Restaurant industry is observing rapid growth on yearly basis as population is increasing and per capital income also is on rise. Different retaurants use varied approaches to increase their business. Restaurant chains like McDonald’s are using franchisee model to expand their business and to give tough competition to rivals. Model proved successful for the company and help it in increasing its business. However, with passage of time compeition also increased and due to this reason an attempt is made in the present research study to identify impact that franchisee model have on the McDonald’s business growth. Rationale behind research is that restaurant business is growing at fast rate in Saudi Arabia and many SME open in past years. McDonald’s use franchisee model to expand its business in mentioned nation (Showail, McLean Parks and Smith, 2013). Hence, it was necessary to conduct research to identify extent to which mentioned model will benefit firm in terms of busines growth in current and future time period. This, reflect the importance of the present research study for the business firm.
Mc Donald is one of the fasest growing restaurant chain in the world(Asad Sadi and Henderson, 2011). Company have vast product portfolio and country to country to some extent it varies. More then 30000 outlets are operating by the firm across the globe through franchisee model. 3,75.000 employees are currently in the company workforce and in future same will increase at rapid rate. Firm is consistently focusing on increasing its footprint across globe by using franchisee model. This was one of the trend that is observed from past few years. Other trend that is identified is that franchisee business model is emerging as one of the popular medium of growth for firms like McDonald’s. Hence, in such kind of situation it is hard to find out extent to which franchisee model become successful because already there are small retail restaurant chains that are in position from where tough competition can be given to the company. Hence, it can be said that major research problem is to identify extent to which franchisee model can contirbute to business growth of McDonald’s.
Aim of research: Present research study aims at identifying impact that franchisee model have on growth of the McDonald’s business in Saudi Arabia.
Objective of research
To evaluate growth rate of McDonald’s business in Saudi Arabia.
To find out reason behind success of franchisee model in Saudi Arabia.
To identify role that sub franchising which is not very popular in Saudi Arabia can play in growth of the business firm.
In current time period gap between franchisee owners and management is increasing. Franchisees have common assumption that management is not taking care of them and they are only concerned about shareholders and profitability. Trust gap become 1.45 on scale that is between 1to 5. On this category franchisee give rating to management in terms of cooperation given by it to them in operating business. Pressure to control employee cost is another factor that is affecting franchisee and mangement relationship. Franchisee are struggling to earn profit in business because nothing special is offered in menu in comparison to rivals. Hence, lack of cooperation between management and franchisee is affecting business growth of Mc Donald.
According toYousuf Danish and Lawton Smith, (2012) franchisee model help a lot to the business firms in opening their branches in the Saudi Arabia and other nations of the world. This is because by making own investment it is very difficult task to expand business at fast rate across the globe. It is the franchisee model that assist firm in increasing its business in the world. In past few years on multiple locations in Saudi Arabia McDonald’s and other large restaurant chains open multiple restaurants and capture the market. Hence, it can be said that franchisee model proved effective for the company. Currently, company is operating 150 stores in the mentioned nation and plan to increase same to 200 by 2020. This fact revealed that franchisee model assist firm in giving boost to its growth rate in the mentioned nation and in upcoming time period also this rate will keep on growing consistently. This is because company presently looking for digital transformation of its business as it recognize importance of data driven technology for the company in terms of making business decisions. Thus, it can be said that use of advance technology will further assist firm in reaping advantage of franchisee model in Saudi Arabia.
Contrary to this Zamani‐Farahani and Henderson, (2010) state that franchisee model is affecting firm growth and give boost to it but it is not factor that alone help company in expanding its business at fast rate. It is the product quality and service that assist firm in creating more customers in the business. Franchisee model help firm in expanding business in short duration. Even if McDonald’s will not make use of this model in its business then it also it was possible for it to observe robust growth in the business. Hence, it can be said that franchisee model does not play any big role in the company growth.
As per views of Sadi. and Saricimen,(2010) there are varied reasons behind success of franchisee model in the Saudi Arabia. One of the basic reason is that income level of people is high in the Saudi Arabia. Due to higher per capita income spending is also high among people in Saudi Arabia. Hence, local people prepared to take franchisee of the McDonald’s and this factor help company in growing its business at fast rate in the Saudi Arabia. Apart from this, large number of foreign people live in Saudi Arabia for employment purpose. Such kind of people on festive seaosns or for party purpose prefer to visit such kind of costly restaurants. Such kind of consumer behaviour lead to increase in franchisee at fast rate in Saudi Arabia. Apart from this, there are multiple foreign dishes that are quite popular in the Saudi Arabia like Pizza etc. These dishes are prepared by using specific ingredients. Such kind of taste can not be observed in case of local restaurants. Hence, there is great demand of the products of McDonald’s in the Saudi Arabia and due to this reason, number of people are consistently taking franchisee of mentioned firm in relevant country.
Contrary to this Park and Glascock,(2010) state that even Mc Donald name is quite popular it does not mean that it will get huge success in business for long years. From long time no change is observed in menu of the restaurant and due to this reason people get boared by visiting Mc Donald restaurant. They are looking for different alternatives and small size restaurants are to some extent meeting their expectations which impetus pressure on Mc Donald. Hence, it become inevitable for the company to increase new dishes in its restaurant menu so that customers can find something new and something different every time when they visit restaurant. Such kind of strategy will give competitive edge to the firm over rivals.
According toMacdonald, (2013) firms that are runing restaurant chains like Mc Donald are following franchisee model which is proving successful for them and pave a way of growth for them in gulf countries and other nations of the world. This is because through this model they in collaboration with local people are easily runing their business and coms to know about needs, want, taste and preference of local people. All these things assist firm in developing deep insight about people of specific nation and according to their taste food products are served. Hence, it can be said that there is huge importance of the fanchisee model for the business firm and it is playing major role in its success.
Contrary to this Ali, (2008) state firms like Mc Donald are not exploiting opportunities fully that are available in the market. This is because they are not following sub franchisee model in many nations of the world where ample opportunities are available. Sub franchisee model is one under which single entity that is appointd as master franchisee which guide and train as well as provide other support to other franchisee units in same nation. Sub franchisee model assist firm in bringing drastic change in business expansion growth rate. This is because better supervision is given to franchisee owners by the company management indirectly through mdiation fo sub franchiser. In franchisee model it become hard to maintain management in specific nation. Hence, it can be said that failure to adopt sub franchisee in varied nations of the world may prove costly to the Mc Donald in terms of growth rate.
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Books and Journals
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Ali, S., 2008. [Online]. Franchising’s appeal: market growth in saudi arabia. Available through:<https://www.franchise.org/franchising%E2%80%99s-appeal-market-growth-in-saudi-arabia>.
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