True, but franchises only stay franchises because they are making money. McDonalds in general tries to ensure that franchises make money. They won't let you get a franchise if you they don't think it will be good for all. All includes other franchises in the area - there are only a few cases where there is a McDonalds "near" another, and most are owned by the same person. (The only cases I know of is the original McDonalds has a bigger one across the street because the original is too small for the traffic and would be closed without the historical significant; and a case where one is inside a mall while the other is outside, and thus get different traffic)
McDonalds is also careful to ensure all their franchises are in locations that will make the owner a ton of money (if they run the business well) and so it is a good deal. Not all companies work this way though.
Aren't most fast food restaurants franchises, and the individual corporations running them own a handful in a fairly constrained geographic area? There are 3-4 companies that own the various McDonalds locations in my area and I don't think any of them own more than 3.
Most of the locations are franchises. It is pretty common for a franchisee to earn enough money to open another McDonald's. The corporate profits probably don't tell the whole story.
How many individual people are buying new franchises these days?
I can't say with certainty, but my impression is that most McDonald's (and other fast food chains, possibly other franchises as well) locations are then owned by semi-regional operators that run a number of franchises. Around here, I know most of the McDonald's are run by 1 corporation. Same with the Burger Kings. It was the same way where I lived previously.
I'm not sure that agrees with the franchise model. McDonald's corporate owns the real estate, but not most of the businesses. So most of those terminals aren't actually theirs.
My interpretation of what he says was basically McD's has more leverage. Part of establishing a restaurant is establishing enough return clientele at a certain location. And a large portion of the clientele might stay with the owner if it turned into a Jack in the Box. But this number drops off a cliff if it's also across the street. So the BATNA for a non-McDonalds franchisee is just switching franchises, and taking a hit to their business. But the BATNA for a McDonald's franchise is starting all over again.
mcdonald's is actually a good example. it's at least 3 businesses on top of the nominal one of fast food: franchising, supply chain, and real estate. franchisees pay for access to the mcdonald's brand, trademarks, and shared marketing. in addition, mcdonald's corporate provides complete supply chain support, so franchisees buy all of their food and materials through mcdonald's itself or from its approved suppliers. mcdonald's corporate also owns the real estate that many franchises sit atop, so it's a landlord to boot.
it'd be easy to split those businesses into separate ones, as it's plainly obvious that all three businesses can viably stand alone, apart from serving fast food. you might argue that that'd dilute the brand value because the product wouldn't be as uniform, but you just have to look at the international variation to realize that that's not so important to brand value.
> Yes, and McDonalds has a business of connecting people who want hamburgers with people who are making hamburgers.
I don't know for McDonald's, but for many fast food companies that's absolutely true: the main company (the brand) only sells the franchises, and the franchisers actually own and operate the restaurants. However, the main company holds very tight control over the experience (prices, branding, inspections, menus, ...).
McDonalds corp cares whether franchisees succeed or fail. Failing franchisees start cutting corners, which results in McDonalds stores which are run down, with poor service and product quality and this harms McDonalds corp's reputation and bottom line. This is the reason McDonalds corp won't let just anybody start a franchise, you have to buy your way into this game by having at least a million dollars liquid, to prove to the corp that you have enough cash on hand to run the store properly. They also don't let a franchisee put the store anywhere they like, rather they choose and develop properties themselves to make sure those locations make strategic sense for the corp as a whole (they don't want two McDonalds franchises sitting right next to each other competing, driving each other out of business.) Furthermore if you want to be a franchisee you have to go through their training courses, you can't just buy a McDonalds franchise on a whim and gift it to your trustfund son. If you want your spoiled son to own a McDonalds franchise, you need to persuade him to go through their training program.
If Taylor machines were actually a real threat to the viability of many McDonalds franchises, McDonalds corp would make changes. It is against their interests for McDonalds franchises to fail and they already employ several severe and strict measures to reduce the likelihood of failure.
If this system seems overbearing, then simply start your own burger shop, or get a franchise from a fast food brand who doesn't give a shit like Subway. Subway will give a franchise to somebody with a tenth as much money, don't care if franchises sit on top of each other, etc. Not incidentally, Subway has an abysmal reputation for consistency, quality, cleanliness and food safety. McDonalds food is crap, but it's crap in a way that is consistent and safe (in the short term; it might give you diabetes but it probably won't give you botulism.)
Franchise stores and restaurants like McDonalds don't compete with each other as they have a physical attribute to them insuring this. IT Franchises however would be free to compete with each other making this business model pretty much impossible. The only way I see this working is with Franchises limited to one per country/state, who are specialised in regards to language, customer preferences and local laws.
reply