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How do franchises work?

The UK had more than 400 restaurants run by more than 200 franchisees at the end of 2001. This represented just over 35% of McDonald's total UK restaurants. Nearly one half of these franchised restaurants are run by former employees of McDonald's.

To set up a franchise with McDonald's costs at least £200,000. Potential franchisees need to contribute at least a quarter of this sum. Partnerships are not allowed to set up a McDonald's franchise.

Fancy starting a franchise with McDonald's? It won't come cheap! © Photolibrary Group

Would-be franchisees have to sign a franchise agreement with the firm. This gives them the right to operate a specific McDonald's restaurant, at a single address, for a period of 20 years.

Under the franchise agreement, the company agrees to provide the McDonald's trademarks, restaurant decor, signage and equipment layout. In addition, the franchisee can use the recipes for the firm's products, their stock control, accounts systems, method of operation, and marketing.

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