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Tuesday, 8 April 2014

CHICKEN INN AND MCDONALD'S APPROACH TO REAL ESTATE




McDonald's - I'M LOVIN' ITTM
I am impressed by how Chicken Inn and other Innscor International franchises are taking up prime real estate spots in the city centers of Harare and elsewhere at an aggressive speed  and obviously to the detriment of competitors.  But this phenomenon , is it without precedence in the history of the fast food retail business and real estate? At this juncture I am therefore, reminded of Ray Kroc and McDonalds’ success that was based on a shrewd approach to the fast food retail business and real estate. So is Innscor International Franchising implementing the same strategy? Lets see!


STATE OF THE ART- Innscor Food Court Interior


Innscor International Franchising a “ quick service restaurant” franchising division of Zimbabwe-based Innscor Africa limited has in excess of 320 stores in Zimbabwe, Zambia, Kenya, Nigeria, Malawi, Ghana and Senegal. These stores operate under Chicken Inn, Pizza Inn, Creamy Inn, Bakers Inn, Vasili’s and Galito’s brands.(IF YOU WANT TO BE A FRANCHISEE OF ONE OF THESE CLICK HERE FOR INFORMATION) Innscor has also protected its interest in these brands as intellectual property (IP). But what is of particular interest to real estate and probably a reminiscence of McDonalds’ shrewdness is that Innscor has done what it calls “ a strategic partnership with  Petroleum site operators, offering exceptional convenience “. “A strategic partnership” so they say but this is what is called a lease.

 To talk about strategic partnerships in which a lease is a central document you will definitely prick McDonalds’ heart because under Ray Kroc this firm did things like these. Through the vision of one of its managers called Harry Sonnerborn McDonalds’ leased premises “ offering convenience” and in turn subleased to its franchisees. The franchisee would pay the rent plus a mark up of 40% ( in favour of McDonalds’ of course). Even if the franchisee would make a loss McDonald was guaranteed of revenue because the franchisee was obliged to pay its rent. When the franchisee performed well things were even better for McDonalds’ because the franchisee would pay 5% of sales or the stipulated lease mark up – whichever was higher.

Ray Kroc and Harry Sonnerborn also requested up front security deposits ( a possible source of controversy in Zimbabwe) from franchisees that was used as capital to fund the opening of more restaurants. To put icing on the cake of McDonalds’ real estate success Sonnerborn later devised a mortgage plan to eventually own properties they subleased to franchisees. Such moves later led to the establishment of Franchise Realty Corp by Ray Kroc.

With the presence of Innscor franchises at such prime spots like the Sports Dinner service station where there is great exposure to vehicular and human traffic along Samora Machel Ave in Harare Innscor is probably implementing Ray Kroc’s shrewd tactics and with some success .

Acknowledgement: Information on McDonalds’ courtesy of JaneMcGrath.


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3 comments:

  1. Thank you for the excellent effort to explain this business approach. It has worked extremely well for McDonald's.

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