1. What could be the reason why McDonaldâ€™s have both franchised and own restaurants?
2. Which financial measures should McDonaldâ€™s use to control the global marketing programme in the single countries and in single restaurants?
3. What problems might arise if individual McDonaldâ€™s restaurants were required to enter sales data directly on the companyâ€™s centralized accounting website at the HQ in USA, instead of following the current procedure of sending it through country (subsidiaries) and through other regional channels?
McDonaldâ€™s Corporation (McDonaldâ€™s) â€“ www.mcdonalds.com â€“ is the worldâ€™s largest food service retailing chain. The company is known for its burgers and fries, which it sells through 32,000 fast-food restaurants in over 120 countries. Franchisees operated 81 per cent of the
restaurants at year-end 2009. McDonaldâ€™s is headquartered in Oak Brook, Illinois, and employs approximately 400,000 people.
The company recorded revenues of $22,745 million during the fiscal year ended December 2009. The net income was $4310 million.
The history of McDonaldâ€™s dates back to a hamburger stand in California, owned by two brothers Dick and Mac McDonald. Ray Kroc, a distributor of milk shake mixers, impressed by the operation of the McDonald brothers, persuaded them to allow him to open a similar restaurant in Des Plaines, Illinois. The first McDonaldâ€™s restaurant was established in Des Plaines, Illinois in 1955. Soon the number of McDonaldâ€™s restaurants increased to 100 by 1959 and 500 by 1963.
Under the franchise arrangement, the franchisees invest in the equipment, indoor- and outdoorsigns, seating and decoration, while the mother company owns or leases the land and building.
Franchisees pay the company service fees and rent for premises. Service fees are set as a percentage of sales, while rent and other terms of occupancy are stipulated in the franchise agreement, which is drawn for a period of 20 years.
The video case is about the challenges, which McDonaldâ€™s may face in consolidating revenues and other financial information from operations in multiple countries. It is also about recognizing how differing laws and monetary systems can affect the accounting activities of a global corporation.
Collecting, analysing and reporting financial data from all the restaurants in 120 countries is no easy task, as the accounting experts at McDonaldâ€™s are well aware. Every month, the individual restaurants send their sales figures to be consolidated with data from other restaurants at the local or country level. From there, the figures are sent to country-group offices and then to one of three major regional offices before going to their final destination at the McDonaldâ€™s headquarters in Oak Brook, Illinois. In the past, financial information arrived in Illinois in bits and pieces, sent by courier, mail or fax. Today, local and regional offices log onto a special secure website and enter their month-end figures, enabling the corporate controller to quickly produce financial statements and projections for internal and external use.