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Mcdonalds Npv Projects

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    The fast food industry in Canada is like no other in the world. Canada has long been a country of indulging and not caring about consequences. Stats Canada published that in 2004, 23. 1% of the Canadian population was overweight. It has also been noted that the obesity rate seen a sharp increase during 1978 to 1980. The fast food industry did begin in the early part of the 1950’s, but didn’t truly take off till the 1980’s.

    In around the 1980’s the use of intercom communication started to gain interest for the use of Drive-thru windows, and during this same time obesity started to climb. The fast food industry has exploded in the last ten years, mainly because more Canadians are stating they don’t have enough time to cook. The average preparation time of a meal in Canada has declined from 44 minutes in 1996 to just 21 minutes in 2004. As we as a country become more and more fast paced. The Fast-Food industry gains more and more appeal. As the times change so do our choices, and more Canadians are looking for healthier choices while living a fast paced life.

    In 2008 the three most commonly visited restaurants in Canada were McDonalds, Tim Hortons, and Subway. Subway is growing rapidly in Canada because of its convenience and somewhat healthier choice in diet. Food Service Industry Sale Overview As of 2008, there were 20,248. 4 full service restaurants in Canada and 10,525. 0 Restaurants with limited service with the total commercial foodservice restaurants (including institutional foodservices, retail foodservices, and other foodservices) totaling 58,904. 02 in the Canadian marketplace (Ministry of Agriculture Food & Rural Affairs).

    Food Expenditure in Canada Overview (all stats from Food Expenditure in Canada 2001 published by Statistics Canada): ? 2001 households spend an average of $124 per week on food in stores or restaurants. 60% of this was in table-service restaurants compared to 25% in fast-food restaurants (including take-out). ?All income groups dined out more however there were differences with men who lived alone spending the most on restaurant food purchases compared to families or lone-parent families. ?Food purchased from restaurants for fast food in Canada was 5. 57 percent with the most being consumed in the Atlantic Region at 12. 5 percent compared to the lowest being in the Prairie region at 10. 59 percent. ?The Meal type most purchased out by Canadians is Breakfasts with the highest being 16. 46 percent in the Atlantic region compared to the Prairie Region at 8. 54. Meal TypeCanadaAtlantic RegionQuebecOntarioPrairie RegionBritish Columbia Breakfasts4. 3716. 469. 228. 698. 548. 61 Lunches3. 9211. 758. 198. 017. 688. 52 Dinners3. 539. 957. 337. 366. 267. 83 Snacks5. 4413. 0211. 7312. 0810. 8911. 78 Fast Food1. 503. 893. 742. 473. 113. 78 Table-Service1. 685. 523. 523. 083. 333. 94 Other Restaurants2. 416. 626. 164. 155. 215. 1 Canadian households have spend the same amount on food in 2001 as in 1996 30 cents of Canadian household food expenses went to restaurant meals (up from 28 cents five years earlier) 2001 $38. 00 per week were spend in restaurants by Canadian households compared to $86. 00 on food purchased in stores. Weekly spending on food ranged from an average of $66 for incomes less than $20,000 up to $203 for households with incomes of $80,000 or more. Individuals in the highest income group purchased meals from restaurants on average twice a week compared to once a week for those in the lowest income group.

    Across Canada weekly food spending ranged fro $109 on average in the Atlantic Provinces to $132 in British Columbia. Focus on Specific Food Service Franchise in Canada-McDonalds McDonalds in Canada is ranked number three in the world for food statistics (amount of food sold per capita per $GDP) at 0. 352 per 10,000 population (according to www. NationMaster. com). Only the United States (ranked number one) and New Zealand (ranked number two) outscore per capita food statistics sold per capita in Canada.

    Additionally, according to Social bakers (a website promoting Corporate Facebook Statistics) McDonald’s is positioned as number 7 of all Canadian Brands with Fan growth speed growing 42 by day,287 by week, and 2,351 by month; this is important to note as social capitalism is key as a new global currency (www. Socialbakers. com). McDonalds is the ranked number two in sales within Canada with Tim Hortons being number one. As we continue into our analysis we are going to look into new possible ways to increase the value of our company and the market share of our industry.

    McDonalds Beginning The history of McDonalds is the classic tale of opportunity meets ingenuity. A 52 year old man named Ray Kroc had sunk his life savings into a company focused on distributing milk shake mixers (Multimixer) saw an opportunity when he visited a California hamburger stand operated by Dic & Mac McDonald and offered to financially invest and help them open other franchises. To open a franchise today the initial fee paid to McDonalds is $45,000 and equipment and pre-opening costs range from $1,000. 000 to $1,200,000.

    A new owner must come up with 40% of total cash cost to open a new restaurant and McDonalds offers no financing options. The agreed to Franchise Term is a minimum of 20 years and the service fees a calculated from the restaurant’s gross sales and paid on a monthly basis. Rent is calculated on a monthly basis based on a percentage of sales. (www. McDonalds. com). History within Canada There are currently 1,400 operating McDonald’s locations within Canada with over 77,000 employees. The founder of the first Canadian McDonald’s was George A.

    Cohen and the President is John Betts, and the Chief Operating Officer, Dave J. Allen. The first McDonald’s in Canada was opened in Richmond, British Columbia in 1967. Ironically, this was the first McDonalds restaurant opened in the global market outside the United States. Currently, this company is headquartered in Don Mills, Ontario, Canada (www. ask. com Encyclopedia). In 1968, a franchise of McDonalds was started in Eastern Canada beginning in London, Ontario followed by growth in New Brunswick (1970), Montreal (1972 followed by intense growth within Quebec), 1977 (250th McDonalds opened St.

    John’s Newfoundland), and a milestone was reached in 1981with McDonalds becoming the largest foodservice organization in Canada. In 1985 the first small McDonalds version called McSnack opened in Toronto’s Dundas West subway station (this has continued to grow within Canada to serve small public areas such as Malls, subway, sky train, and other transit areas). IN 1994 McDonalds signed an agreement to open franchises within Wal-Mart stores with over 200 McDonald’s restaurants now serving Wal-Mart customers. Simultaneously, in 1994 this company declared all McDonalds to be ‘smoke free’ environments.

    In 2003 McDonalds became the first restaurant in Canada to offer free WIFI high-speed wireless access. In 2011, McDonalds has been operating within Canada for 44 years (statistics taken from www. McDonalds Canada). Financial overview McDonald’s revenue was 24. 07 billion last year with share revenue at 22. 29, and gross profit at 8. 79 billion, and interestingly shares are held mainly at 71. 90% by institutions which indicate the security of this company as a long term investment (statistics according to www. Yahoo. Finance). Approximately 70% of McDonalds in Canada are owned and operated by Canadian Entrepreneurs.

    McDonalds supports the Canadian economy as it purchases $730 million worth of food and paper goods from Canadian Suppliers and has over a network of 100 or more Canadian suppliers it supports (www. McDonalds Canada). Social Responsibility In 1977, held it’s first McHappy Day and raised more than $460,000 for local children’s charities. In 1981 the first Ronald McDonald House opened in Toronto (provides accommodation to children and families travelling for cancer treatment). In 2004 McDonalds launched its 10 Cent Happy Meal Program (donations of 10 cents of every Happy Meal sold were donated to Ronald McDonald House Charities).

    From 1982 until present, the Ronald McDonald’s House Charities (focused on supporting children and families dealing with life-threatening illness and disabilities) has raised over 42 million dollars. Currently there are twelve operating Ronald McDonald Houses across Canada (McDonalds Canada). Marketing McDonalds is famous for its marketing strategies from the first restaurant to capitalize on the children market by packaging toys with friend and calling it a ‘Happy Meal’ to its very ‘catchy’ ‘memorable’ marketing campaigns such as: ? You Deserve a Break Today (1971) We Do It All For You (1975) ?Two all beef patties special sauce lettuce cheese, pickles, onions, on a sesame seed bun (1975) Have You Had Your Break Today (1991) ?We Love To See You Smile (2000) I’m Lovin’ it (2003) Also McDonalds is famous for its contests from Customer Service Survey Sweepstakes, to its Fanatic Contests, they also run an annual Monopoly prize contest. McDonalds has set the benchmark for marketing for all fast food restaurants in Canada and around the world (McDonalds Canada). There logo is the most recognized logo in the world.

    The age of employees is increasing and should be addressed. The population of Canada is living and working longer. Our population growth is steady but not sufficient to sustain high employee turnover. What can we do to improve this situation and should it be improved. What would it cost to implement a way of lowering our turnover rate, and does the benefit overrun the cost. 2. Explore the possibility of cold cuts Cold cuts are very popular to the Canadian public, which is popularly sold by subway and there is a large amount of Canadian consumers who consume this on a daily basis and this is one place which McDonalds have yet to exploit.

    We will address the pros and cons of McDonalds applying this strategy. 3. Social responsibility Corporate responsibility plays an important role of any business life cycle. McDonalds Value their corporate responsibility and it is part of their corporate structure . As a large corporation, maintaining their corporate responsibility helps in and maintaining business growth and profitability by showing good corporate governance McDonald’s can achieve their short and Long term goals by maintaining its employee morale, and building confidence with its customers, suppliers and shareholders.

    We take a deeper look into the average McDonalds and we find that with an average employee turnover of 9% it is fair to say that 9% of the wage expense is training of new employee’s if not more. Wages is the highest cost of running a business. The bottom line can be improved by taking and adding incentives to our valued employee to stay with us longer. As the employee morale and productiveness improves so will customer satisfaction. An internal study done by McDonalds in 1999 discovered that as employee reduced the slowing of customers by speeding up the processing line, annual sales for that store increased by $200,000.

    How did they improve the processing line, by giving incentives to those who performed the best in the course of a week? Should it be implemented, I do believe that the benefits package should be implemented. I t will reduce costs and increase annual sales. Improve employee morale and make for a better restaurant. Implementation We take and poll those who are going to be affected by this change. We take and ask the employees what the feel would give them some incentive to try harder. Will it be benefits packages or incentives? The time frame that one should give this type of project would be six months to one year.

    It will not happen overnight but it could make a huge difference in the costs of running our businesses. Operational issues Ensuring that the choices we make are going to hold the greatest effect on our employee. We have the resources to accomplish this task. We can afford to spend today in order to reduce tomorrow. The dollars expensed today could go out as an expense without any positive effect. Human Resources The man power required to implement this would be very low. It would consist of added hours to management employee already employed. Financial Aspect

    To implement this in such a way to make it effective it would require a full benefits package for all 77,000 Canadian employees. This package would be covered 50% by the employer and the other 50% by the employee. The cost of the benefits package through Canada’s Blue Cross would be $58 for families and $29 for individuals per month. I would take into account the rate of usage within Tim Hortons, which sits around 87%. Now with this figure we find that 87% of the 77,000 employees within Canada will take advantage of the employee package with a cost of 50% to McDonalds.

    If we say that only half of the employee are going to have families then we find that 33,495 will be calculated at $58 and the other 33,495 will be calculated at $29. This translates into an estimated annual cost of $17,484,390. In a company that is valued in the billions this is seen as very low cost of implementation. The employee turnover rate is 9% it’s fair to say if we reduce this by half the training cost saving would lower and the productivity with each individual store will increase. 2. Enter a new product line: Cold Cuts Cold cuts are very popular to the Canadian public, which is popularly sold by ubway and there is a large amount of Canadian consumers who consume this on a daily basis and this is one place which McDonalds have yet to exploit. Here are some of the pros and cons of McDonalds applying this strategy.


    • More Variety for customers
    • More profit from sales
    • Competition with others
    • More customers
    • Addresses problem of obesity Disadvantages
    • Higher inventory
    • More cost in making this cold cuts
    • Might not taste as good as the competitors

    Evaluation of alternative . The most critical component of a fast-food chain’s branding is its menu. It is also the most dynamic component. What is offered and how it is priced are constantly being altered throughout the year with new items, seasonal items, and promotions. The frequency and complexity of rolling-out these changes successfully requires agility. Centralized responses, reliable implementation and speed separate winners from losers. Canadians are popularly known to always have the cold cuts for breakfast from there fast food outlets available such as subway and Quiznos which McDonalds does not offer, I believe they should exploit this and add this to its menu.

    One of the main reasons McDonalds should add the cold cuts to their breakfast menu it’s because this will attract the many customers who desire these cold cuts on a daily basis and it does give them more variety and one thing McDonalds has been guilty of in their past has been the fact they keep ignoring the breakfast menu so I believe these cold cuts should be added to the menu it increase its customers base in Canada. I strongly believe this should be implemented into the McDonalds menu not only because it attracts more customers but it gives them way more variety and increases sales and profits.


    We conduct a market research to find out how much this cold cuts would cost, what customer want exactly and how to satisfy this wants, McDonalds would have to put greater focus on cutting times of recession, a lower price is something that attracts a lots of customers and I believe they should study their entire value change and cut costs. In other to be competitive, McDonalds must deal with these disadvantages such as more cost of making this cold cuts and introducing it to the market and also so deal with the problems of calories and obesity.

    The cold cuts have been popular in Canada and have also been seen as healthy food for customers but studies show have that this cold cuts contain a large amount of calories and if McDonalds can go into this cold cuts and also reduce its large amount of calories and make it much healthier then they have an advantage in terms of attracting large amount of customers and increasing sales so it’s very vital to deal with the problems of calories.

    A time frame that I believe and recommend this type of product should be given to take off is a period of nine months because this is enough time for a proper research to be conducted and to determine how much this project might cost and all other logistics. (You will find attached the Nutritional information for subway and Quiznos Operational Issues Some of the operational issues which could be faced by McDonalds could be implementing this new idea (cold cuts) and product, also attracting new customers.

    We have to ensure that our ideas and decisions are going to be of great value not just to the company but to our customers as well. Some of the ways we could tackle our operational issues are as follow. Summarize the possible obstacles in implementing this new idea, analyze the issue and create a procedure to solve the issue based on the facts and data gathered through the interviews made with the customers and actual observation linking to the products. It should be factual and ocular. Eliminate obstacle for the implementation of the newly set -up procedure.

    The research teams should discuss their findings or surveys with McDonalds and with their suggested procedure for implementation. Issues that concern the suppliers or other outside establishment should be handled and discussed through proper channels with the full support of the company McDonalds. Implementation of the newly set-up procedure-. Set-up operating procedure will be in place and research members make a follow through ensuring that the implementation is taking place.

    After six to nine months, team members will review the set procedure and make revisions if necessary for the successful implementation of the set standard procedure in solving operational issue. If McDonalds implemented this new idea of cold cuts to the menu, McDonalds would be improving its image. This new line would show as a healthy alternative to cooking at home. It would cut down on its calories in its products compared to its competitors. Human resources The human resources required for this to be effective would be high.

    It would include the cost of renovations to each individual McDonalds and an increase in net working capital. This is a very important aspect of future growth for McDonalds and with this we’ll look to the financial aspect of things. Financial Aspect There are roughly 1,400 McDonald’s restaurants in Canada. The space required to implement this project would be roughly 900 square feet to every store. We would need an increase net working capital, and also a very aggressive marketing campaign. The average cost of construction for 900 square feet of restaurant space is $45,000 to $70,000 in Canada depending on where you are located.

    McDonald’s hosts and annual fundraiser on McHappy day where funds are raised from sales proceeds on that day to support children causes with 75% of the funds raised go toward local communities and 25% goes toward global charities and global causes. Since 2004, McDonalds have managed to raise over 20$ million by donating 10 cents from each and every happy meal sold in Canada. RMHC Core objectives are to focus on the importance of providing support for families with children who suffer from disabilities and critical illnesses.

    Ronald McDonald’s House is a program that offers the families of children an alternative comfortable home accommodation with kitchen, quite room, and bedrooms shared with other families of ill children for a nominal fee within close distance to their Children’s hospital while getting treatment. Another Successful Program is the Ronald McDonald Family Rooms Program, which extends the comfort of being home within the hospital providing living room, lounge, and a playroom to relax and rejuvenate away from hospital atmosphere.

    The Ronald McDonalds’s Room Program is built in collaboration between the Hospitals and RMHC 2. Partnership and sponsorships and local leagues McDonald’s has been a major Sponsor for Sporting events such as FIFA World Cup and Olympic games and also a long time supporter of programs that provide kids with involvement in sports; it helps provide kids with skills and abilities they need to grow by working in teams and as individuals to achieve common goals or individual goals in life.

    Since 1994 McDonald’s have been an official sponsor of FIFA world Cup games and the FIFA World Cup McDonald’s Player Escort Program since 2002. McDonald’s Player Escort Program is a program where young kids between ages of 6-10 from different countries across the globe get a lifetime opportunity in escorting famous soccer players to the Field before millions of spectators at the beginning of every FIFA World Cup game. Olympics Games In 1976 McDonald’s became one of the official Sponsors of the Montreal Olympics games.

    In 2008 McDonald’s found an opportunity in Supporting Sports and launch its McDonald’s Champion Kids program. The program provides the opportunity for kids from around the globe to meet athletes, watch the Olympic Games, and visit local attractions to better understand the culture of the Country hosting The Olympic Games. 3. Owner operator involvement McDonald’s Corporation plays an important role in communicating their Social responsibility with owner operated or business operated franchise locations, as it believes that local involvement in community is key factor toward better corporate image and stronger brand.

    Many Franchise locations participate in sponsoring Local Leagues and corporate office encourages participating in local community sports such as football activities including club sponsorships, and youth sports tournaments. Some Franchises share the social responsibility by providing some Student grants and scholarships for colleges and universities in local communities. Nutrition and Well Being McDonald’s and Supersize me Movie Supersize Me is an independent documentary film that was released n 2004 . The documentary was a non-scientific experiment about the effects of eating Fast Food. Morgan Spurlock the Star and Director of the documentary did believe that Fast Food industry is contributing to the obesity level in the United States of America as they don’t serve healthy and nutritious meals. McDonalds Franchise was chosen for the experiment where he would have to eat 3 meals a day from McDonalds for 30 days covering as many Menu items within the 30 day Period.

    Before conducting the Experiment Morgan Spurlock had to go visit 3 Doctors gastroenterologist, a general practitioner, a cardiologist to verify that he is healthy and to monitor his health as he progress in the experiment. Within the 3 weeks of the experiment ended with Morgan gaining weight and his health deteriorated showing that eating fast food is not only unhealthy but also fast food chains are not giving enough details about their nutritional facts. McDonalds Response to Negative publicity

    After airing the documentary film, McDonalds have received many lawsuits in reaction to the documentary film. It also gave McDonalds negative image of how unhealthy their products are and bad publicity. In response to Negative Publicity McDonald’s started to develop new healthier choices within their product line, by removing supersized menu, another step was the introduction of nutritional information in a consumer friendly manner at restaurants. Implement Healthier Menu

    With the Consumer Trends Moving toward healthier choices McDonalds have done considerable and extensive research in developing new healthier choice items for is consumers . one of the new product lines that McDonald’s is suggesting of introducing and implementing in the marketplace to offset the losses of its customer base is by introducing Cold Cuts menu as it offers a better nutritional value to its consumers. Conclusion McDonalds is a well managed socially responsible corporation.

    They have many positive things about them and have not had a lot of bad publicity other than Supersize Me. In our analysis of McDonalds we discovered there have a very high employee turnover and a bad image of high fat and high cholesterol foods. We looked into a few alternatives, and feel that the employee turnover needs to be improved this would be a straight out expense and it would not see any initial changes for at least six months. This would further improve the image of McDonalds and reduce future training costs and improve productivity.

    The Employee benefits package should be implemented and should be available to all employees who have been with the company for more than 6 months. The cost will be covered 50% by employees, and would be at their discretion whether to take advantage of it. In our analysis of the corporate image and social responsibility we discovered that the only poor image that McDonalds has is the view upon its food menu. To address this looked into a radical new menu line within the restaurants. This would be the implementation of a cold cuts line.

    It would be very expensive at first, but would show a positive NPV in as little as five years. The rate of return was calculated at 18% because of the high risk of the restaurant industry. The benefit of having a cold cuts line would greatly increase the chances of large groups choosing McDonalds over other fast food restaurants. It will have negative effects on current food menu items but a positive effect on total cash flows. This too should be implemented and marketed aggressively towards all in Canada.

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