Various factors affect the management of McDonalds Company and such relate to the internal and external threats. As part of the internal problems, the complicated nature of McDonalds menu that makes it harder for the customers to choose what they want alongside the challenges of opening a new franchisee as a result of the high costs clearly affect the company. The major external threat affecting the firm is the fact that people want to eat healthy diets and therefore this greatly contributed to it losing business because of the related health concerns. The complexity of the fast-food industry has led to a situation whereby in order for firms to compete, it is essential that they differentiate their products according to the needs and preferences of the customers and at the same time ensure that they serve healthy products while being price competitive (Goodman & Cohen, 2004). Understanding the internal and external problems facing McDonalds will therefore be important, as this will help in presenting a clear action plan on how the organization will get to improve on its business performance.
Complicated nature of McDonalds menu
In order to market its products to a large client base, the management of McDonalds found it necessary to come with a broad line of its products. In terms of the chicken delicacies, it has over fifteen brands that include chicken McNuggets, chicken select tenders, grilled artisan sandwich, McChicken, premium McWrap chicken and southern style chicken among many others. Developing and articulating the attributes that make one meal differentiated from the other and at the same time offering quality meal packages, for the purposes of attracting value-oriented customers, may have numerous benefits but in the case of McDonalds, this leads to over complication in its menu (Kincheloe, 2002). This in turn leads to the clients receiving garbled messages over the specific line of products and therefore makes it harder for them to choose their preferred delicacies.
Ideally, in as much as the menu may be tailor made to allow for many different delicacies, the regular clients still end up on sticking to one line of their delicacies and this clearly presents numerous disadvantages to the firm. Another concern relating to the complicated menu is that while going through the menu, panic may grip a customer because of the nouns and adjectives used to define the respective foods. For instance, while checking for the burgers, there is the Jalapeno Double, Buffalo Ranch LaFrieda custom blend, Angus beef patty, SMC (super-melty-cheese) served with a Donkey Sauce slathering on garlic-buttered brioche. To be precise, the menu is more of an unreliable predictor of the actual food presented at the table. Ideally, the only thing eatable without any fear or regret is “lunch sandwich of chopped pork-glazed soy with cucumbers and coleslaw” (Kincheloe, 2002).
Expensive to open a new franchisee
In as much as opening a McDonald’s franchise may seem a lucrative business; it requires too much capital, which may end up scaring investors. To start with, for the successful opening of a single restaurant, it is mandatory from the company that the potential franchisees do get to have liquid assets exceeding $750,000. This has to be personal and non-borrowed resources. This clearly presents a high figure and as argued by analysts, the company charges excessively for rent alongside the fees for training and remodeling and therefore this makes the business less profitable (Goodman & Cohen, 2004). The startup costs are inclusive of equipment and construction expenses that average between $950,000 and $2.5 million. The total figure corresponds to the restaurant size, selection of the kitchen equipment, style of décor, signage as well as landscaping.
Moreover, it is a requirement that the franchisees pay up to 45% of the related startup costs alongside other personal resources while settlement of the rest may occur through financing. In addition to such costs, McDonald’s also charges $50,000 as franchisee fee with an ongoing monthly fee that equals 4% of the gross sales (Goodman & Cohen, 2004). Having sufficient capital for the opening of a new franchisee evidently presents a great internal problem for McDonald’s Company as the high fees may not be affordable by the average American who may be cash strapped and therefore takes note of what he or she spends.
This affects the management of the company in the sense that for it compete adequately it becomes necessary that it operates numerous restaurants to improve on its market share while the high costs discourage many potential investors from opening new franchisees. This clearly may not be favorable for the business as it may lead to a situation of undercapitalization arising from the costs of setting up the franchisee system alongside the costs of supporting the operations of new franchisees that in some instance may exceed the royalty revenues in line with the franchise fees. Typically, it may take a minimum of 20 profitable franchise units to generate enough royalty to support the whole franchise structure (Goodman & Cohen, 2004) External threats
Over the recent past, critics have been vocal in stating about the health risks posed by McDonald’s foods. This has negatively affected the company as many people alongside their families have continually shunned away from the once popular fast-food joint. As argued, eating McDonald’s food may bear serious damaging effects to the customer’s health; this is because of the low nutritional value of the meals that contain high fat levels alongside sodium and calories content (Schlosser, 2012). Ideally, majority of the McDonald’s food contain significant amount of oil and grease and this may be quite harmful as it leads to the deposition of huge amounts of bad fats into the body of which may not get to digest well. This implies that individuals not only digest huge quantities of fat but also store them as well. With statistical associations relating to weight gain, diabetes, obesity and cardiovascular conditions, regular consumption of McDonald’s fast food diets may prove dangerous.
The extremely high fat and calorie content may result in numerous weight gain problems leading to the great risk of causing diabetes. Similarly regular consumption of fast foods bears the risk of developing resistance to insulin that may heighten the risk of developing specific types of diabetes complications. Critics further argue that consumption of McDonald’s foods may result in cardiovascular health problems, which may result into increased hospitalization in relation to coronary problems. Therefore as argued, McDonald’s foods contain numerous chemicals that raise the bad cholesterol levels, which may result into the lowering of immunity and consequently damaging of DNA (Schlosser, 2012). This in the end may reduce the quality of life of its customers, hence presents a serious external problem.
Goodman, D. J., & Cohen, M. (2004). Consumer culture: A reference handbook. Santa Barbara, Calif. ;Oxford: ABC-CLIO. Kincheloe, J. L. (2002). The sign of the burger: McDonald’s and the culture of power. Philadelphia, Pa: Temple Univ. Press. Schlosser, E. (2012). Fast food nation: The dark side of the all-American meal. Boston: Mariner Books/Houghton Mifflin Harcourt.
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