1 / 13

Comparative Analysis of McDonald's and Burger King's Franchise Opportunities

This analysis evaluates the franchise prospects of McDonald's and Burger King for a 30-year-old with a $300,000 inheritance considering a fast-food venture. Key factors analyzed include franchise fees, initial costs, annual sales, and net profits against a background of economic metrics such as MARR and interest rates. Sensitivity analyses on franchise fees and annual profits indicate that Burger King presents a more favorable investment opportunity, backed by robust Incremental Rate of Return evaluations. This comprehensive report aids potential franchisees in making an informed decision.

elysia
Télécharger la présentation

Comparative Analysis of McDonald's and Burger King's Franchise Opportunities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Business Venture Analysis McDonald’s vs. Burger King

  2. Team 1 Members & Delegation • Nancy Macias Organization • Brian Myers Summarization • Eliseo Sanchez Research & Organization • Masis Haroian Techie

  3. Scenario • A 30 year old person with a business degree has just inherited $300,000.00 and is considering opening a fast food franchise. The two franchises that are being considered are: • McDonald’s • Burger King

  4. Analysis Assumptions • Life Span of 20 years (n = 20 years) • Same Resale Value at the end of 20 years • Equivalent Cost for Land and Building • Equivalent Average Annual Sales and Profit • Location, Volume, Size of Real Estate not taken in Consideration (no impact on the analysis) • MARR = 15% • Interest Rate = 10%

  5. McDonald’s Fact Sheet • Initial Franchise Fee $45K • Equipment & Pre-Opening Costs $900K • Land & Building $1.0 million • (only if a new building has to be built) • Franchise Fee 12.5% • Annual Sales $1.3 million Annual Net Profit $500K • (after taxes, fees and other operating costs)

  6. Burger King Fact Sheet • Initial Franchise Fee $50K • Equipment & Pre-Opening Costs $750K • Land & Building $1.0 million • (only if a new building has to be built) • Franchise Fee 8.5% • Annual Sales $1.3 million • Annual Net Profit $500K • (after taxes, fees and other operating costs)

  7. McDonald’s 12.5% Franchise Fee $900,000.00 pre-opening costs Annual Costs $162,500.00 Burger King 8.5% Franchise Fee $750,000.00 pre-opening costs Annual Costs $110,500.00 Quick Comparison

  8. Analysis Results & Conclusion Analysis Methods • Incremental Rate of Return Analysis ROR • Benefit to Cost Ratio • Annual Worth Analysis (note: all these methods will result in the same answer if used properly) (we primarily used ROR primarily to find the better choice) Results: • ROR = 35.8% • Since ROR>MARR, higher cost alternative is chosen, Burger King • B/C & AW Analysis confirm results

  9. Sensitivity Analysis (1) Varying the Franchise Fee from 9.0% to 14.0%, Burger King still is a better alternative

  10. Sensitivity Analysis (2) Varying annual profit from $300K to $700K

  11. Resources • http://www.bk.com/(official website) • http://mcdonalds.com/(official website) • http://www.franchise-zone.com/food_franchises.shtml • Wall Street Journal • Essentials of Engineering Economic Analysis (textbook), Donald Newnan, Jerome Lavelle and Ted Eschenbach,2nd edition, 2002

  12. Course Related Useful Websites • http://www.fincalc.com/ • http://www.mikemillerfinancial.com/calculators.cfm?ID=125 Provides several calculator for retirement,taxation,savings,investments,etc. • http://www.getobjects.com/index.html • Provides Cash Flow Diagram explanations and several examples (PV,FV and others)

  13. THE END

More Related