Page 1: Introduction
When the McDonald brothers, Dick and Mac opened their first restaurant in 1940 in San Bernardino, California, they could never have imagined the phenomenal growth that their company would enjoy. From extremely modest beginnings, they hit on a winning formula selling a high quality product cheaply and quickly. However, it was not until Ray Kroc, a Chicago based salesman with a flair for marketing, became involved that the business really started to grow. He realised that the same successful McDonald's formula could be exploited throughout the United States and beyond.
There are now more than 29,000 McDonald's Restaurants in over 120 countries. In 2001, they served over 16 billion customers, equivalent to a lunch and dinner for every man, woman and child in the world! McDonald's global sales were over $38bn, making it by far the largest food service company in the world.
In 1955, Ray Kroc realised that the key to success was rapid expansion. The best way to achieve this was through offering franchises. Today, over 70 percent of McDonald's restaurants are run on this basis. In the UK, the first franchised restaurant opened in 1986 - there are now over 1,200 restaurants, employing more than 70,000 people, of which 34 percent are operated by franchisees.
This case study examines the success of franchising and investigates the special three way relationship that exists between the franchisee, the franchisor and the suppliers.