Lessons from behind the arches

Spending 24 years with the Golden Arches exposed me to the good, the bad and the ugly of growing a truly global franchising food retail brand. McDonald’s have an outstanding success story made possible by trying new things, pushing boundaries, making mistakes but mostly learning from them. Here are some of the key messages I believe all businesses big or small can adopt.

Guarantee Supply

McDonald’s adopt a dual supplier arrangement (where possible) for its core products. These agreements ensure that if one supplier is unable to meet its supply obligations for any reason the second supplier can ramp up production to cover the shortfall. Other advantages include creation of competition between suppliers and the ability to tap into two company’s research and development initiatives.

Recurring Revenue 

The growth of any business is controlled by cash flow and equity. McDonald’s guarantee cash flow by creating recurring revenue streams from every business unit whether they are franchised or company owned. These streams include rent, system fee, royalty and marketing contributions.

Unwavering commitment to compliance has helped McDonald’s become a truly international brand

Compliance is King 

Ensuring that the operational procedures and policies of the brand are adhered to will build the business. Proven methods that you have developed work, so non compliance to these methods will damage the brand. Compliance checks should be completed on a regular basis but should also be combined with business growth discussions. The compliance managers/consultants should be partners to your franchisees and not just checklist tickers.

Company Owned Operations

McDonald’s success can be attributed to the quality of its training and systems. To achieve this you require resources including people and income. Company owned stores and their infrastructure supply a natural environment to develop people, trial products, develop new procedures, set benchmarks and deliver profit. Although the split may vary a 70/30 Franchisee/Company owned split is considered a good model.

There are many reasons McDonald’s are a leader in branding, international expansion, food retail and franchising that many organisations could learn more lessons from.

 

James Howell

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact James Howell at james.howell@dcstrategy.com