Solid Gold

Beyond Burgers

All franchise operations have a franchisor and franchisees. The differences between franchises become apparent, however, when you compare how those two groups get along with each other from system to system. McDonald's, for one, has a reputation for warm franchisor-franchisee relationships.

"Some of the philosophies Ray Kroc established when he started the business in 1955 have made an important difference in the quality of our relationships with our franchisees," says Greenberg. To wit:

*The McDonald's franchise system is built on the premise that the corporation should only make money from its franchisees' food sales. Unlike some franchise operations, McDonald's headquarters doesn't sell equipment, food or packaging to its franchisees. All of that is purchased from company-approved third-party suppliers.

"There's nothing our licensees are buying--in terms of seating, signs, equipment or food--that we're making a profit on," says Greenberg, "so we avoid a whole area of potential conflict of interest that exists in so many franchising operations."

*McDonald's is also different, Greenberg says, because its nearly 2,700 U.S. franchisees are all independent, full-time licensees rather than conglomerates or passive investors. That means owners are there, in the store, seeing firsthand--and affecting on-the-spot--what goes on. Greenberg sees this as a huge competitive advantage because owners can make sure the customer's experience is a good one. They're also friends and acquaintances of the people who frequent the restaurant. "[Our licensees] are small-business owners who work in their local communities," says Greenberg. "That's the hallmark of McDonald's."

McDonald's franchisees, though part of a system, are bona-fide entrepreneurs--and the more fiery their entrepreneurial spirit, the more successful they are. "Once you accept the fact that you're going to follow the rules, there's an enormous opportunity to be entrepreneurial," says Greenberg.

Such as? "How you build and manage your own organization so you can expand is very entrepreneurial," he says. "Training and developing [employees] so you can handle a second and third store is entrepreneurial. Although McDonald's has a lot of tools, a lot of help and a lot of training, at the end of the day the individual restaurant owners are in charge of building organizations and motivating their employees."

Creativity is encouraged as well. Bingo nights, breakfast buffets and family dinner nights for their customers are just a few ideas franchisees have cooked up; others include good-grades incentives for their student employees. (For more examples, see "Breaking The Mold," below.)

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This article was originally published in the January 1997 print edition of Entrepreneur with the headline: Solid Gold.

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