Monday, October 24, 2011

Free Business Plan of the Day

McDonalds is an astonishingly successful franchise. If you need to get a clear example of this in practice, just look at the distribution of customers across restaurants in the average airport.

Every time I go past one, the McDonalds is easily the most packed place there. For some reason, the appeal of cheap and tasty comfort-food hamburgers is especially large for tired travelers whose self-control is depleted. The queues in front of the place are typically at least twice as large as those at the next most crowded place.

Let us make the rather heroic assumption that the profit per customer is similar between McDonalds and other comparable fast food restaurants at the airport. By this measure, being the most packed place is a pretty good proxy for being the most profitable. I can’t back this up with any hard numbers, but I’d be willing to wager a decent amount of money to this effect at 2:1 odds.

But here’s where things start getting weird. My guess is that not only is McDonalds the most profitable store at the airport, but I’d wager that the difference is so big that the second-most profitable restaurant you could open at the airport would be another McDonalds in the same terminal, right next door to the first if needs be. Even though you’ll clearly be competing with (and cannibalizing) the first one.

Now, this obviously doesn’t appear to happen. I’m not sure if the McDonalds franchising arrangement prohibits McDonalds granting another franchise license within a certain distance (it probably does). And I’m not sure the airport would grant another McDonalds tenancy right next door (they may not, based on a nebulous idea of serving different customer needs, although my guess is that they should, if they’re profit-maximising). 

But it’s just possible that nobody has thought of an idea so absurd as opening up a second McDonalds right next door. My guess is that it would make quite a bit of money. If you decide to avail yourself of this awesome free business plan, make sure to let the manager of your store know that you owe a guy called Shylock a free Big Mac Meal. I'll plan to collect when I run into two McDonalds stores at an airport within 15m of each other.

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