General Business and Finance Blog

In today’s business world, no one achieves results without proper market research. Every sector of every market is crammed with competing businesses, all trying to get some kind of advantage over the other businesses working in the same area. Tailored research into a market is the only way to claw a little extra ground for a company – a space in which it is able to start attracting customers that may otherwise have visited the sites or services owned and sold by similar enterprises.

The basic unit of marketing research is the individual consumer – a group of which, or whom, are referred to as the marketing demographic for the product or service in question. Basically, what market research does is to work out what kind of person, or kinds of people, are most likely to be interested in a particular type of product – and then direct advertising campaigns and actual marketing efforts towards attracting those people. The logic is simple and very effective – indeed, marketing research has been formally conducted with a great deal of success since the 1920s, when radio advertisers first found that the products they were selling sold better when their adverts were placed on stations that targeted the same audience as the product.

What happens is this. A market research company takes a product and brings it to the marketplace as a whole, whereupon it gathers significant amounts of data regarding people’s reactions to that product. Once enough data has been amassed, the successful demographics for the product become clear. So a product that reacts very well with teenage girls develops a demographic in the teenage girl sector of the market, and its advertising campaigns are conducted accordingly. There’s no sense in marketing multi coloured flexible hair curlers to balding middle aged men.

There’s a fairly technical side stroke of market research that can result in some surprising sales leads, too. If a product is hoping to sell to a particular market, and the research done by a marketing investigation company reveals that the target demographic is not interested, while another demographic is, the product is modified to appeal to its target audience. Or it may be altered to appeal to the new market, dependent on the nature of the research results.

The logic behind researching markets applies on all levels, to all products and services. Companies that own websites (which, these days, is pretty much all companies) are involved in market research every time they try to source the right keywords for selling their stuff. A keyword is heavily targeted towards a particular demographic – the more targeted the better, in fact, as very specific keywords tend to deliver much higher sales results because they come under fire from less competition.

In the modern business world, this tactic of defining market areas with less competition is one of the highest goals of good marketing research. There is, past a certain point, very little sense in trying to sell something into an over saturated market area. So really good market research will try to identify areas where a demographic can be refined to make a product or service particularly appeal to it.

Researching markets is one of the most productive ways a company can possibly increase its sales. Without it, in this day and age, it may die.

With over 30,000 locations and fifty years in the burger business, the McDonalds brand is the most recognized and successful franchise in the world. Not surprisingly, before considering anything else many would-be franchise owners ask themselves: How much does a McDonalds franchise cost and how can I buy a McDonalds franchise? They hear it only costs ,000 to get a Mighty Mac franchise, an investment that’s quite within their franchise affordability range.

The McDonalds Franchise Fee
As with most things in life, a little information is a dangerous thing. While it’s true McDonalds charges a ,000 franchise fee, this is only the initial franchise fee for licensing rights – the upfront fee charged to join the network. There’s a LOT more financial commitment and cost involved to buy a McDonalds franchise after that. On top of the investment, there are other qualifications besides having the money.

Different McDonalds Franchise Ownership Options
According to McDonalds, there are two ways to buy a McDonalds franchise and enter their system. The first, and most frequently used method is purchasing an existing restaurant, either one operated directly by McDonalds or from a McDonalds franchise owner/operator. The second, infrequently used way is obtaining franchise rights for a new restaurant. Let’s consider these in reverse order, since McDonalds provides few financial details on the first, most frequently used method.

Buying A New McDonalds Franchise
For franchise licensing rights to a new McDonalds, the company charges its standard ,000 initial franchise fee, except if the franhise is for a McDonalds in a gas station or convenience store, the fee is rduced to ,500. There is also a reduced franchise fee for McDonalds Satellites located in universities, hospitals, etc.

The other cost categories for a new McDonalds franchise include real estate, signage, seats, equipment, decor, opening inventory, training and working capital. These are broken down in Item 7 of the McDonalds FDD.

For a Satellite McDonalds, the range is 8,375 to 8,400; for a McDonalds located in a gas station or convenience store, the range is 0,750 to .2 million. The standard, new McDonalds restaurant clocks in with a range of million to .8 million.

So, basically a new McDonalds franchise is a 8, 375 to .8 million investment depending on the model selected.

The factors impacting new restaurant costs are: size of the McDonalds restaurant facility, area of the country, pre-opening expenses, inventory, selection of kitchen equipment, signage, and style of decor and landscaping, McDonalds says. A detailed breakdown of the initial investment costs into discrete categories, including a working capital component, is provided in the McDonalds FDD Franchise Disclosure Document which can be obtained at the Franchise Foundations website (see link below).

Owner/operators must pay forty percent (40%) of the total cost from liquid, personal assets and may finance the remainder from traditional lending sources.

Buying An Existing McDonalds Franchise
What about the most frequently used way to buy a McDonalds franchise – purchasing an existing restaurant from a current McDonalds franchise owner or one that’s company-owned by McDonalds and sold as a “turnkey franchise”? Unfortunately, details about how much this type of McDonalds franchise costs are not specified, other than the following statement:

“The purchase price of an existing restaurant varies and is dependent upon a number of factors including sales volume, profitablity, occupancy costs, reinvestment or improvement needs, competition and location.”

To get a better handle on this statement, when existing, “turnkey franchises” are sold in any industry (McDonalds franchises included) the purchase price reflects the value of the business as a going concern, generating (in the case of McDonalds) $ X million in sales and $ Y in profits. A typical McDonalds restaurant that’s been operating for at least one year produces over ,000,000 in annual sales, with profits in the low six-figure range. I estimate the sales price of an existing McDonalds franchise (or company-owned restaurants sold as turnkey franchises) to be in the million to million range, plus or minus. Twenty-five percent (25%) of the purchase price must come from liquid, personal assets and the balance can be financed from traditional lending sources.

Ready to whip out your checkbook? Even if you are, there’s a lot more to obtaining a McDonalds franchise than just have the investment capital.

The McDonalds Franchise – Item 19 Financial Performance Representations
According to the McDonalds FDD Item 19, the average annual sales volume of traditional restaurants in the U.S. open at least one year as of 12-31-09 was ,37 million in 2009. The highest sales volume for a U.S. McDonalds in 2009 was .3 million (the “star” performer). The lowest performing McDonalds clocked in at 7,000.

Item 19 of the McDonalds FDD goes on to list proforma financial results for restaurants that hit three different sales levels – million, .2 million and .4 million, showing cost of sales, gross profit and operating profit at each level. Unlike other franchise companies with similar investment levels, McDonalds steps up to the plate and provides franchise earnings information in Item 19 of its FDD.

Getting the McDonalds FDD Franchise Disclosure Document
If you would like a copy of the entire 383-page McDonalds FDD published 2010 (or just particular sections of the FDD, like Item 19 Financial Performance Representations or Item 7 Estimated Initial Investment) to review and get further information, go to the McDonalds Franchise page of the Franchise Foundations website.

copyright 2008-2010, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

For further information, visit the Franchise Foundations website

Home Party Business Marketing is largely a matter of understanding what one is getting into. The party plan method is the use of social events – home parties to parade, demonstrate, show off and sample products used primarily to sell items whose main appeal is to women by women, such as Tupperware, Mary Kay Cosmetics, kitchen utensils, home decor items e.g, home garden & party, jewelry, skincare e.g, Arbonne International, candles e.g, Mia Bella. Recent additions to the field include lingerie, and sex toys e.g., Passion Parties.It is very evident that the home party plan traditional business idea is fresh once again as a new generation of sellers open their homes for direct sales.Home parties now account for approx. 30 percent of the nearly $30.8 billion in U.S. direct sales, and 15.2 million Americans bought or sold goods from home in 2007; according to the Direct Selling Association, the premier resource for all thing direct sales.With the growth of the internet, customers find that they continue to benefit from a personal and convenient way of purchasing products.  The Internet is fast becoming an essential element of home party plan business success. It gives both the home party consultant and their customer each a worldwide base.  The growing trend is to host virtual parties online.  Internet sales account for 14% of all home party sales!The 4 Elements Of A Successful Home Party Plan Business1. A Home: As with real estate, location, location, location matters.  Let me share with you some statistics. Home parties account for roughly 70% of the 78% face to face sales made in the US.  Cozy, comfortable, social always wins out!  So be sure to host home party plan fun monthly meetings at the least.2. It’s A Party: Success with home partys lies in the fact that it’s a party at your home–or better yet, at someone else’s. Customers socialize, and you make money. Need more convincing? Make fun is the order of the day. Party like a rockstar!Home Party Plan Success Tip: Fundamentals are the building blocks of fun3. Plan(ning) : When you fail to plan, you plan to fail.  You need to plan the party elements.  You need to plan your business element i.e., marketing, business plan, training, education & development.  Your party plan hostess must be coached and prepared.  The Home party demo must be planned before hand.  Don’t get side tracked and have a show that goes on for 3 hours.  No one makes great purchases when they are tired4. It’s A Business |?biznis| ( bus.):noun2 the practice of making one’s living by engaging in commerce : the world of business | whom do you do business with in Manila? | [as adj.] the business community | [with adj.] the jewelry business.• trade considered in terms of its volume or profitability : how’s business?As Max Sanborn asserts, “The ultimate objective of a business is profit. The primary purpose of a business is to create customers. Profitability without customers is an impossibility.”You are a home party consultant, you are in this of course to have fun, partying in your home or that of a hostess for the express purpose of making and increasing home party sales and profits.Party like a rock star,

With over 30,000 locations and fifty years in the burger business, the McDonalds brand is the most recognized and successful franchise in the world. Not surprisingly, before considering anything else many would-be franchise owners ask themselves: How much does a McDonalds franchise cost and how can I buy a McDonalds franchise? They hear it only costs $45,000 to get a Mighty Mac franchise, an investment that’s quite within their franchise affordability range.

The McDonalds Franchise Fee As with most things in life, a little information is a dangerous thing. While it’s true McDonalds charges a $45,000 franchise fee, this is only the initial franchise fee for licensing rights – the upfront fee charged to join the network. There’s a LOT more financial commitment and cost involved to buy a McDonalds franchise after that. On top of the investment, there are other qualifications besides having the money.

Different McDonalds Franchise Ownership Options According to McDonalds, there are two ways to buy a McDonalds franchise and enter their system. The first, and most frequently used method is purchasing an existing restaurant, either one operated directly by McDonalds or from a McDonalds franchise owner/operator. The second, infrequently used way is obtaining franchise rights for a new restaurant. Let’s consider these in reverse order, since McDonalds provides few financial details on the first, most frequently used method.

Buying A New McDonalds Franchise For franchise licensing rights to a new McDonalds, the company charges its standard $45,000 initial franchise fee. The second cost category associated with establishing a new McDonalds franchise is “Equipment and Pre-Opening Costs.” According to McDonalds, these costs range from $995,000 to $1,843,000. So, basically a McDonalds franchise is a $1 million to $1.8 million initial investment. The factors impacting new restaurant costs are: size of the McDonalds restaurant facility, area of the country, pre-opening expenses, inventory, selection of kitchen equipment, signage, and style of decor and landscaping, McDonalds says. A detailed breakdown of the initial investment costs into discrete categories, including a working capital component, is provided in the McDonalds FDD Franchise Disclosure Document which can be obtained at the Franchise Foundations website (see link below). Owner/operators must pay forty percent (40%) of the total cost from liquid, personal assets and may finance the remainder from traditional lending sources.

Buying An Existing McDonalds Franchise What about the most frequently used way to buy a McDonalds franchise – purchasing an existing restaurant from a current McDonalds franchise owner or one that’s company-owned by McDonalds and sold as a “turnkey franchise”? Unfortunately, details about how much this type of McDonalds franchise costs are not specified, other than the following statement:

“The purchase price of an existing restaurant varies and is dependent upon a number of factors including sales volume, profitablity, occupancy costs, reinvestment or improvement needs, competition and location.”

To get a better handle on this statement, when existing, “turnkey franchises” are sold in any industry (McDonalds franchises included) the purchase price reflects the value of the business as a going concern, generating (in the case of McDonalds) $X million in sales and $Y in profits. A typical McDonalds restaurant that’s been operating for at least one year produces over $2,000,000 in annual sales, with profits in the low six-figure range. I estimate the sales price of an existing McDonalds franchise (or company-owned restaurants sold as turnkey franchises) to be in the $2 million to $5 million range, plus or minus. Twenty-five percent (25%) of the purchase price must come from liquid, personal assets and the balance can be financed from traditional lending sources.

Ready to whip out your checkbook? Even if you are, there’s a lot more to obtaining a McDonalds franchise than just have the investment capital.

The McDonalds Franchise – Item 19 Financial Performance Representations According to the McDonalds FDD Item 19, the average annual sales volume of traditional restaurants in the U.S. open at least one year as of 12-31-08 was $2,311,000 in 2008. The highest sales volume for a U.S. McDonalds in 2008 was $9,552,000 (the “star” performer). The lowest performing McDonalds clocked in at $491,000. Item 19 of the McDonalds FDD goes on to list proforma financial results for restaurants that hit three different sales levels – $2 million, $2.2 million and $2.4 million, showing cost of sales, gross profit and operating profit at each level. Unlike other franchise companies with similar investment levels, McDonalds steps up to the plate and provides franchise earnings information in Item 19 of its FDD.

Getting the McDonalds FDD Franchise Disclosure Document If you would like a copy of the entire 375-page McDonalds FDD published 2009 (or just particular sections of the FDD, like Item 19 Financial Performance Representations or Item 7 Estimated Initial Investment) to review and get further information, go to the McDonalds Franchise page of the Franchise Foundations website.

copyright 2008-2010, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

For further information, visit the Franchise Foundations website