McDonald's: A taste for business

Cos Constantinou is a busy man - and would have things no other way. He has five McDonald's franchise outlets under his belt, and plans to take on more in the future. Having been part of the McDonald's franchise network for 20 years, he has become the first franchisee in the UK to sign up to a new 20-year term, allowing him to expand his business further.

Turn the clock back to October 1988, when Mr Constantinou opened his first franchise in Lewisham. Previously, he had been involved with various businesses, including Wimpy restaurants, his own chain of sports shops and, most prominently, his shoe factory business. But there were changes afoot.

"I was actually looking for a new business," he remembers. "I then thought about McDonald's, I regarded them as a very professional outfit and was very impressed by their cleanliness and high standards."

Initially, there were no opportunities. But he had better news the second time he approached McDonald's, and when he heard that there were franchise possibilities, he applied for an interview. He was given the chance of doing a week's unpaid on-the-job training, which convinced him that this was the vocation for him. "I thought that their standards were absolutely exceptional," he says. "And I wanted to be a part of that."

He went before a panel of leading McDonald's executives that included the then president and vice-president in the UK. To his delight, he was accepted, and began a nine-month period of formal training, and once that was completed, he was offered the Lewisham store in October 1988.

The McDonald's franchise is an outstanding opportunity for those with the right business acumen. Commitment is the watchword when it comes to this franchise. McDonald's only takes the best, and while the potential rewards are there, they are there to be earned rather than taken. This is a hands-on business, and McDonald's always says it is looking for people who will work hard to maintain its current high reputation and to outperform any competition that comes its way.

It's worth clarifying what each franchisee owns. McDonald's franchisees rent the restaurant real estate but buy the fittings, equipment and also the right to operate it for up to a 20-year period.

Mr Constantinou's McDonald's empire in south-east London has spread. As well as his Lewisham restaurant, he is in charge of four other businesses - Deptford (which boasts a 1950s/1960s style restaurant), Catford (a drive-thru/retail park outlet), an old pub conversion near Bromley and, most recently, an outlet in Greenwich near the Cutty Sark.

With 20 years under his wing, his hard work proved to the franchisor that he was well deserving of a new 20-year term, which is part of McDonald's ongoing commitment to its franchisees. "After my 20 years came to an end in October 2008, I was very proud of the fact that McDonald's considered me for a new 20-year lease.

"We are showing strong increases thanks to repeat demand and our new look, which includes brand new refurbishments and new look menus. The re-imaging and refurbishment of the stores keep them modern and customer-friendly. Our menus allow for a greater variety of foods. Organic milk, free-range eggs and Rainforest Alliance Certified Kenco coffee are all on the menu. Our products are among the best that you can find."

The training and support are key elements of his success. The training is intensive, taking place over a nine-month period. During that time, each candidate learns every aspect of successfully running a McDonald's restaurant. The candidates are trained up to perform all roles in the restaurant, from the management right through to the nitty gritty of cleaning. It should be pointed out that this training period is actually unpaid, and so all candidates will need a significant amount of liquid capital to cover themselves and their financial commitments during this time. A training deposit of £5,000 is also required, although this is returned to the franchisee once the training is completed.

The support is also of a very high standard. Franchisees are assigned a business consultant, who will offer advice and support. Head office teams are also there for any other help - franchisees can pick up the phone to ask a question on any problem in any field that they might have, and will receive comprehensive help. "If you want to pick their brains about anything, they are there at the end of the phone," says Mr Constantinou. "You can do your own thing, but with the support of a universally regarded brand. McDonald's is a brilliant company to work with because of that and the dedication it shows to its franchisees."

That dedication is also shown in other forms of support that it offers its franchisees. Regular communications meetings and sessions are held for feedback, news and assistance. Another strong selling point is that each franchisee gets a say in how the UK McDonald's is run via representatives on the National Leadership Group.

Successful candidates should already have prior proven success in business or another career - an ideal background would be in managing and developing people, marketing and sales building. Because this is very much a people business, potential franchisees must be sociable, polite and must possess the ability to develop employees' skills and talents. They must also enjoy meeting customers and go out into the local community, as McDonald's frequently takes part in charity and philanthropic initiatives.

A crucial element of a McDonald's franchise is the investment. The cost tends to vary in accordance with its potential cashflow. However the average investment level is £200,000.

Many franchisees opt for the Conventional Franchise route, which requires 25% of the asking price to be paid upfront with the remainder borrowed. A second option, called the Business Facilities Lease, is designed to help those without the required funds to cover the 25%. Under this approach, the franchisee uses the cashflow of the restaurant to raise enough capital to buy the franchise during the first three years of trading.

Other start-up costs include a £30,000 franchise fee, as well as ongoing fees for rent, service and a contribution to the national marketing spend.

All things considered, the McDonald's franchise has many rewards for its franchisees, with healthy prospective profits, the potential for expansion and opportunities for career growth.

Mr Constantinou is already making plans to take on future outlets. "I am drawing up a business plan for more franchises," he says. "My son is also involved with the business. He is managing the pub conversion near Bromley and is doing an exceptional job. We both hope that after I retire, he will take over my role.

"That's how confident I feel about the opportunities that McDonald's has to offer. Becoming a McDonald's franchisee is certainly the smartest move I ever made." 

Classification: Food and Drink
Investment level: Franchise fee: £30,000
Training deposit: £5,000
Average franchise: £200,000
Website: www.mcdonalds.co.uk/franchising
Email: franchise@uk.mcd.com
Phone: 020 8271 4424