Expanding businesses face an array of obstacles they must overcome to optimize their chance of success. Growth is one of many major barriers for fast-food restaurants, because with greater operational capacity comes greater expenses, upkeep, and uniformity. Restaurants strive to obtain operational efficiency to keep their doors open and remain in business. If restaurants cannot manage their cash flows and optimize operational efficiently then operations will be impeded because there is not enough money to support operational expansion.
There are many issues to consider when expanding a fast-food restaurant. Continuous expansion can create an increase in both variable and fixed costs. Some of the variable costs include increased employee wages and emergency expenses. Fixed costs are also increased, because there are more restaurants. Instead of paying rent for one building there is now five restaurants that both have their own rent and insurance due at the end of every month regardless of sales made.
With all these factors taken into consideration, even the smallest daily decisions can make a difference in the operational efficiency of the chain. McDonald’s is one of the most successful chains in the world. With around fourteen-thousand stores, operational efficiency is of critical importance; therefore increased technological and labor efficient methods have dominated the workplace at their chains (Frequently Asked Questions, 2013). They have been very successful at luring customers by their low prices and delicious burgers which provides a value to the consumer or a reason to buy the product.
Even with great products, the economy as a whole has taken a big effect on the chain. The dollar menu has been an integral part of operations given lingering somber conditions of the economy. Also, simplifying the menu back down has improved efficiency during operations and gotten rid of unnecessary costlier items. Implementation of standardized efficient training and operational practices has left McDonald’s with an extremely efficient workforce. These efficient practices results in faster practices which in turn leads to lower variable costs.
McDonald’s not only implements these practices, but is also constantly looking for ways to do things more effectively. These efforts are what make for one of the most efficient operations in the fast food industry. One of the implementations McDonald’s as gone through includes the installation of Echelon Corporation’s, Loanwords technology which provides state of the art kitchen equipment that optimizes efficiency while saving energy. This equipment has communicative technology which allows McDonald’s to manage energy use and minimize maintenance costs (Gaucheness’s, 2007).
Being one of the world’s largest fast food chains does present substantial challenges. In order to create value to the consumer, McDonald’s has to give the consumer what they want amidst a huge array of tastes and preferences throughout the world. For example, the staple of McDonald’s is the beef burgers, forever, in places such as India beef is not consumed due to their cultural beliefs. In this example there is an obvious cost disadvantage. If McDonald’s wanted to keep operations in India alive they would have to find a suitable alternative to beef.
Initially Mutton had become the staple product served on their foods in India, but more recently McDonald’s has been experimenting with full vegetarian menus there (Choc, 2012). Many examples like this can be found across the globe depending on the cultures and societal norms. In situations like this, McDonald’s goes forward with a similar plan, offering a value bearing reduce while still maintaining efficient practices to maintain profitability. The potential economic impact for Bergmann is that the operational expansion will result in a couple of different situations.
The increased fast-food chains will increase workforce both nationally and locally by offering more hourly local positions, and increasing the number of corporate positions throughout the country. The supply of Bargeman’s product will increase by increasing the number of firms or in this case restaurants, which results in both lower prices and an increased probability of a higher number of sales. Depending on people’s tastes and preferences, alternate fast-food consumption will either decrease or stay the same.
Particularly in the short-term when the newer product is initially introduced into the local area demand may be slightly higher due to consumer curiosity. If the new chain does fairly well amongst consumers, then continued growth would be both a feasible and smart decision. With any other fast food restaurant, price sensitivity will be of vital importance in regard to setting price, and in considering new products. One of the biggest problems McDonald’s has come across is the decreased demand for their product uh to the depressed condition of the economy.
The set prices results in an extremely low profit margin making expansion even more difficult. Two of the best ways to settle this matter is to wait for a better economic atmosphere, or by creating a superior product that adds value to the consumer which would in turn increase demand for the product. Superior product will also help impede potential threat from competitors. Also, community involvement is a great way to spread the company’s name and build a positive reputation. While the present day does not offer the most promising outlook for an expansion, if done ropey, success may emanate.
