Punjab) led by Vikram Bakshi and Hardcastle
restaurants, which is headed by Amit Jatia, manages operations and expansions across
Western India (Mumbai, Pune, and Gujarat).
McDonald's in India is a locally owned and managed company run by
Indians, employing local staff, procures from local suppliers to serve its customers.
McDonald's India opened its first family restaurant at Basant Lok in Oct, 1996;
today it has 169 Restaurants across India. This vibrant decade has seen McDonald's
evolve Indian menus, Indian sensitivities and yet remain as globally innovative as
ever. This journey has seen McDonald's develop a rich brand identity amongst its
customers and employees as well as partners alike.
At McDonalds India we have had a single mantra: providing 100% total
customer satisfaction and the formula for achieving this goal in our restaurant
operation is the long-standing commitment to the McDonalds Promise Around the
world, McDonald's traditionally operates with local partners or local management. In
India too, McDonald's purchases form local suppliers.
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McDonald's constructs its restaurants using local architects, contractors,

labour and - where possible local materials. McDonald's hires local personnel for all
positions within the restaurants and contributes a portion of its success to
communities in the form of municipal taxes and reinvestment.
Six years prior to the opening of the first McDonald's restaurant in India,
McDonald's and its international supplier partners worked together with local Indian
Companies to develop products that meet McDonald's rigorous quality standards. Part
of this development involves the transfer of state-of-the-art food processing
technology, which has enabled Indian businesses to grow by improving their ability to
compete in todays international markets
Mr. Jatia and Mr. Bakshi
McDonalds worldwide is well known for the high degree of respect to the
local culture.
McDonald's has developed a menu especially for India with vegetarian
selections to suit Indian tasted and culture. Keeping in line with this McDonald's does
not offer any beef and pork items in India. McDonald's has also re-engineered its
operations to address the special requirements of a vegetarian menu.
The cheese and cold sauces used in India is 100% vegetarian. Vegetable
products are prepared separately, using dedicated equipment and utensils.
Also in India, only vegetable oil is used as a cooking medium. This separation
of vegetarian and non-vegetarian food products is maintained throughout the various
stages of procurement, cooking and serving.
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The McDonald's philosophy of Quality, Service, Cleanliness and Value

(QSC&V) is the guiding force behind its service to the customers. McDonalds India
serves only the highest quality products.
All McDonalds suppliers adhere to Indian Government regulations on food,
health and hygiene while continuously maintaining their own recognized standards.
All McDonalds products are prepared using the most current state-of-the-art cooking
equipment to ensure quality and safety.
At McDonalds, the customer always comes first. McDonalds India provides
fast friendly service- the hallmark of McDonalds that sets its restaurants apart from
others. McDonalds restaurants provide a clean, comfortable environment especially
suited for families. This is achieved through McDonalds stringent cleaning standards,
carefully adhered to.
McDonalds menu is priced at a value that the largest segment of the Indian
consumers can afford. McDonalds does not sacrifice quality for value rather
McDonalds leverages economies to minimize costs while maximizing value to
customers.
The company has invested Rs 450 crore so far in its India operations out of its
total planned investment of Rs 850 crore till 2007.
McDonalds India Pvt. Ltd. has moved an application to the government
seeking permission for payment and remittance of the initial franchise fee and royalty
to Mc Donalds Corporation.
The permission has been sought on two grounds: McDonalds India would pay
an initial franchise fee of $45,000 on each of the McDonalds restaurants already
franchised or to be franchised, in the future, in India; and a royalty equal to 5 per cent
of the gross sales from the operations of all its Indian restaurants on a monthly basis
to McDonalds International. The company hopes to break even in 2008. They
currently serve around 5 million customers a day and hope to grow at the rate of 50%
to 70% a year.
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CHALLENGES IN ENTERING INDIAN MARKETS

REGIOCENTRICISM:
Re-engineering the menu - McDonalds has continually adapted to the
customers tastes, value systems, lifestyle, language and perception. Globally
McDonalds was known for its hamburgers, beef and pork burgers. Most
Indians are barred by religion not to consume beef or pork. To survive, the
company had to be responsive to the Indian sensitivities. So McDonalds came
up with chicken, lamb and fish burgers to suite the Indian palate.
THE VEGETARIAN CUSTOMER
India has a huge population of vegetarians. To cater to this customer segment,
the company came up with a completely new line of vegetarian items like
McVeggie burger and McAlooTikki. The separation of vegetarian and nonvegetarian sections is maintained throughout the various stages.
CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION

Customer perception is a key factor affecting a products success. Many
potentially revolutionary products have failed simply because of their inability to
build a healthy perception about themselves in the customers minds. McDonalds
being an internationally renowned brand brings with it certain expectations for the
customers.
Target Segment
What is McDonalds for me?
A Family with children
A treat to children, a fun place to be for the children.
Urban customer on the Great taste, quick service without affecting the work
move
Teenager
schedule
Hangout with friends, but keep it affordable.
Customers expect it to be an ambient, hygienic and a little sophisticated brand

that respects their values. The customers expect the brand to enhance their selfimage.
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Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the
fact that they connect strongly with the brand. However, fulfilling some of the
customer expectations like a broader product variety provide McDonalds a great
scope for improvement
MCDONALDS TO OPEN 40 OUTLETS BY 10

McDonalds India plans to open 40 new restaurants by 2010. As part of our
expansion plans, we will open 40 new outlets across east and north India over the next
two years, said Vikram Bakshi, joint venture partner and managing director (north
and east India), McDonalds India.
Further, the company plans Rs 1.5 billion investment on expansion plan up to
2010. According to Bakshi, the focus of the expansion in the aforesaid period will be
National Capital Region (NCR) of Delhi and Kolkata.
The US food giant has a joint venture with Vikram Bakshis Connaught Plaza
restaurant for the east and north India. The north India operation also seeks to increase
its head-count from the present 4,500 to 6,500 to staff the new outlets, said Bakshi.
Currently, McDonalds operates 155 outlets across India.
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MARKETING MIX
Logic: Marketers have four tools to use to develop an offering to meet the
needs of their targeted customers. Collectively they are called the marketing mix.
You may have heard of the "four Ps" of marketing: product, price, place, and
promotion. Collectively these are called the marketing mix. More comprehensively
they are viewed as: product, service, or program - something of value you are offering
the customer, client, or park visitor price - what the customer, client, or park visitor
pays (direct costs are financial, indirect or alternative costs are such things as time it
takes and the things people give up if they choose your offering) place, distribution,
location, or accessibility - where the transaction takes place, perhaps in a park
promotion or communication - this is how you inform the target market the benefits in
your marketing mix.
Collectively these are the tools organizations uses to develop offerings to
satisfy their target market(s) ... the only tools at their disposal. Remember: If your
marketing mix doesn't meet their needs they will not be satisfied - and if they aren't
satisfied you are unlikely to meet your objectives.
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The marketing mix should be viewed as an integrated and coordinated

package of benefits that reflect the characteristics of customers and various targeted
publics and satisfy their needs, wants, and expectations. Note that the elements of the
marketing mix should be integrated because each element of the mix usually has some
impact, direct or indirect, on the other three.
For example, if you improve the product or service you probably have to
change the price because it costs more to produce. Although you may not have to
change where the product is delivered to the customer, you will almost certainly have
to change the promotion or communication with the customer because you need to tell
the customer about the changes you have made in the product and how the changes
will make it more desirable and satisfying.
One problem in many organizations is that different divisions may be
responsible for different elements of the marketing mix.
This happens even in well managed organizations. The result is that the
offering is confusing to the target market. Lack of communication among divisions
makes this problem worse. And if they don't share the same view of organizational
objectives, the problem is worse still.
These variables are known as the marketing mix or the 4 P's of marketing.
They are the variables that marketing managers can control in order to best satisfy
customers in the target market. The firm attempts to generate a positive response in
the target market by blending these five marketing mix variables in an optimal
manner.
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PRODUCT
The product, service, or program includes both tangible and intangible
elements. The tangible, of course, are those things that the customer can see, touch,
feel, taste, or smell.
The intangible include such things as the image of the offering ... which
includes the image of the organization making the offering, the psychological aspects
of pricing (high price to many customers is equated with high quality - and vice
versa).
PRICE
The price is what the customer pays. It includes direct and indirect costs as
well as opportunity costs. The benefits of the product have to be great enough to
warrant the price. Price includes all costs associated with the product, service, or
program.
PROMOTION
Promotion includes all forms of communication you use to communicate the
benefits of your offering to the target market(s). The objective is to persuade the
customer in such a way that he or she recognizes that your offering is uniquely
qualified to meet his or her needs.
The term promotion mix is commonly used to refer to the types of
communication that are available: advertising, public relations, personal selling,
publicity, and sales promotion.
Some authors include direct marketing. Word of mouth, though seldom
discussed, is powerful promotion.
38- 56
PLACE
The place is where the customer receives the product, service, or program. The
place of delivery, including all of its resources, is part of what the consumer buys. A
place that meets his or her needs better may be worth more.
The place may be a park, a visitor center in the park, or an interpretive exhibit
along a trail. In setting its strategy, the organization must determine how much the
target market is willing to pay for atmosphere and physical resources of place.The
marketing mix principles (also known as the 4 Ps.) are used by business as tools to
assist them in pursuing their objectives. The marketing mix principles are controllable
variables, which have to be carefully managed and must meet the needs of the defined
target group.
The marketing mix is apart of the organizations planning process and consists
of analyzing the defined:
How will you design, package and add value to the product?
Product strategies.
What pricing strategy is appropriate to use?
Price strategies.
Where will the firm locate?
Place strategies.
How will the firm promote its product ?
Promotion
strategies
39- 56
PRODUCT
BENEFITS OFFERED
We must remember that Marketing is fundamentally about providing the
correct bundle of benefits to the end user, hence the saying Marketing is not about
providing products or services it is essentially about providing changing benefits to
the changing needs and demands of the customer.
The vegetarian burger menu consists of the McAloo Tikki Burger. It is a
vegetable burger with potato, peas, and spices, tomato, onion, and a vegetable-tomato
mayonnaise.
McVeggie is another Vegetarian burger on the menu. It looks similar to the
above McAloo Tikki Burger, but is made from mixed vegetables, peas, and spices,
lettuce and veg mayonnaise (referred to as Veg Sauce in India).
Another new Menu Item added is the McSurprise burger. It contains a patty,
onion, Italian mayonnaise. There is also a Pizza McPuff, consisting of a puff pastry
stuffed with peas, sliced cheese etc.
40- 56
McDonalds concentrated on studying the Indian culture, its value-systems and

its influence in food consumption decision making.
It found that although a substantial proportion of the populations were nonvegetarians, they stuck to mostly fish, mutton and chicken. Muslim took beef but
though pig meat to be dirty; Hindus preferred neither beef nor pork; Christian took
both beef and pork. McDonalds decided, for the first time in their business history, to
drop ham and beef burger from their menu.
Two years back, they even excluded mutton burgers from their offerings.
McDonalds developed a menu especially for Indian with vegetarian selection to suite
Indian taste.
It introduced products like McTikki Aloo for the Punjabi taste buds.
McDonalds has also re-engineered its operation to address the special requirements
of a vegetarian menu.
The cheese and cold sauces used in India is 100 % vegetarian.
McDonalds are committed for giving customers wholesome, healthy, and delicious
food.
They ensure that the cooking area as well as cooking equipment for vegetarian
products is visibly segregated from the non Vegetarian sections. Whats more- their
crew members cooking vegetarian food items are identifiable by their green aprons.
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MCDONALDS MAIN INDIAN MENU

VEGETARIAN
McVeggie
NON VEGETARIAN
Chicken Maharaja Mac
McAlooTikki
McChicken Burger
Paneer Salsa Wrap
Shahi Chicken McCurry
McCurry Pan
Wrap Chicken Mexican
Pizza McPuff
Fillet-O-Fish
42- 56
PRICING
Pricing is the only mix which generates a turnover for the organization. The
remaining 3ps are the variable cost for the organization. It costs to produce and
design a product; it costs to distribute a product and costs to promote it. Price must
support these elements of the mix. Pricing is difficult and must reflect supply and
demand relationship.
Penetration
Skimming
Competition
Pricing
Strategies
Product Line
Bundle
Psychological
The customer's perception of value is an important determinant of the price

charged. Customers draw their own mental picture of what a product is worth. A
product is more than a physical item; it also has psychological connotations for the
customer.
The danger of using low price as a marketing tool is that the customer may
feel that quality is being compromised. It is important when deciding on price to be
fully aware of the brand and its integrity.
43- 56
A further consequence of price reduction is that competitors match prices

resulting in no extra demand. This means the profit margin has been reduced without
increasing sales.
Hence McDonald uses as a part of its business strategy to penetrate deeper
into the new and existing markets, the forever young brand McDonalds introduced
Happy Price Menu at Rs.20/- in the year 2004 in India.
This value for money proposition has been well accepted by the discerning
customers. The communication towards his proposition has gradated over the years,
but the Happy Price Menu platform has been consistent.
A very popular punch line of McDonalds-Aap ke zamane mein, baap ke
zamane ka daam. The main reason of this price strategy was to attract the middle
class & the lower class of people in India. After this not only the upper class prefers
going there but all class of people go there.
VALUE PRICING
Happy meal small burger ,fries ,coke + toy
Medium Meal Combo- burger ,fries, coke-veg Rs:75 ,Maharaja Mac Meal
Rs: 95
Family Dines under Rs: 300
Price lowers than Pak, Srilanka, and 50% lower than U.S.
44- 56
PROMOTION
The various promotion channels being used by McDonalds to effectively

communicate the product information are given above. A clear understanding of the
customer value helps decide whether the cost of promotion is worth spending.
There are three main objectives of advertising for McDonalds are to make
people aware of an item, feel positive about it and remember it. The right message has
to be communicated to the right audience through the right media. McDonalds does
its promotion through television, hoardings and bus shelters. They use print ads and
the television programmes are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonalds are:
You Deserve a break today, so get up and get away- To McDonalds
Aap ke zamane mein, baap ke zamane ke daam.
Food, Folks, and Fun
Im loving it.
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PLACE
The place mainly consists of the distribution channels. It is important so that
the product is available to the customer at the right place, at the right time and in the
right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonalds
outlet.
There is a certain degree of fun and happiness that a customer feels each time
he dines at McDonalds. There are certain value propositions that McDonalds offer to
its customers based on their needs.
McDonalds offers hygienic environment, good ambience and great service.
Now McDonalds have also started giving internet facility at their centers and they
have been playing music through radio instead of the normal music.
There are certain dedicated areas for children where they can play while their
parents can have some quality time together.
Direct Distribution
M an u factu re
r
C on su m
er
Indirect Distribution
Manufacture
r
Retailer
Consum
er
46- 56
IMPORTANCE OF PLC IN MCDONALDS

The requirements of customers change over time and thus the product offering
has to be changed accordingly. What is the fashion today may be out of market within
few weeks. Thus continuous innovation is required.
To counter these changes McDonalds has continuously introduced new

products and has phased out the old ones which were at the decline stage of their
PLC. The introduction is timed such that the new product does not cannibalize the
product already in the maturity or growth stage. Thus the secret lies in getting profits
with different products in the different stages of the PLC.
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SWOT ANALYSIS
STRENGTH
McDonalds has a strong market presence with its nearest domestic competitor
being only half its size, McDonalds is the market leader in both the domestic and
international markets. McDonalds benefit from cost reduction through economics of
scale because of its enormous size and its huge global presence allows it to diversify
risk involved with the economic performance of specific countries.
In Indian markets, McDonalds is well placed to expand and take advantage of
long term economic growth. McDonalds also has exceptional brand recognition. This
strong brand recognition creates significant opportunities for the company.
WEAKNESS:
The food industry is really saturated. Because of this, McDonalds has to deal
with the prospects of looming market saturation, which could make it difficult to add
new outlets. The market is forecast to grow by around 2% per year. There is also an
increasing price competition driven by too many competitors, which reduces the
companys ability to increase revenue.
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Nevertheless, the swift of the companys focus from a value menu to a more
diverse one has recently limited the negative effect of the intense price competition
that was traditionally taking place among the industry leaders. Lack of product
innovation is another weakness of McDonald.
OPPORTUNITIES:
McDonald in addition, to increase profitability has slowed its explanation of
McDonalds restaurants to refurbish and change the image of current restaurants and
adding new features such as internet access. McDonalds still has plans for more
international expansion. McDonalds still needs to penetrate in many countries by
introducing new products in the market considering the eating habits of the people.
THREATS:
McDonalds is exposed to changes in the global economy. The companys
aggressive international expansion has left it extremely vulnerable to other counties
economic slowdown.
The Fast Food industry is becoming an increasingly competitor sector.
McDonalds keeps up with competitors through expensive promotional campaigns
which leads to limited margins to gain market share. McDonalds is attempting to
differentiate itself, with new formats and new menu items, but other fast food industry
are doing the same too.
McDonalds just like other fast food industry often receives bad press because
of its link obesity. Increased concern such as this has led the food standards agency
and the department of health in the UK to review the advertising of junk foods such as
McDonalds to children. Top competitors for McDonalds include Yum! Brands.
49- 56
ANALYSIS OF THE RESEARCH

Graphical
re-presentation
of
survey
done
with
public
through
questionnaire Survey is done by taking the sample size of 30 consumers.
SURVEY QUESTIONNAIRE
Q.
Do you visit McDonalds?
20%
80%
Q.
Which is your favorite product at McDonalds?
Q.
Is the product line in McDonalds adequate?

50- 56
Q.
What is the main problem you faced at McDonalds?
51- 56
Q. What do you think about their pricing strategy?
10%
40%
50%
Q.
Which area do you think needs the most improvement?
52- 56
Q.
What is the first thing that strikes your mind about McDonalds?
53- 56
CONCLUSION
The franchising can give you a good start into the entry of the business for
some people, sometimes entirely new running any business of their own.
All you need to do is to follow the already existing formula with the training, advice
and marketing.
But, you are still investing some of your life savings. So it is best to do
research before you invest and take the advice of experienced professionals.
For the franchisors, to be this experienced advice is as least beneficial, for
without it, they may have an unsuccessful franchise but they will also put their whole
business in a bad position and place their livelihoods, lifesavings and all of their
franchisees in danger.
The growth of franchising in India is inevitable, because of its unique style of
business proposition and presence of several other factors acting as positive role
concurrently. Entrepreneurs realize this fact and look forward to gain the best from
this business option. As a result, the acceptability of franchising as a business option
has increased.
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Now people show keen interest in franchising matters. For them, it is a much
flexible business options in terms of - choice of sector, franchisors-, degree of
engagement (full time / part time) and even in the amount of investment. Franchising
system has a great impact on the society also. It creates a synergy in the society and
unveils a unique kind of win win proposition.
The Franchisor wins by having a presence, whereas the franchisee wins by
owning a profitable business and the society wins at large by emergence of numerous
entrepreneurs and having superior products and services.
McDonalds is a company that operates, franchises, services, and continually
grows in the quick service restaurant business. According to McDonalds,
approximately 80% of McDonalds restaurants are in nine markets: India, Australia,
Brazil, Canada, France, Germany, Japan, the United Kingdom and the United States.
McDonalds has restaurants all over the world in 121 countries serving 46
million customers each day. McDonalds also has other partner restaurants with brand
names such as: Aroma Caf, Boston Market, Chipotle and Donatos Pizzeria
generating $1 billion in annual sales collectively.
McDonalds is comprised of many restaurants that are operated by the
company, however they also have a large amount of franchises. Under the terms of the
franchise arrangements, the franchisees are operated under joint-venture agreements.
McDonalds relies heavily on its franchising activities with approximately
70% of the restaurants being owned and operated by independent business people all
over the world. The company is an equal opportunity franchiser with a proven 34% of
franchiser and 70% of applicants being US minorities and women (McDonalds,
2002). McDonalds offers support in all areas of franchising from operation.
McDonalds is the leading fast food chain in India where consumers rely on
product advertisements and food labels for nutritional education. The America
association advertising agencies states that responsible food marketing strategies
should, avoid vague, false, misleading or exaggerated statements, incomplete or
55- 56
distorted interpretation of claim made by professionals or scientific authorities, and

unfair product comparisons.
McDonalds is attracting mainly the teen age group. In India markets,
McDonaldss is well placed to expand and take advantage of long-term economic.
McDonalds keep up with competitors trough expensive promotional campaigns
which lead to limited margin to gain market share.
Lastly franchising business in India has raised the standard of leaving of the
people.
56- 56

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Franchising Business in India McDonalds

Franchising Business in India McDonalds

Franchising Business in India McDonalds

Franchising is one form of marketing channel; rather it is the fastest growing

Franchising Business in India McDonalds

Franchising Business in India McDonalds

While franchising is a safer route into becoming an entrepreneur, it is not just

Franchising Business in India McDonalds

According to the international franchise association of america,a franchise

A continuing relationship in which a franchisor provides a licensed privilege

Franchising can be described as a pooling of resources and capabilities; the

Franchising Business in India McDonalds

There is considerable interdependence between the franchisor and the

Achieving a certain level of sales.

Gaining a number of new customers.

Expanding your franchises territory.

Making a minimum amount of profit.

Improving your personal finance situation.

Franchising Business in India McDonalds

Franchising Business in India McDonalds

ADVANTAGES TO THE FRANCHISERS:

They can cover more territories

form of royalty without much fresh investment and additional efforts.

try to carry out these activities more effectively.

Franchising Business in India McDonalds

Franchising Business in India McDonalds

misunderstanding which may cause any conflicts between them

FRANCHISING LAW IN INDIA

Franchising Business in India McDonalds

Franchising Business in India McDonalds

The Indian government permits foreign franchisors to charge royalties up to

Franchising Business in India McDonalds

Franchising Business in India McDonalds

India is a geographical diverse country. Franchising in India is at a very

Franchising Business in India McDonalds

FRANCHISING TAKE IN INDIA

The annual turnover achieved by franchised business in India touches Rs.

More than 650,000 people are directly employed by franchised business.

Variety of franchising formats (retail franchising non retail franchising / pure

Franchising Business in India McDonalds

THE FRANCHISING ASSOCIATION OF INDIA

The Franchising Association of India (FAI) is a membership organization of

Franchising Business in India McDonalds

FOUR MAIN OBJECTIVES:

Franchising Business in India McDonalds

Franchising Business in India McDonalds

LEGAL ISSUES OF FRANCHISING

Franchising Business in India McDonalds

THE IFA EDUCATIONAL FOUNDATION

The companys key staff

Managements experience in franchise management

Franchisors bankruptcy and litigation history

Required investment and purchases

Responsibilities of the franchisor and franchisee

Other franchisees in the system with contact information

period in which franchisors must give prospective franchisees 10 business days to

Franchising Business in India McDonalds

THE FRANCHISE AGREEMENT

The franchise system, such as use of trademarks and products

Rights and obligations of the parties: standards, procedures, training,

Term (duration) of the franchise

Payments made by the franchisee to the franchisor

Termination and/or the right to transfer the franchise

Franchising Business in India McDonalds