Day 003 - 30 Jun 94 - Page 07
1 with smaller restaurants, the drive-through concept which
is finding its way on to Britain's highways and byways.
2 The numbers are probably no more £250,000 of which 40 per
cent needs to be capital.
3
Q. What about BFL, the business facility lease?
4 A. The same basic arrangements. So, someone would
probably need 25 to £30,000 in working capital. It is not
5 a hard and fast rule. For the right person in the right
circumstance we are extremely flexible.
6
Q. Within that franchise arrangement, first, who owns the
7 premises?
A. The premise, real estate is controlled by the
8 corporation, controlled by us.
9 Q. A subsidiary question: Does the corporation or, at any
rate, your company own any premises apart from
10 restaurants, buildings and offices?
A. No.
11
Q. Within the franchise, who does the employing of the crew
12 members?
A. The franchisee hires their own people.
13
Q. Who purchases the supplies of food?
14 A. The franchisee purchases their own supplies.
15 Q. Is the franchisee in any sense governed or dictated to or
required by the terms of the franchise in the choice of
16 the decoration, the materials which are used within the
restaurant?
17 A. He is guided, but he is not dictated to.
18 Q. Perhaps the most important question amongst these,
Mr. Preston -- no, the second most important question --
19 how does the company make money out of its licences?
A. We charge the licensee a rent and a royalty for use of
20 the premises and the operating system. If the gentleman
or lady operating the restaurant has no sales, there is,
21 you know, whatever per cent you want times zero is zero.
It is a shared risk, a shared reward, where they get
22 theirs first.
23 Q. Finally, this, Mr. Preston, assuming for the moment (and
it is a matter to which I shall come in detail in due
24 course) that McDonald's, the company that is, seeks to
maintain certain standards in its operation, how does it
25 ensure that those standards are maintained by its
franchisees?
26 A. Firstly, we do seek to maintain standards, most
definitely.
27
Q. We will come to that. Assuming that to be right for the
28 moment?
A. We have a battery of people we call "field
29 consultants" or "supervisors" who monitor the activities
of our licensees on an announced or an unannounced basis,
30 as appropriate. Here in Britain we employ a system called
"mystery diner" where people are out shopping at
