Business Studies Paper on McDonald’s Corporation Fast Food

McDonald’s Corporation Fast Food

8.0 Operations Overview

McDonald’s Corporation entry into the Kenyan market will see more stores being rented within the Nairobi central business district (CBD). The choice for this area of operation is to target the highest number of potential customers operating in the region. The choice for the operation building is to have a kitchen, toilets, a station where one can relax and enjoy the delicacy and sale counter for those in a hurry. The operation equipmentare to be easily held, and the priority will depend on the basics (Pycraft, 145). Since this is a food business, hygiene is an ultimate objective that must be achieved and maintained at all time. The kitchen is to be well kept and ensure good sanitation that is compliant with the national health standards. The company willensurehigh-quality operation standards in order to maintain the business good reputation (Aswathappa, 352).

McDonald’s Corporation will reveal its existence through advertisement is the available products. People in Nairobi are advanced in terms of technology; hence, most of the advertisement will be carried out through the internet platform. The major platforms to be used in advertising are the social sites such as Facebook, Twitter, and Instagram. for those people who wish to know the existence of the company and are not into the social sites, the company will carry out advertisement through billboards, local newspapers, radio, and flyers. The promotion plan is projected to run for about one year and in the subsequent year, the company will design a new strategy for gaining the customers depending on the result that will be realized.

8.1 Legal requirements

The legal authority that McDonald’s Corporation will have a close relationship with is the County Government of Nairobi. The county government is the one that will be responsible for issuing the legal permits necessary for the company operations. The first requirement forestablishing the business is the trade license. Trade license is to be issued by the Nairobi county government upon payment of the required fee. The company will also employ staff to assist in the operations (Brown and Alan, 247). The staffs are covered by the labour unions in accordance with compliance with the state labour laws. This is anobligatoryprerequisite to ensure that the workers are well taken care of, and the working environment is conducive to their health. Therefore, the management will ensure that all the staff is registered with Central Organization of Trade union (COTU).

In Kenya, those operating in the food industry are expected to have health license. This is a mandatory requirement that will be issued after conducting a medical test at the hospital. The management will ensure all the staff meets the standards by ensuring all are medically fit to operate in the restaurant (Pycraft, 52). The restaurant must also be tax compliant and meet the expectation of tax remittance for every product that will be purchased. This requires that the daily sales be billed using the ETR machine that will automatically calculate the tax. McDonald’s Corporation will extend the ISO 900 certification to the country by ensuring the expected quality managements standards. The business will try to ensure that all the customers’ and stakeholders needs are met in compliance with the ISO 900 standards. The operation of the restaurant fall under section four of quality management and section five on management responsibility.

8.2 Sustainability

The sustainability of the restaurant will be divided into three phases, which are profit, people, and theplanet. All the stakeholders are important in ensuring the restaurant operations are sustainable in all the possible ways. Therefore, the management will be responsible for supervision and the overall operation of the business to ensure all activities comply to the set objectives. The people, who are the consumers of the products that will be provided, must be looked after (Brown and Alan, 447). This is ensured through the production of nutritious and healthy foods. McDonald’s Corporation would like to improve the health of the Kenyan society by giving a well-balanced diet full of nutrients that is obtained from the products used to make the food. The production ingredients will be selectedcarefully from the local vendors that will ensure a steady supply of fresh materials.

The aim of the trade is also to maximize the revenues and enhance the entire company. The profits accumulated will be used in the expansion of the business by opening other outlets in the city and extending to other towns within the country. McDonald’s Corporation is creating a sustainable environment for the future generation; therefore, the packaging materials that will be used to serve the customers are environmentally friendly. Some of the food will be packaged in portable paper bags while others will be served in recyclable plastic containers  (Pycraft, 124).

8.3 Sale Forecast and Production Volume

McDonald’s Corporation is entering a very competitive market with close to producing similar products. The success of the company will depend on the level of advancement and the variety of products to be produced. The product quality will help raise the interest of the customers and if maintained will help determine the figures of sale per day and throughout the financial year. The main challenge that can arise will be maintaining the customers that are will be interested in the products at first and maintain their loyalty. The supporting issues of the criteria can be based on the economic challenges or the financial crisis that may cause people to reduce their consumption of fast foods. However, McDonald’s Corporation is hopeful that people will still be interested in consuming the healthy diet that will be provided by the business (Brown and Alan, 523).

Despite the predicted challenges, the company is hopeful to maintain the expected average sales per day that will see the business realize the daily profit. The profit that will be obtained from the daily sales may be minimal but after winning customer loyalty, the profits is likely to increase even after paying the tax.

8.4 Action Plans

The main reason for being in the business is to produce quality products as well as win the customers loyalty for the business to realize profits. Therefore, before the project or the business become operational, a little bit of housekeeping must be carried out. This will involve the strategies to making the restaurant look attractive to the people and enable then develop the attitude of “let’s try it out”. The attitude can be maintained depending on the quality of the product, the environments, and customer’s service delivery.

The business will have to negotiate renting rate and prices with the building that will be identified. Upon acquiring the space, the stakeholders will carry out the necessary renovation and decoration of the restaurant. Modern catering equipment will be purchased to help in the production of food that is on the menu. The sitting space will be made is to accommodate only a few people, twenty in numbers. Another arrangement will be to acquirethestaff and train them to the company standards of service delivery. In the final week, the whole restaurant is to be cleaned, and first stock delivery be made. On the opening date, the company management will carry out an advertisement in the local radio station that is tuned in most to create awareness (Schlosser, 147).

9.0 Financial and Risk Management Strategy

McDonald’s Corporation extension branch in Nairobi will be a small business hence the financial analysis that will be carried out is for the start of the operation. Since this is an old company in a new area, the management will have to evaluate the workforce in Nairobi, determine their performance, and find out if they qualify for the international standards. The company will be keen on keeping the financial records such as balance sheet, cash flow statement, and income statements. The importance of keeping the financial record is to enable the company knows the financial status of the business so that the management can determine the success of the business.

9.1 Products for Sale

Burgers menu: All the beef delicacies in the restaurant will be seasoned with salt and black pepper added. In the burgers menu, there is the hamburger, big mac, BBQ Ranch Burger, Big N’ Tasty, doublecheeseburger and Mc Double. These are some of the few foodstuffsthatwill be launched to test the markets. In the subsequent years, the business will intend to expand and improve the menu of the burger list and provide Bacon Mc Double, Mc Feast, Daily Double, ranger Burger, BBQ Ranch source, Bacon Clubhouse, Mc spicy Burger and triple cheeseburger.

Chicken menu: The menu is to comprise of chicken select, which is the company version if strips chicken. Mc Chicken, which is a balanced spiced chicken sandwich that is made the chicken white meat, lettuce and mayonnaise, place on a toasted bun. In the list is also the premium chicken sandwiches which is a company rebranding of the Mc grill chicken sandwich and crispy chicken. The introduced premium chicken wrap is also introduced in the menu together with chicken fajita, chicken mc Nuggets, Mc Arabia, Chicken bites and Mighty wings (Schlosser, 234).

The menu will also have a fish and port category with fish prepared for sale being Filet-O-fish and Fish Mc bites. Since pork is not a famous delicacy for the people in Kenya, the restaurant will serve Mc rib, which is a sandwich that comprise of boneless port, barbecue source, pickles and slivered onions. The most common fast food that is fast going is the fries. Fries will be prepared in large quantity to satisfy the customers demands as it was observed in the market study.

The break first menu for those who wish to carry break first to the office will have a wider variety of muffin, Hamdesal, sausages, hot cakes, donuts, biscuits, and cookies. Beverages is also in the list of products being offered, which will include milkshakes, sodas, tea, coffee and other soft drinks that are available in the market. The last menu is to comprise of desserts that will consist of assorted pies of chicken, biff and sausage, and apple pies. In the desert menu, the fast food restaurant will provide McDonald land cookies, yogurt and fruit parfait, smoothies and brownie melts.

9.2 Product pricing

The pricing for the product is to be inconsistency with the already existing fast food restaurants. The assumption in price setting is that the dollar is more valuable than the Kenyan Shillings; therefore, the prices will range from $1.5 to $10 depending on the product being sold (Abrams, 235). The original price cannot be determined due to the continuous variables inthemarket mix. The pricing for the products will be set to make the company realize its returns and enable the company to meet the rent and staff expenses. In the second year of operation, the business is assumed to will have established a better ground by maintaining customer’s loyalty and attracting more customers. Through this, the business is expected to increase the price of the product by 3% to enable the business meet its expenditures and general operations.

9.3 Startup Cost and Source of Funds

The startup cost is estimated to be $350,000 that will come from the business director planned budget of expansion. The cost is considered a profit from other McDonald’s Corporation businesses, hence will not put the business to the extent of borrowing bank loan. The cost capital will be spent on acquiring the space, the furniture’s, renovation and acquiring the legal permits for business operation. The other capital will be set for running the business operations such as advertisement and sales promotions. The table below shows an estimated expenditure and source of funding.

Source of business funding $
Investment from business owner 350,000
Fund distribution
Renovation of the building 50,000
Operation equipment’s /supplies 100,000
Administrative expenses/wages 15,000
Advertisement 1,000
Equipment maintenance 2,000
Utilities 3,000
Stock 5,000
Other expenses 1,000
Operating capital 38,000
Total used fund 312,000

 

9.4 Restaurant Proforma Statement

The figure below shows the projection for the first year of operation

ITEM AMOUNT
Sales

Cost of goods sold

Gross profit

1,975,000

732,000

1,224,000

Expenses

Wages

Rent

Water

Telephone

Electricity

Advertising

Stationery

Postage

Transport

Insurance

Repairs

 

677,100

30,000

3,000

3,600

2,500

10,000

500

475

60,000

2,500

5,000

Net profit before tax

Tax 16%

776,650

124,264

NET PROFIT AFTER TAX 652,386

 

9.5 Break Even Analysis

NO DESCRIPTION YEAR 1
1 Water 3,000
2 Telephone 3,600
3 Electricity 2,500
4 Advertisement 10,000
5 Stationery 500
6 Postage 475
7 Transport 60,000
8 Repairs 5,000
9 Tax 6,4632
TOTAL COST 147,207

 

The break even analysis is carried out with an estimation of 5000 sales for the fast food. the average selling price is at $5, with a monthly break-even sale of $15,000. The projection level is set above each monthly sale at an approximation of 35%.

To calculate the total contribution margin for the year, the total variable cost is subtracted from the total sales ($19,750 – $147,207) = $127,457.

9.6 Proforma Balance Sheet

The introductory balance is at $1,000,000, whichis expected to grow at positively by the end of the financial year. Since this is a new company, the business expects to take advantage of the introduction by getting more customers who wish to taste the products.

DESCRIPTIONS AMOUNT ($)
ASSETS
Current assets

Cash

Debtors

Stock of finished goods

Stock of ingredients materials

 

Total Current Assets

 

 

125,000

110,000

193,500

271,500

 

800,000

Fixed assets

Machinery and equipment

Furniture

Fittings

Office equipment

 

Total Fixed Assets

 

 

129,500

40,000

17,500

13,000

 

200,000

TOTAL ASSETS 1,000,000
LIABILITIES
Current liabilities

Creditors

 

Long-term liabilities

Owner’s equity

 

50,000

 

 

950,000

 

 

TOTAL LIABILITIES AND EQUITY

 

 

1,000,000

 

TOTAL FINANCED BY

 

 

1,000,000

 

 

9.7 Risk Analysis

Introducing the business in new location and region can be a beneficial or a risky venture depending on the nature of the market. Various factors are bound to challenge the introduction if the business in Nairobi. These factors are categorized into Strength, Weaknesses, Opportunities, and Threats.

Weaknesses: The businesses intend to establish a sitting capacity of only twenty customers. This is a weakness because the business can end up booming with many customers wanting to enjoy their meals while seated. The first outlet will be located at one place. Some of the potential customers may be challenged with the business location hence making the business to lose revenues. During incentives, the business can attract more customers hence creating long ques (Aswathappa, 357).

Strengths: McDonald’s Corporation is to provide American cuisine, which will introduce a new culture in the African continent. The delicacy is fresh and nutritious, served to both children and adults. The strength of the business is also based on the low starting price, which is a strategy to attract customers. If the strategy succeeds, the business is expected to perform well within the first financial year and the subsequent years (Wilk, 537). The strength of the business is also based on providing kinds special delicacies that also see the business make good sales. Consequently, the business will also offer quality fast food to those in a hurry to get to work. Finally, the business is expected to operate for long hours hence ensuring good service delivery to every potential customer without disappointment.

Opportunities: McDonald’s Corporation is a well know fast food restaurants and introducing the business in Nairobi may be a good opportunity for the business to realize the profits by gaining a larger market share. Extending the services to Nairobi will also be a good opportunity to gain popularity globally as the international market grows. Exporting the McDonald’s Corporation team to the region is another opportunity for the company to explore the wider market in Africa and find the opportunity to invest more in the continent. The business will also have the opportunity to introduce new menu in the region and provide good and quality service to the people (Aswathappa, 356). Finally, the local people will have the opportunity of being employed by the company hence creating more job opportunities for the government.

Threats: the major threat in the business is expected to rise from the competitive market. There are already food outlets delivering close but not similar products. The business can be related to contributing to the poor health in the region by providing junk food such as fries (Wilk, 35). Therefore, the business can face the challenge of being outdone by the restaurants that provide local delicacy as fast food. Another threat will come from the supermarkets, which are known, to currently having fresh food outlets. These can increase the level of competition for the business. The final threat can be in terms of pricing the product. McDonald’s Corporation wants to maintain the quality of the product, which can turn out to be expensive for the locals to purchase. Therefore, the business can end up experiencing losses as the management try to balance the between winning customers and sustaining the business.

9.8 Limiting Factors

The fast food business keep on expanding on adailybasis with new companies trying to improve on the products are already in the market. Despite that growth, just as McDonald’s Corporation, every business has its own pros and cons that influence its sustainability. However, in the establishment of a business in a new location, there can be more limiting factors than positivity (Abrams, 235). The business may be established with an intention to gain a larger market share but end up finding more competition than the predicaments. The business can end up in financials crisis due to low customers turn our or due to complicated legislative issues. Since McDonald’s Corporation is going to establish a new competition in an already existing competitive market, the success of the trade will be contingent on the quality and the uniqueness of the products that will be on offers.

9.9 Strategic Success Factors

McDonald’s Corporation strategic for success is to develop varieties of healthy food with the focus on attracting and changing customers’ perception, both young and the old. The strategic plan is to find a suitable location that will be easily accessible and can be reached by many potential customers. The service delivery is expected to be one of a kind that is aimed at attracting and retaining customers (Aswathappa, 356). McDonald’s Corporation has been in the fast food business for several years hence have acquired tactics and innovations that will see the business through success. The consideration for all the promotion and pricing strategies is expected to create a good foundation to winning and retaining customers.

10.0 Conclusion

Following the financial report by the National Restaurant Association, the restaurant industry is most likely to realize a faster financial growth in 2015. The projection by the association is estimated at $710 billion, an increase in revenue by 3.8% compared to the previous year 2014. The restaurant will create employment for the local people hence will be effective in improving people’s livelihood through better pays and good working conditions. This is part of the contribution that is played by the restaurant industry as the largest private employer industry globally  (Abrams, 452). With the introduction of McDonald’s fast food outlet in Nairobi, the company strongly believes that there isademand for quality fast food in Nairobi. Despite the many fast food restaurants, the company has designed new strategies that will not match the standards if the already existing food outlets.

10.1 Recommendations

To recommend on the established risk, the business has come up with strategies that will provide ananadequate solution to the problems (Wilk, 63). Since the business already exists alongside others, McDonald’s Corporation can choose to buy or rent some of the already existing food outlets and change the quality of food and service delivery. Renting these fast-food outlets will help the company in reducing competition. If the strategy succeeds, the company can then buy all the other outlets so that McDonald’s fast food outlets can be the dominating food outlet in Nairobi Central Business District.

11.0 References

Abrams, Rhonda M. The Successful Business Plan: Secrets & Strategies. Palo Alto, Calif: The Planning Shop, 2003. Print.

Aswathappa, K. International Business. New Delhi: Tata McGraw-Hill Education, 2008. Print.

Brown, Robert, and Alan S. Gutterman.A Short Course in International Business Plans: Charting a Strategy for Success in Global Commerce. Novato, Calif: World Trade Press, 2003. Print.

Clark, Richard E, and Fred Estes.Turning Research into Results: A Guide to Selecting the Right Performance Solutions. Charlotte, N.C: Information Age Pub Inc, 2008. Print.

Kotler Philip & Armstrong Gary.Principles of Marketing.  New York: Pearson Prentice Hall,

McDonald’s Website.About us. Retrieved on February 2, 2015 from <www.macdonalds.com>, 2014

Mugo Caroline. Fast food boom in Kenya double-edged sword. Retrieved on February 2, 2015

Pycraft, Mike. Operations Management. Cape Town: Pearson Education South Africa, 2000. Print.

Schlosser, Eric. Fast Food Nation: The Dark Side of the All-American Meal. Boston: Mariner Books/Houghton Mifflin Harcourt, 2012. Print.

Wilk, Richard R. Fast Food/slow Food: The Cultural Economy of the Global Food System. Lanham, MD: Altamira Press, 2006. Print.