Partnerships
There must be a minimum of two and a maximum of twenty people in a partnership.
Partnerships are owned, controlled, managed and financed by the partners. All finances are raised by the partners through personal savings or borrowing from the bank.
All profits raised by the partners go to the partners.
Partners have a contract that they write themselves. This contract outlines the rules of the partnership.
You could also have a sleeping partner who invests money into the partnership but takes no active role in the day to day running of the business. Sleeping partners have limited liability.
Franchising
Franchising is a form of co operation between two businesses. A company which has a well-known product or service allows an individual to buy the right to use their products or services and trade under their name.
A franchise is owned by the franchisee, controlled by the franchiser, managed by the franchisee and financed by through savings or borrowing from banks.
All profits made by a franchise are kept by the franchisee but the franchisor takes a percentage in the form of royalty payment.
Entrepreneurs
Entrepreneurs are seen as someone who as the ability to take risks and organise the factors of production, they are particularly interested in their firm’s survival. A business needs finance to fund and obtain a business.
A business needs labour to help develop a product service and then to produce or deliver the business.
Businesses need customers, without them the businesses will fail.
The business needs suppliers to provide the products.
The businesses need somewhere to manage its finances and problems e.g. an office, factory, etc.
In order for the business to be successful you would need all of the above factors and also a plan of what you intend to do with your business.
In order for an entrepreneur to succeed he or she will need to have ideas, be willing to take risks, have the ability to persuade others and also they need the energy to keep the business going under tough circumstances.
If I were to start a business I would need an idea as to what sort of business I am going to run. In order to this I would need a business plan to plays ways to start up a successful business.
Secondly I need to consider what people are willing to buy. When I have this figured out I need to start thinking about the workers I am going to employ.
I think the best method of growth for me would be a sole trader, because all the profits go to me. A sole trader business is also quick and simple to set up.
It is also easier because quick decisions can be made so I do not need to check with anyone else before I make a decision.
The external factors that affect businesses are:
Political
This includes national and local government policy and laws, and also national and local government spending and taxation.
These include:
- European Union
- Pressure groups
Social
This includes changes in lifestyle, costs and benefits and also population changes.
Economic
Economic growth
International trade
Unemployment inflation
Technological
New technology
New products
ICT
One of the main reasons for financial constraints in business is inflation. Inflation is the overall rise in prices in a country over a year. The inflation rate in the UK is currently around 2%.
There are 3 forms of inflation:
- Cost Push inflation: this is when a businesses cost increase. E.g. wages rise forcing the business to raise prices.
- Demand Pull inflation: this is where customers create a shortage of goods by demanding too many, leading to a price rise.
- Monetary inflation: this is where the government prints extra money meaning money loses its value.
Another reason for financial constraints is interest rates. These are the government’s way of handling inflation. These rates are set by the Bank of England who decides the best rate to meet the government’s inflation target. Currently the official rate is 50% but it is said to increase. Each 0.25% increase results in a rise of £25 in a £100,000 mortgage.
If demand pull inflation pressures are too high then this will lead to an increase in interest rates. As a result people will have less spare money to spend on others things because their mortgage will be too expensive and the demand for goods will lesson.
Companies have to pay direct taxes.
Private individuals have to pay income tax which is based on the amount they earn. However sole traders and partnerships are taxed at income tax rates rather than at cooperation tax rates.
Both employer and employees has to pay national insurance as a proportion of employee’s income. This contributes towards the social security system, e.g. job seekers allowance.
Indirect taxes include:
Value added tax is payable at each stage of production on the value added by the business. This tax is usually passed on to consumers through higher prices.
Businesses pay additional taxes on top of VAT placed on certain goods such as alcohol, tobacco and petrol. This is known as excise duties.
Finally business pay additional taxes on imported goods and this is known as customs duties.
The group’s 30,000th restaurant opened in 2001, and the golden arches now spread across almost 120 countries and welcome 47million customers every day.
Some of the main concerns with the environment are global warming, acid rain, ozone depletion, wildlife and natural habitats, air, land and water pollution.
Many of the causes of these problems are the activities of businesses in providing consumers with their wants and needs. Greater environmental awareness of consumers means that many businesses are adopting more eco friendly practises to ensure that they maintain consumer loyalty. To help protect the environment the government has introduced the following acts:
The Environmental Protection Act
Under this act businesses have to ensure that they are using those methods which will best reduce the amount of land, air and water pollution. Failure to do so will result in fines.
Legal constraints that affect McDonalds are:
Planning permissions
If McDonalds wanted to build new premises or change the use of their existing premises then they would have to submit plans to the local council. The local council will work out the benefits of the plan (e.g. new jobs/ businesses in the area) against any negative effects (e.g. noise pollution, the kind of people it would attract, safety, and invasion of privacy) and then make a decision. The council can deny the business from demanding changes to their business plans.
Consumer protections
There are a number of laws that protect consumers from the actions of businesses, these include:
Trade Description Act
This makes it illegal to describe goods and services incorrectly. For example if a T.V is surround sound LCD colour screen then that is exactly what it should be.
Weights and measures act
This act makes it illegal for a business to sell short measures of goods which are underweight. A pint of beer should be equal to 500 grams of sausages. Inspectors have the right to test weighing and measuring equipment to ensure that they are in working order.
The food and drugs act
It is illegal to sell food or drink which is unfit for human consumption, or on which the labelling wrongly describes the contents or misleads people about the quality or nutritional value of food.
Employee protection
The government has also introduced:
Health and safety at work act
This law requires employers to be responsible for the health, safety and welfare of employees in the workplace by ensuring that equipment is safe, that employees know how to handle, store and transport articles and substances, and that they are correctly trained and supervised in all of the above.
Sex discrimination act
It is a crime to discriminate against anyone because of their sex or marital status with regard to recruitment, terms and conditions of service, training, promotion and dismissal (firing).
Race relations act
It is illegal to discriminate against someone because of their ethnic group or colour.
Equal pay act
Employee who does the same work to someone of the opposite sex is entitled to equal rates of pay and conditions. This act is meant to give men and women equal pay for the same job.
There are also many laws relating how businesses compare with each other and which restrict the damage they can do to the environment.
McDonalds now face a growing challenge from sandwich outlets such as Subway.
The criticism that McDonalds receive from health food campaigners and concerns about obesity have encouraged them to launch healthier products such as salads, wraps, yoghurt and bottled water. This means that sales will increase which leaves the restaurant with more money left to spend on other things such as refurnishing the restaurant and introduction of services such as internet access.
Due to the fact that the income people are receiving is increasing, this has a positive outcome for McDonalds because the more income people receive the more money they will have to spend on take away meals. Although there are other fast food outlets that might benefit from this. McDonalds still have an advantage.
According to a press report in October, McDonald’s sales were up by 5.5%.
Percent Increase Comparable System wide Sales
Sales As Constant
Month ended October 31, 2006 2005 Reported Currency
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McDonald's Restaurants* 5.5 3.4 8.2 6.6
Major Segments:
U.S. 5.6 3.0 6.3 6.3
Europe 5.5 3.3 12.1 6.7
APMEA** 4.7 4.3 6.1 6.8
Year-To-Date October 31,
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McDonald's Restaurants* 5.5 3.8 6.4 6.6
Major Segments:
U.S. 5.0 4.4 5.7 5.7
Europe 5.4 2.7 6.1 6.5
APMEA** 5.7 3.5 4.4 7.7
* Excludes non-McDonald's brands
** Asia/Pacific, Middle East and Africa
(This table was collected from .com)
In the year 2004 McDonalds launched a documentary film which was directed by Morgan Spurlock, an American film maker. It follows a time period where he only eats fast food provided by McDonalds, three times a day, every day, for thirty days. He had to eat everything on the McDonalds menu at least once without any exercise.
Spurlock was a 33 year old, he was fit and slim and very healthy. He weighed 185.5 lb (84.1 kg) he gained 24.5 lb (11.1kg). He experienced mood swings, and nearly a catastrophic liver damage.
One of the social effects that will affect McDonalds is the changes in population due to: high birth rate, a fall in the death rate or a higher number of immigrants than emigrants. This will effect the business because their will be an increase in demand for goods and services. The businesses investment will increase so they can meet the increase in demands. If the population is increasing, more goods and services will be demanded. To meet these demands businesses will have to employ more workers and invest in more capital equipment. If the demand for goods increases, sales will increase and the business will make more money. If there are more workers to choose from then that means that different employees can specialise in the different jobs their best in. On the other hand, a fall in population will decrease the demand for goods and services, and the opposite of the above will happen.
Businesses are also interested in the number of people in each age group and gender because this will determine the demand for their goods or services and types of goods and services they should be offering.
The size and structure of population in a local area will also have an affect on the business.
The lifestyles also affect businesses. People’s beliefs, values, tastes and attitudes are constantly changing, and businesses have to react to these changes or go out of business.
There are a number of social reasons why McDonalds have not had the chance to open a restaurant in an area. Many neighbourhood groups and locals residents believe that McDonalds is just another fast food outlet, which is seen as a threat to existing businesses. As well as causing litter and traffic problems most of which is caused by drive thrus.
In the year 2004 a McDonald’s restaurant in Cambridge was said to be closed in order to build more houses.
McDonalds used Disney to help promote their happy meal toys. Now Disney has declined their 10 year contract. This contract was signed in 1996. The original agreement meant that McDonalds would pay Disney $ 100 million a year in royalties, and promoted 11 movies, videos, theme parks, and TV shows.
This contract has been withdrawn because Disney has become concerned about linking cartoon characters to the fattening fast food that is associated with McDonalds.
The deal was worth an estimated $1 billion to McDonalds and $100 million to Disney. The last Disney toys to be featured in the happy meals will be ‘Pirates of the Caribbean: Dead mans chest’ and the animated ‘Cars’.
McDonalds on the other hand was unhappy with the box office results of the latest Disney movies which are being beaten by their competitors Dream works. When the contract was first signed, blockbuster animated movies like ‘The Lion King’ had Disney on top of the industry, but in the past years sales have dropped.
At the same time, Dream works has been getting Academy Awards praise from the public for films like ‘Madagascar’ and the ‘Shrek’ series. Accordingly, McDonald’s signed a two-year contract with DreamWorks last summer, so children will soon get to see the Oscar-winning green ogre ‘Shrek’ in their Happy Meals.
McDonald’s uses their ways of advertising quite cleverly. McDonalds have a slogan as a representative of their golden arches store. The McDonald’s slogan has changed over the years.
Currently their slogan is “I’m lovin it” which is endorsed by a celebrity Justin Timberlake. This slogan emphasises that everyone who eats McDonald’s food will simply love it because it tastes great and the service is fast and well.
This is a questionnaire to determine why people visit or not visit McDonalds.
Part 1
1. What age range are you?
7 – 9
10 – 15
16 – 20
21 – 31
Other ______________
- What fast food outlet do you eat at most often?
McDonalds
Burger King
KFC
Pizza Hut
Other______________
If you’ve eaten at McDonald’s restaurant please continue with part 2 and 3. If you have not, please complete Part 3.
Part 2
- How often do you eat at McDonalds?
Every day or more
2 - 6 times a week
About once a week
About once a month
- How would you rate the level of hygiene in McDonalds?
Excellent
Good
Satisfactory
Poor
- Would you recommend McDonald’s to a family or friend?
Yes
No
- Do you agree that McDonalds are targeting their food at young children?
Agree
Neither agree nor disagree
Disagree
Part 3
- Are you happy with the amount of healthy options they provide?
Yes
No
Comment __________________________________________________________________________________________________________________________
- Do think there should be more healthy options.
Yes
No
Comment __________________________________________________________________________________________________________________________
10. Would you visit McDonalds?
Yes
No
If no, why? _______________________________________________________________________________________________________________________________________________________________________________________
11. Do you think McDonalds have friendly staff?
Yes
No
If no, why? _______________________________________________________________________________________________________________________________________________________________________________________
12. How would you rate the accessibility to McDonald’s?
Excellent
Good
Satisfactory
Poor
From the information I gathered, I realised that the older generation seemed to visit McDonalds more than any other fast food outlet.
I think this is because most adults will not have the time to cook food so they might go to McDonalds after work. Most adults however do take their children to McDonalds for a quick meal.
These results are not accurate enough to base a judgement on McDonalds, because they do not show any information about how McDonalds might aim there advertising at younger children.
I chose to represent my data in a pie chart because that way there are more accurate results and it is easier to see the percentage of people that selected each outlet.
Based on what I’ve researched I think it was a good idea for McDonalds to start franchising because I now see the results it has on McDonalds.
McDonalds is now one of the top selling fast food brands and I think that without Ray Kroc the McDonald brothers would never have seen such a dramatic increase in sales and profits to their small hamburger stand.
For the McDonald brothers I do think franchising has been a great success for them.
