Franchising the McDonald's way Senior executive reflects on lessons learned over 33 years
With the launch of a new book looking at the success of McDonald's, author Paul Facella talks to The Franchise Magazine about the importance of franchising in building the global brand
In the epilogue of his new book Everything I Know About Business I Learned At McDonald's, Paul Facella reflects that franchising allows the company to thrive 'on the full-time, best efforts of all licensees. The model is based on the belief in the individual store operating independently but dependent on the strength of the system.'
The former president and CEO of the USA'division of McDonald's, who spent a total of 33 years with the company and is now enjoying a well-earned retirement, has written his book to reveal the 'soul of the McDonald's organisation,' and relate the lessons learned from his involvement with the globalisation of the McDondald's brand and network.
Of course franchising has played a huge part in the development of McDonald's, and Paul reveals huge respect for the format. 'What could be better than a committed franchisee, spouse and family being involved day to day in the restaurant in the area in which they live?,' he reflects. 'McDonald's was built to be part of the community. That's the difference from a company like Starbucks that's all company run - it's very difficult to get the same passion and involvement in company-owned restaurants. The important thing is to get the right person in there.'
Paul estimates that 'about one per cent' of franchisee applicants are accepted, who then must past a very intensive training programme which lasts between a year and 18 months. 'It really submerses the franchisee in the business,' he comments. 'Although statutically 30 per cent of McDonald's franchisees started out as staff members. You have incredible opportunities to move up - there's a culture that says we'll promote our people from within.'
The standardisation of product and pricing has been a large factor in the success of McDonald's. 'Replicability is very important,' agrees Paul. 'McDonald's wrote the book on it, literally with its intensive operations manual. Every store manager has to graduate the McDonald's Hamburger University. It's the pinnacle of training in the restaurant field, in fact the full course in the US is eligible for 42 college credits.'
The success of the franchisees and their desire to grow has driven the expansion of the McDonald's global network. Paul reveals an astonishing statistic: 'I believe that the average McDonald's franchisee owns something like 2.5 stores.' He continues: 'The beauty of the system is that there are strict criteria for expansion, covering the franchisee's ability to develop people, financial stability, and the way they run their operation. That's a built-in incentive for everybody to run the best store they can.'
Paul reflects that the company's unique culture is behind the organisation's 'soul'. He concludes: 'As I wrote the book, one of the things that occurred to me was was the unique heritage of the company. Other quick service restaurant chains, including Burger King, Wendy's and Taco Bell, may have been around longer, but none have had the continued involvement of the founder for anything like as long. Ray Krok worked from 55 until the day he died, and orignial grillman Fred Turner is still active as honourary chairman 53 years later. For them it wasn't about building a company and selling out, it was about building a passion for people, doing something not done before and being the best in the market. There's been a steady hand there over 53 years.
'McDonald's has never been about making a quick buck. Ray's approach was to let the franchisees make the first buck, and he would make the second.'
PAUL FACELLA'S 7 LEADERSHIP PRINCIPLES THAT DRIVE BREAK-OUT SUCCESS
Honesty & integrity. McDonald's founder Ray Krok would never take kickbacks from suppliers. He set the tone at McDonald's for honesty and integrity which is the cornerstone of the relationship between franchisor and franchisee.
Relationships. The McDonald's business model can be likened to a three legged stool, where the legs are the franchisees, the suppliers and the employees. All are dependent on each other. McDonald's treats all three parties as true partners.
Standards. McDonald's takes standards to the nth degree. The McDonald's mantra is: 'Everything can be improved'. In order to achieve this the company is committed to measuring everything to keep track of progress. No organisation has as many field reps.
Lead by example. That started with Ray Krok. He would walk into a store and if he didn't like the product he would stand on a chair, give people their money back and tell them to come back tomorrow. You will see executives taking off their jackets and helping serve customers if a store is not running right. It's a very flat organisation in the sense that there's no elitism.
Courage. That may get a few eyebrows raised, but I've watched great leaders needing the courage to say no. For example McDonald's turned down a huge deal in the '80s because it didn't support the franchising polices within the company. When Jim Cantalupo took over in 2003, sales were down and he decided to cut growth of stores in the US, let everything settle, then spend over US$100 million to incentivise operators to reinvest in their stores.
Communications. You can't stress enough the importance of communication in a large organisation. In the absence of good communications rumours and inuendos sink in. Letting people in on the process is important, especially in a decentralised organisation such as a franchise network.
Recognition. Most organisations say they recognise people. McDonald's always does it with fanfare, with gusto, with class. There are 23 specific awards McDonald's gives out in the US and they track them over the years. People are really motivated to get the awards.
Interview by Stuart Anderson