Franchising Case Study Group 2

University of Southeastern Philippines Bo. Obrero, Davao City

McDonald’s India: Preparing to Rule the Land of Maharajas (Case Study in Franchising)

Submitted by: Kapungan Gomez Drillon Monizza Fernandez

Company Background McDonald’s is a good example of business format franchising. As we all know it is one of the successful franchising businesses now. Ray Kroc, the founder of McDonald’s worldwide chain of fast food restaurants used to describe the McDonald’s phenomenal success. Kroc was a perfectionist to the core and never used to compromise in any aspects of business. He promised to offer the customers high quality products, served quickly in a clean and pleasant environment, at an affordable price from the day he opened the first restaurant. In 1954, Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of the “multimixer”, a milk-shake maker. He came to know that the McDonald’s hamburger strand in California was running eight Multimixers at a time. He paid them a visit and pitched the idea of opening up several restaurants to the owners, Dick and Mac McDonald. They struck a different deal, and Ray Kroc opened the first McDonald’s restaurant in 1955. In 1965 McDonald’s went to public.

Statement of the Problem      

How did McDonald’s expand its operation globally? What was the entry strategy of McDonald’s entering to India? Why did they choose to enter that way, according to you? What were the challenges before McDonald’s India that came in its way to start operation in India? How did McDonald’s overcome these challenges? Evaluate its growth and expansion strategy in India. Is McDonald’s ready to start offering its franchise in India? Examine its franchise feasibility.

Answer/Solution:

1. The McDonald’s expand globally because they were focus on quality, service, cleanliness and value (QSC & V) to the customers which became their corporate philosophy. They also try to reach the area where families had little time to shop and to prepare food at home in their early morning rush to offices and workplace that’s why they’ve tried to think about it. 2. The strategy made by the McDonald’s to enter India is they invite interested entrepreneurs to be a franchise partner in order to fuel the growth of McDonald’s in India. 3. Most Indians are very traditional food preference and like to eat home cooked food while at home or at office/workplace. Maybe the changing food habit is the big challenge before McDonald’s India that came in its way. 4. They overcome this challenge by diversing their products. McDonald’s added Chatpatey(spicy) Potato Wedges and the wrap to their menu in 2002. McDonald’s commitment to its Indian customers is also shown in a development of special sauces that use local spices. McDonald’s has also changed its operations to address the special requirements of a vegetarian menu. Vegetable products are prepared separately, using dedicated equipment and utensils. 5. McDonald’s has been expanding its operation in different geographical areas of the country. It is expanding n gradual manner in India and is evident from the fact that it started its first restaurant in Chennai in April 2008, well after 12 years of its first two restaurants started in Delhi and Mumbai on October 13, 1996 and October 21, 1996 respectively. Its Indian operations are managed by its Joint venture (JV) partnersHardcastle Restaurants Pvt. Ltd., Mumbai for Western region and Connaught Plaza Restaurants Pvt. Ltd., New Delhi for the Northern region. The JV was signed in March 1995. By the end of 2005, there were more than 50 restaurants in India-about 35 in the Northern and 20 in Western region. While McDonald’s India has been inviting applications from the interested entrepreneurs to be a franchise partner, it is yet to decide about appointing franchisees to fuel its growth in India.