SEPT report

This assignment report was produced by the company S E.P T. Under the responsibility of M Alain HUSSON DUMOUTIER Ecole Supérieure de Commerce, Institut d'Etudes Politiques de Paris Member of the Chambre Nationale des Conseils et Experts Financiers. Arbitrator and Expert at the International Chamber of Commerce Former Head of Franchising at CREDIT LYONNAIS Former Court-Appointed Expert in finance and management SELI Kupport de mission - MeDONALD'S contre M COLORAFI - Mars 109k Introduction We were asked by the company McDONALD'S FRANCE and by Monsieur le Bâtonnier LELOUP, on Friday 13 February 1998, to respond to the various points set out in the report of Monsieur GANDUR dated 4 February 1998 Monsieur Mathieu LIS, a collaborator of S.E.P.T, went on site to ANTIBES on Thursday 19 February 1998 - Monsieur HUSSON DUMOUTIER on Wednesday 4 March Reading Monsieur GANDUR's report and the arguments put forward led us to extend our assignment on two fronts. First a technical front aimed not only at responding to certain arguments which seemed open to discussion, but also at presenting a more appropriate version of the facts Then, a more doctrinal front which aims to explain the economics of the company McDONALD'S and its constant adaptation to the fluctuations and deep changes in markets This report will accordingly examine three points in turn: - The analysis and refutation of certain elements of Monsieur GANDUR's report, both as to form and as to substance - The economics of McDONALD'S franchising and its characteristics - The particular case of the companies controlled and managed by Monsieur COLLORAFI in the general and local economic context A methodical piece of work, based on these various elements, aims to present a second version of the facts SEPT. Rapport de mission - MADONALD'S contre M. COLLORAFI. Mars 109g History S August Lease-management of the McDONALD'S restaurant of ANTIBES to M. COLLORAFI by MCDONALD'S FRANCE Term 20 years 31 August Transfer of the agreement to the Company SEBOL 1g:me franchise 45ee McDONALD'S 14 December McDONALD'S loan agreement to Company SEBOL ¡ of 415,283.33 FF from 1 November 1988 Term 13 months 1° January McDONALD'S loan to SEBOL of 415,283.33 FF Term 6 months 15 April| Loan agreement of 336.417.+1 F Term 12 months Regularised in October Extension of the CARREFOUR Shopping Centre (letter of 8 February 96 from COLLORAFI to Thierry CHERPITEL ii SEPT. Rappori de misson - MCDONALD'S conre M. COLLORAF - Mars 1008 mars) MD CONSULTANTS study for the siting of a McDONALD'S restaurant in ANTIBES (Antibes Ouest, Les Pins) July| Opening of the QUICK DRIVE February| Flash study on Antibes Nord (B & 0) Ret D 8 February Letter from M. COLLORAFI to McDONALD'S turnover falling since 94 + closing hours 21 h QUICK impact 10 to 15% * Cannes 5 to 10% 17 April Letter from M. COLLORAFI to Guy DUPUY at Aix Turnover forecast 17 M.F. for SEBOL 31 July Creation of the company B & O operating Antibes Nord 9 October Opening of the McDONALD'S DRIVE at Antibes Nord Let lease-management agreement known as “STRAIGHT LICENSE” i. SEPT . Rapport de mission • MeDONALD S contre M. COLLORAFI. Mars 1498 10 January Letter from M. COLLORAFI to M HENNEQUIN requesting the Antibes Ouest - Vallauris restaurants 22 January Meeting of VI COLLORAFI with Isabelle KUSTER 31 January| Letter from M. COLLORAFL He thanks for the acceptance of Antibes Ouest Regrets Vallauris awarded to M. GILARSKI 11 February| Creation of the articles of association of the company LESPINS L au t avri!! Customer survey Antibes Centre Commercial CARREFOUR Study cited by M GANDUR 29 April Opening of the McDONALD'S Les Pins restaurant + MeDONALD'S Vallauris 10 June Amendment of the Antibes Vord fees Standard fee rate from 20% to 17% Minimum monthly standard fee from 245,000 to 180,000 F 18 June Franchise agreement for Antibes Ouest (Les Pins). Type “B.F.L” 26 June| Summons of MCDONALD'S by M. COLLORAFI before the Commercial Court of Paris ") a 11 September| 120-day review of Antibes les Pins 17 November Financial review of McDONALD'S end of November Formal notices from McDONALD'S Fees due • LESPINS Oct., Nov. and Dec. 97 • B dO: March, April, June, Oct, Nov. 97 and Jan. 98 • SEBOL. 10 monthly instalments due Jan., Feb., March, April, May, June, July, Oct., Nov. and Dec. 97 2 January | Termination of the 3 agreements by McDONALD'S FRANCE NAP Rappor de riston . MEDONALD Sicare M COLLORAFI - Mars 1998 J 1st Part Study and refutation of the arguments put forward in the assignment report of Monsieur GANDUR Without calling into question the importance of the work carried out by M. GANDUR, our study will deal first with the formal aspects of the study and then concentrate on the problems of substance ON FORM Imprecisions On several occasions the expert M. GANDUR uses the words “I estimate” to give a quantitative assessment of a precise figure. Thus on p. 22 of his report “he estimates at 1% of turnover the impact of the cleaning of the premises carried out by in-house staff whereas it was previously provided by an outside company”. This estimate does not give rise to a precise calculation or a justification whereas this cost logically requires an explanation. The economy of scale consequently reaches only 1% according to this estimate. It would still be necessary to know the financial approach that makes it possible to arrive at this result Calculations Likewise, certain calculations rounded by the expert M. GANDUR lead to significant distortions in the assessment of the facts. Thus several points can be analysed. SEPT • Rappori de mission • MeDONALDS contre M. COLLORAFI - iVars 1908 1.1.2.1. The aggregates used The aggregation of the figures of the Var département with those of the Alpes-Maritimes is not justified in the demonstration presented by the report Indeed, the Var borders the Alpes-Maritimes but it is in no way comparable, neither by its economic situation nor by its population. This is why MCDONALD'S distinguishes this département from that of the Alpes-Maritimes very precisely in its statistics. Moreover, the western boundary of the Alpes-Maritimes lies beyond Mandelieu and Théoule at the level of the col de la Cadière Miramar, i.e. more than 10 km from Cannes going towards Saint-Raphaël. Lastly no McDONALD'S restaurant straddles the two départements. After analysis, the joining of the statistics concerning the Alpes-Maritimes with those of the Var introduces certain distortions that serve the demonstration of M. GANDUR's report Indeed, by using the cumulated figures of the Var and the Alpes-Maritimes the report brings out several points (p. 6 of M. GANDLR's report): The growth in turnover in percentage of the McDONALD'S restaurants located in the Alpes-Maritimes and the Var is therefore 114.81% + 7,68% + 5,58%6 + 15,60% in 1994 in 1995 in 1996 in 1997 compared with 1993 compared with 1994 compared with 1995 compared with 1996 Whereas the figures relating only to the Alpes-Maritimes give the following proportions (according to the same figures cited by M GANDUR p. 6): + 22,4 %» + 11,2% - 7.3%% 19,4%% in 1994 in 1995 in 1996 en 1447 compared with 1993 compared with 1994 compared with 1995 compared with 1996 The rate of expansion in the Alpes-Maritimes in 1997 of 4.4% for McDONALD'S is therefore well below the 15.0% obtained by M. GANDUR for the Alpes- Maritimes and the Var. Rapport de menton deDONALD'S contre 11 COLLORARI Murs 1908 All of M. GANDUR's comparative calculations, notably for the bases that he cites on p. 19, are affected when this coefficient of 1.011 is used to record the increase in the turnover of the restaurants of the Var and the Alpes-Maritimes in 1997. Such a figure, very different from those that should have been used, calls into question the subsequent calculations of the report 1.1.2.2. The elements of the aggregates with corrections To get closer to reality we redid the calculations using the documents made available to us in order to give a clearer approach to the elements concerning the restaurants of the Alpes-Maritimes For example, our table includes all the McDONALD'S restaurants of the Alpes-Maritimes without those of the Var for the reasons given above. Moreover, the PUGET restaurant is removed from the Alpes-Maritimes compared with M. GANDUR's table. It is located in the Var, and not in the Alpes-Maritimes where M. GANDUR had placed it in his annex no. 1 M. COLLORAFI's restaurants are included in this table, unlike M GANDUR's table. It is indeed difficult to study a market without taking into account all the McDONALD'S restaurants of that market. Nevertheless, in the interest of accuracy, our totals show a distinction between all of the Alpes-Maritimes and the same set without M. COLLORAFI's restaurants - i SEPT Rapport de mission - LEDONALD'S contre 1. COLLORALi • vars 1994 EE.L: i.._ Change in annual turnover in francs of the McDONALD'S restaurants of the Alpes-Maritimes between 1992 and 1997 Site Site Description Opened ¿lisera en Firale- tron 1luteil aracil 44 (usert en 17 NICE MASSENA to ANTIBES 120 NICE LINCONTRE 102 MANDEDE 1St NICAPROMENALE 255 MONACTI 263 NICE TNL 296. CRASSE 331| CAGNES SUR MER 708 CAGNES PLAGES 437 CANNESTISALLEE 177 NICE SAN 4 184 MENION 5R ANTIBESNORD 501 ANTIDES EST 593 VALADRIS 612 MOOOINS 63 FANNISLANORTS Total McDo. “comparable” Sub-total without M. Colluan Average McDo. “comparable” Average without M. Colorad Total All McDonald's Sub-total without M. Colloral Laren ah ant 42 27422 021:2i 2257+212 2tr 820835 iK01572 23 150: 20 2 5KK7 1"+151.7k 21.07 $1 -5.37% 1 50% 18 (EN 571) 20 236 03-4 20$95 741 229Z5058 2÷249 0J0 ?135168 76100940 15990868, 30 7086l9 30:C004 1339428H: S0708619 207 328300| 178 080420 | 27384 178 152 008 160 22 157 I+i D08: -K119 + 79% 175% 4,94% 0,204% ¡lurer d'usert en IX309795 20÷07 531 22 U6b 501 21 322#53 Terti 5602 73X8837 199277082 45 300552 Foula- .!I. 25 7C'3 13.40% - 17,039, ",23% 0.25% 10.74% 230 712 438 20 0014; 0814: 20108021 222 X83 942 6,01% Source: McDonald's France, February 1998 "Open " Li 880 H2 Evolu- lion * 774 30, 095 -D170 -+ 724 -0.57% 1.79% 0,91%. -+ 385 | 49% +775 inx. +7 287211 17.385 olt. 3B80H 20381 KM 0,58% 3.85% 14.95% 1.1.2.3. Comments on the table - Change in annual turnover in FF of the McDONALD'S restaurants of the Alpes-Maritimes For each year, we drew up three columns (except in 1993, only two columns): • The first column “Opened before 19.” contains the turnover of the McDONALD'S of the Alpes-Maritimes that had been open for at least one year at 1 January of the year in question: they have at least one full financial year (12 months) before that year. These are the so-called “comparable” restaurants • The second column “Opened in /..” contains the turnover of the McDONALD'S of the Alpes-Maritimes opened in the year in question or the previous year; they have not completed at least two full financial years of 12 months since their creation, the year in question included. • The third and last column “Change” contains the percentages of change in the turnover of the McDONALD'S of the Alpes-Maritimes said to be “comparable”, the only ones to have at least one full financial year before the year in question. This change quantifies the growth or decline in turnover in the year in question compared with the previous year, which is also full (12 months of activity). On these turnover figures, three types of calculation were carried out (Note: each of these three calculations was made, on the one hand, for all the McDONALD'S of the Alpes-Maritimes, including M. COLLORAFI's restaurants, and, on the other hand, for this set without M. COLLORAFI's restaurants) • The first comprises the totals of the turnover of the “comparable” and newly opened McDONALD'S (for less than two years). • The second calculates the average turnover of the “comparable” MDONALD'S, which have already had at least two full financial years. On this average, we calculated the percentage change of this average turnover Note: Contrary to the method used by M. GANDUR, who took the average of the percentage changes, which leads to a mathematical error, we weight this change according to the turnover of each McDONALD'S using as a base the average turnover. Indeed, the average of the percentages cannot serve as a reliable base because it does not reflect the importance in terms of turnover of the restaurants: for example, a change of +10% for a restaurant with turnover of 15,000,000 F corresponds to growth of 1,500,000 F whereas for a restaurant whose turnover is 25,000,000 F it is 2,500,000 F, this is not reflected in the average of the percentages. There is a difference of nearly 1,000,000 F. The method that we used takes this difference into account. Atil SArT Ruppori de mission - MCDONALD'S conde M COLLORAF! Mars 1008 • the third calculation is the total turnover of all restaurants, “comparable” or not, with their change. Its purpose is to show the constant change in McDONALD'S turnover in the Alpes- Maritimes Thus, by observing the more exact data, the figures for the average activity of the restaurants of comparable type, quite significant differences can be found with M. GANDUR's report. If there is general agreement on the turnover of M. COLLORAFI's Antibes Centre Commercial - the distortions are therefore significant on the averages that serve afterwards as a reference for M. GANDUR in his calculations. M. GANDUR's report sets out on p. 5 of his report the following changes • Between 1993 and 1994 for the average of the restaurants - 0,63%% for M. GANDUR whereas our calculations result in - 5.02% with Antibes SEBOL. - 5,22% without Antibes SEBOL Compared with 1993, there is therefore not stagnation in 1994 but a decline • Between 1994 and 1995, the difference is even more marked: for the average of the restaurants + 5.11% for M. GANDUR whereas our calculations result in - 1.10% with Antibes SEBOL and • 0.81% without Antibes SEBOL Which amounts to o points of difference between our references, that is to say that there is near-stagnation in 1995 and not growth • Between 1995 and 1996, the gaps are 2.45 points: for the average of the restaurants - 9,34% for M. GANDUR whereas our calculations result in - 11,79%o with Antibes SEBOL - 9,98% without Antibes SEBOL SEPT • Rapport de mission MADONALD S'contre M COLLORAFI. Mari 1998 i." Statistics of McDonald's restaurants located in the Alpes-Maritimes Number of restaurants All restaurants “Comparable” restaurants Turnover (millions of FF) All restaurants Growth in turnover All restaurants of “comparable” restaurants Turnover per restaurant All restaurants - “Comparable” restaurants Source: McDonald's France, February 1998 2X8 10,74% -5,027 | 9,547 -1,10% -11,747 17,06 0,587 20,974 24.052 | 22,844| 22,592 19,928| 20,043 Comments This table takes account of the table on page 6 of M. GANDUR's report Again, the differences in the number of restaurants lie in the fact that M. GANDUR does not count M. COLLORAFI's restaurants (one additional between 1993 and 1995, two additional in 1996 and three additional in 1997) It can already be observed that the so-called comparable restaurants reach after 1993 a plateau of 20 M F in general which is relatively stable with + or - 10% variation. When this figure is exceeded, it is an accident (the Bovine Spongiform Encephalopathy crisis for example) DISCUSSION ON SUBSTANCE The calculations relating to the term of the agreement for the Antibes Ouest - Les Pins restaurant operated by the company LES PINS M. COLLORAFI insisted very strongly in order to obtain the concessions for the restaurants of Antibes Ouest and Vallauris. NANE - Rappor de mission - VEDONALD'S conte M. COLLORAF? - Mars 1498 there are numerous traces of this - letter of 10 January 1997 from M. COLLORAFI to M HENNEQUIN, meeting of M. COLLORAFI with Mme Isabelle KUSTER on 16 December 1996 and 22 January 1997 and finally letter of 31 January 1997 from M COLLORAFI to McDONALD'S thanking for the award of the restaurant of Antibes Ouest and regretting that that of Vallauris was awarded to M. GILARSKI. On 11 February 1997 the articles of association of the company LES PINS were filed On 29 April 1997, 2 and a half months later, the McDOVALD'S DRIVE restaurant of Les Pins opens. However the agreement, which had originally been planned as a “straight” type agreement with MCDONALD'S, became, owing to the financing problems of M COLLORAFI, a “B.FL.” type agreement.* This agreement was signed subsequently on 18 June 1997. But all the financial investments had been made beforehand, before the opening However, they had not yet all been paid. That is to say that McDONALD'S would have had to invest, under its so-called “straight” agreement, 9,282,000 F and its franchisee 2,543,000 F But the franchisee turned to his franchisor and asked it to bear the share that fell to him. The agreement was therefore signed as “B.F.L” type (Business Facility License) for a term of 3 years and MCDONALD'S bears an additional 2,543,000 F' Thus, ultimately, the franchisee COLLORAFI financed 378,000 F, i.e. 3.1% of the amount of the investments of this restaurant, which total 12,203,000 FF, and the franchisor McDONALD'S 11,825,000 FF, i.e. 96.4% (Sources: McDONALD'S. see annex 1.1) In this regard, the proximity of the dates is quite telling since the franchise agreement of Les Pins was amended on 18 June 1997 in favour of M. COLLORAFI and on 26 June 1997, that is 8 days later exactly, the franchisee sent the writ of summons to his franchisor claiming 45.350 M F. in compensation. One might as well say that the writ of summons was ready on the day the said agreement was signed "Let us recall that this type of “B.F L” agreement is generally intended for beginner franchisees with little capital - which was not the case of M. COLLORAFI NEPT Rapport de misson HEDONALDS ronde M COLLORAT. Mars 100g Be that as it may, the agreement for the Les Pins restaurant is terminated since, following the procedure provided for in the lease-management agreement, the franchisor sent on 27 November 1997 a formal notice to pay the fees and on the date of 2 January 1998 the agreement was terminated in accordance with the stipulations which provide that the agreement is terminated if a single payment of fees is not honoured (article ID. Now the company LES PINS already owed at 31 December 1997 the amount of 3 fees, namely for the months of October, November and December 1997, for a total of 504,474.42 FF (see annex 1.2) Moreover, the option that was reserved to the franchisee until 31.13.1997 to convert this “B.EL” agreement into a “straight license” had lapsed by the very fact that this franchisee had not honoured the provisions of his amended agreement Consequently it is not possible for the expert M. GANDUR to use as the number of years remaining to run until the normal term of the lease-management agreement of the company LES PINS a period of 19.35 years on the pretext that the extension of the agreement is at the sole initiative of the lessee-manager. An agreement can be extended only if it is still in force. Now it happens that this agreement is terminated by the franchisee's own breaches Consequently the normal expiry of this agreement, if the termination is not pronounced before, is on 28 April 2000 and not on 28 April 2017, although, if one refers to the signing of the agreement of 18 June 1997, the expiry date would be 18 June 2000 - i.e. a remainder of 39 months. On the reasoning of the capitalisation of losses The present report shows in detail in the third part that the impact of the opening of a McDONALD'S restaurant on others already existing has a relatively limited duration. It is reduced and temporary, if only because of the development of the market. In other words, if it is sometimes noted that the impact of a new restaurant on a previously established restaurant leads the latter to suffer a certain decrease in turnover compared with the forecasts, and sometimes, even more rarely, to losses, these are, over time, very quickly absorbed by the resumption of the development of the two restaurants concerned. We give the details on this observation in the 3rd part M. GANDUR's report, being based on an extreme and questionable hypothesis, estimates that these losses, depending on the restaurants, are lasting and permanent over 9 years, even 18 years and 19 years S LIE: - Kapport de russion - VODONALD 5 conte 11 COLLORAFI. Mars J409 Thus for SEBOL (p. 35 of the report) M. GANDUR estimates the loss of margin on variable costs at 1,415,000 F which he extends over a period of 9.58 years With the discounting adopted of 6.9757077 the amount of the loss reaches 9,576,354 FF This same reasoning (p. 35) leads M. GANDUR to estimate the gap in gross self-financing margin of B & O at 2,239,000 F per year, extended over 18.75 years With the discounting of 9.97 the estimated loss reaches 22,198,563 FF Lastly for the LES PINS restaurant (p. 35), the gap in gross self-financing margin is 1,318,000 F extended this time over 19.33 years (we saw in 1.2.1 why this period could not be used) The calculation results in a loss for this third restaurant of 13,244,734 F with a discounting coefficient of 10.203 In total, by capitalising the losses in this way, the report arrives, most conveniently, at the sum of 45,019,651 F. Now it is more or less this sum that is claimed by M COLLORAFI in his writ of summons dated 26 June 1997, i.e. 7 months before M. GANDUR's report, but on totally different grounds. Indeed M COLLORAFI asks for compensation of i.e. in total 30,000,000 FF for the company SEBOT. 5,000,000 FF for the company B & O and 10,350,000 FF for himself +5 350 000 FF The expert notes in this regard that there is no loss for M COLLORAFI personally On the calculation of the fees 1.2.3.1. According to M. GANDUR's report M GANDLR, taking the forecast results of the 3 restaurants according to the modifications he makes to them, determines the rents and fees that can be borne by the said restaurants Thus the fees become, p. 30 of the report for SEBOL for B & 0 for LES PINS 736,000 F 1,172,000 F 1,034,000 F i.e. 61,333 FF per month i.e. 97,667 FF per month i.e. 86,167 FF per month SEPT Rapport de musion - MCDONALD'S conte N COLLORA// - Mars 1998 But with such an amount of fees the results of the companies would still be negative. SEBOL would lose B & O would lose LESPINS would lose 484,000 F 240,000 F 100,000 F Continuing the calculations leads the report to estimate the amount of fees for a zero result, i.e. the level of the break-even point, at 252,000 F annually for SEBOL i.e. 794,000 F annually for B & O i.e. 934,000 F annually for LES PINS i.e. 21,000 F per month 66,167 F per month 77,834 F per month Such values, so far removed from the current figures and from those generally charged by McDONALD'S restaurants, are not enough to pay the repayments of the loans taken out by McDONALD'S to finance the fixed assets operated by M. COLLORAFI. Thus, for the Antibes Centre Commercial restaurant, considering only the simple rents and without taking into account the works financed by McDONALD'S, the information obtained from McDONALD'S gives the following elements - for a surface area of 402 m² including 62 m² of terrace, a restaurant room of 244 m² on the ground floor and 97 m² of kitchen and technical premises, with on the 1st floor, a crew room and a technical room - the current indexed rent is i.e. 162,630 F per year 38,553 F per month But the lease must be renewed and the request made by the landlord is 093,000 F per year for the rent alone, i.e. 57,750 F per month. Let us add lastly that the leasehold right, at the acquisition of the business in 1987, reached 2,740,000 F Thus, assuming that SEBOL pays 21,000 F of fees per month to MCDONALD'S, the amount of this payment would not even cover 54.5% of the rent paid by McDONALD'S to the landlord VEZI . Rapport de mission - MCDONALD S conte M. COLLURAFI - Mars 1948 1.2.3.2. New presentation of the fee calculations with discussion An adversarial study of the fees was drawn up to present an economically more acceptable version. We studied in turn the cases of - Antibes Centre Commercial - operated by the company SEBOL, - Antibes Les Pins - operated by the company LES PINS. - Antibes Ouest - operated by the company B & O (this case, being the most complex and the most delicate, was added at the end). At each stage we compared the figures used by the expert M GANDUR and those presented by the company McDONALD'S, giving an explanation of the distortions observed SART Rapport de mission - MEDONALD'S contre M. COLORAFI . Hari 1008 Table determining the bearable fee paid to McDONALD'S by the company SA SEBOL SA SEBOL Type of building Mall Sales of which food sales Total cost of food purchases Packaging Total cost of food products sold Gross margin on food sales Crew labour Salaries of managers and social charges Travel expenses Advertising 6M Local promotion External services Uniforms Operating supplies Equipment maintenance and repairs Electricity, water, gas, telephone Office supplies Cash shortages Total controllable expenses Profit after controllable expenses , Standard fee Equipment fee Service fee Accounting and legal fees Insurance Taxes and permits Depreciation and amortisation Financial charges Total non- controllable expenses Non-food sales Total non-food Net non-food result Net operating result (S.0.1) Salary of lessee-manager Other expenses Office expenses Total administration costs Net result before tax Gross self-financing margin Loan repayment Financially bearable rent McDonald's 101.20% 10,00 32,63% 16,1202 M. Gandur r7 of sales food 101.20% 10119L 25,39;. ≥ 970 29,350 7 149 70,65% 300,750 1,38% +501 0,24 3:49% 0.30%% 0.79% 3.50% 3,32% 012% i.120: 11,301% $ 322 11,71% 27.94% 1 X00 1.73%; 3,31°c 6,139% 1.20% 33,83% 1,370) - D, 1750 - 1,37% 5.000i 3,76% - 5,14% 17,11% 3 858| 11,83% 1.72% 38,13% -0, 19% •1 050-10.38% 1127% 4,92% -1 548-15.30% XCa1) X5% 7,27% Gap hit 1 147) ¡ 175 SEPT Rapport de mession MCDONALD'S conte 4 COLLORAFI-Mars 1998 Comments: The purpose of this table is to determine the fee that can be borne by SA SEBOL According to M. GANDUR, page 30 of his report, “The level of rents and base fees presumed ‘bearable’ is that which would make it possible to achieve, after repayment of the loan instalments in principal, a zero gross self-financing margin, that is to say without worsening the financial situation.” We studied in the same way as M GANDUR the forecast result for 1998, noting nevertheless some differences between the indications of McDONALD'S and those of M. GANDUR. Our calculations take account of the elements of the P.A.C (Source: McDONALD'S) which we took into account. The 1998 turnover used by M. GANDUR is 10,240,000 F, a figure that we dispute. We used a figure of 11,300,000 F which is intermediate between M GANDUR's figure (10,240,000 F) and the turnover achieved in 1997 by the restaurant, i.e. 11,654,691 F (see comments on the next page) The table is divided into three main parts: • The first contains the figures recorded for all the McDONALD'S restaurants, i.e. the amount of each item in kF and the percentage of this amount in relation to the turnover from food sales. • The second takes up the figures given by M. GANDUR: here again one finds an amount in kF and a percentage of the turnover from food sales • The third column is intended to specify the differences between our calculations and those of M. GANDUR. Variances: The sources used to determine the fee come from the report of M GANDUR, whose pages we cite, and from McDONALD'S M. GANDUR's report, page 31, arrives at an acceptable fee of 736,000 F for 1998, and our calculations arrive at a higher fee (+ 1,175,000 F) of 1,911,000 F. The fee contractually due to MCDONALD'S (1,800,000 F) is therefore bearable because it is lower than this figure ”. i SEPT Kapport de mission HEDONALD'S contre M. COLLORAFT . Wars 1448 This difference lies in the following differences of assessment • The turnover that we calculated is 11,300,000 F and that of M. GANDUR 10,240,000 F, i.e. a difference of 1,060,000 F. To calculate this turnover, we used M GANDUR's report M. GANDUR, pages 19 and 20 of his report, assesses at -2.03% the impact of the opening of the Antibes Nord, Antibes Ouest and Vallauris restaurants on the Antibes restaurant (SA SEBOL). The last opening date of a restaurant is 28 April 1997, so the Antibes restaurant will be “impacted”, as is shown in the 3rd part, until April 1998 (12 months). From May 1998, it will return to its actual level of 1997. We therefore obtain turnover of 11,312,585 F, rounded to 11,300,000 F as the following table shows: SA SEBOL Actual January 908 249, February March April Total Jan./April May June July August September October November December 1 025 +11 Total May/Dec. Total forecast 1998 Source: Report of Monsieur GANDU R Impact | Forecast! 9,039 9,03 * 9,03. X26 231 X47016 X50050 3 +46 462 X2X 277 • The amount of food sales, which serves as the basis for calculating the fees to be paid to McDONALD'S, is calculated with the same percentage of total turnover given by M. GANDUR in his report (page 31). This explains the difference at the level of the amounts but not at the level of the percentages • Rapport de misson - M DONALD Scontre M. COLORAT - Mars 1998 . d • The third difference is found in the amount of the P.A.C* (Profit After Controllable expenses). It is much higher (+ 817,000 F) in McDONALD'S's indications. These are calculated from a linear regression line with the equation P.A.C. = Food sales turnover x 0.4096 - 430,000 F This equation is calculated by a regression analysis of the P.A.C of all the McDONALD'S in France from the income statements provided by the lessee-managers at 31/12/96 over the last 12 months. That is why we do not detail it (see annex no. 3 for details). The P.A.C. is determined for each type of building “Mall” (in a shopping centre), or “Free-Stander” (stand-alone building). Here, the Antibes restaurant is a “Mall”, so the equation of the regression line of all the “Mall” type restaurants was used. This equation was sent in June 1997, as to all the other franchisees, to M COLLORAFI, who did not dispute it • A fourth difference appears in the amount of non-controllable expenses: the Antibes restaurant generates 80,000 F more in this type of expenses than McDONALD'S's indications. This excess lies in only two items: “Service fee” and “Accounting and legal fees”: for all the other items, the figures given by M. GANDUR in his report were kept. For the first item (Service fee), the difference is normal because it depends on the turnover, which is higher in our calculations. Moreover, M. GANDUR's calculation is not made on the turnover from food sales as is done in reality, but on total turnover, which causes a slight gap of 0.06% of food sales. The second item (Accounting and legal fees) is greatly inflated for 1998 at 216,000 F whereas since 1993, according to the income statements of the company SA SEBOL, it stood at around 95,000 F per year. This sharp increase must be linked to the writ of summons of M. COLLORAFI against McDONALD'S. The average of this item for all McDONALD'S lessee-managers in France is around 90,000 F; it is this latter figure that was taken into account • For the non-food result, the figure given by M. GANDUR was kept, even if the amount of non-food sales is higher (113,000 F) because it depends on the turnover from food sales (here 1.20%) .. i ii The PAC is also a management indicator of the McDONALD'S system. It reflects the quality of the management of a restaurant. It takes into account all the expenses over which the management team may have an influence. Items over which this team has no means of action are not taken into account: non-controllable expenses (fees, depreciation, financial charges). 'RPT Rappors de mission MCDONALD'S contre M. COLORAF! Mars 190g • The preceding differences lead to a very different net operating result different: - 1,050,000 F for M. GANDUR and - 153,000 F in our calculations, i.e. a difference of 897,000 F • Another difference appears at the level of administration costs: the amount given by M GANDUR is 498,000 F. As this is an item that includes the remuneration of the lessee-manager, its amount depends solely on the decision of the head of the business. As in every business, sound management must lead to adapting administration costs to the company's capacity. We for our part approximately took up the figure appearing in M GANDUR's calculations for the LESPINS restaurant, i.e. 420,000 F • The gross self-financing margin corresponds to the net result before tax to which is added the amount of depreciation and amortisation made during the financial year • Lastly, M. GANDUR's report indicates a loan repayment of 200,000 F for 1998. We note that this loan of 350,000 F was taken out with Crédit du Nord on 28 January 1997 (see annex 3.3). MCDONALD'S told us that in parallel with the taking out of this loan, M. COLLORAFI had himself reimbursed the same sum by the company SA SEBOL. Moreover M COLLORAFI paid himself 1,000,000 F of dividends in respect of the profits of the previous financial year. For these various reasons, it seemed to us that this loan was not justified and we did not take it into account as an expense. Be that as it may, according to the repayment schedule, the monthly instalment is 10,549.90 F, i.e. 126,598.80 F for the year 1998, and not 200,000 F as indicated by M GANDUR All these elements explain the difference (+ 1,175,000 F) between the amount of the bearable fee presented here and that of M GANDUR's report The amount of rent financially bearable by the lessee-manager is therefore 1,911,000 F, i.e. 111,000 F more than the rent currently paid by the company SA SEBOL. It is important to stress that the forecast turnover used (11,300,000 F) is low; it will rise again 12 months after the impact of all the new restaurants, i.e. from 29 April 1998 (see 3rd part) SEPT Rappori de mission - MEDONALD'S conre 11. COLLORAFI - Mars 1994 Table determining the bearable fee paid to McDONALD'S by the company SARL LES PINS SARL LES PINS Type of building Free-Stander special Sales of which food sales Total cost of food purchases Packaging Total cost of food products sold Gross margin on food sales Crew labour Salaries of managers and social charges Travel expenses Advertising GLE Local promotion External services Uniforms Operating supplies Equipment maintenance and repairs Electricity, water, gas, telephone Office supplies Cash shortages Total controllable expenses Profit after controllable expenses Standard fee Equipment fee Service fee Accounting and legal fees Insurance Taxes and permits Depreciation and amortisation Financial charges Rents Total non-controllable expenses Non-food sales Total non-food Net non-food result Net operating result (s.0.i)) Lessee-manager's salary Other expenses Office expenses Total administration costs Net result before tax Gross self-financing margin Loan repayment Financially bearable rent McDonald's rode rente Imentaire 101,30% 10000% +59 I(X) 32,24% 15,007 4,5091 5,00гc 0.98% 1,52% 1.00C 0,39C% 0,397 28,79% 1,305. 1,31% - 0,01% 3.44% 4.57%% - 1,13% -014o M. Gandur r of sales food 9 300 101,10% 9 181 | = 1201 26,36' 3.05°i 29.41% 70.39% 12.870% 24! 3.706l 0,26% +20 1.05% 2.48% 1,30C;. 1.82% 2-0) 201% 11.1.5% +20 t65 0,336% 41.18% 29.41% 1519% 4.57% 5,06% 1,577 0,5291 Yut 091% 1,000°; 11.395% 11.30% 29,71% 1.309% 131% -0.01% - 29| -0,32% 3, HVie. 0,20% 1.05% +321 1.71% - 5.02% 373' 14,96% 11,26% S.E P.T. Rapport de mawon MEDONALD'S conre M. COLLOKAFY Mars 1999 Gap hf Comments The purpose of this table is to determine the fee that can be borne by SARL LES PINS According to M. GANDUR, page 30 of his report, “The level of rents and base fees presumed ‘bearable’ is that which would make it possible to achieve, after repayment of the loan instalments in principal, a zero gross self-financing margin, that is to say without worsening the financial situation.” We studied in the same way as M. GANDUR the forecast result for 1998 while noting some differences between the indications of McDONALD'S and those of M. GANDUR. Our calculations take account of the elements of the P A.C (Source: McDONALD'S) which we took into account The table is divided into three main parts: • The first contains the figures recorded for all the McDONALD'S restaurants, i.e. the amount of each item in kF and the percentage of this amount in relation to the turnover from food sales. • The second takes up the figures given by M. GANDLR, here again one finds an amount in kF and a percentage of the turnover from food sales. • The third column is intended to specify the differences between our calculations and those of M. GANDUR Sources: The sources used to determine the fee come from the report of M GANDUR, whose pages we cite, and from McDONALD'S M GANDUR's report, page 33, arrives at an acceptable fee of 1,034,000 F for 1998, and our calculations arrive at a higher fee (+ 330,000 F), of 1,373,000 F. This amount, 4,000 F lower, is very close (0.4%) to that requested by McDONALD'S from the company LESPINS Rapport de mission - MODONALD'S conre M. COLLORAFT Mars lgyg This difference lies in the following differences of assessment: • Unlike the two other companies, SA SEBOL and SARL B & O, we do not call into question the turnover estimated by M. GANDUR of 9,300,000 F. It is important to note that the restaurant has been open only since 28 April 1997, i.e. less than a year, and that it has not been “impacted” by any other restaurant since that date except possibly by that of Vallauris, but the latter opened on exactly the same day, i.e. 29 April 1997. • The first difference is found in the amount of the P.A.C* (Profit After Controllable expenses). It is higher (+ 200,000 F) in the indications of McDONALD'S. These are calculated from a linear regression line with the equation (see annex 1.3) P A.C - Food sales turnover x 0.4163 - 862,000 F Here, the Antibes Ouest restaurant is a “Free-Stander special” with a drive-through service (drive). The equation of the regression line of all the “Free-Stander” type restaurants was therefore used (see above “Determination of the bearable fee by SA SEBOL” for details) • A second difference appears in the amount of non-controllable expenses: the Antibes Ouest restaurant generates 85,000 F more in this type of expenses than McDONALD'S's indications. This excess lies in the first four items of the table: the various fees and the “Accounting and legal fees”; for all the other items, the figures given by M. GANDUR in his report were kept For the Standard, equipment and service fees, the differences lie in the fact that M. GANDUR's calculations are not made on the turnover from food sales as is done in reality, but on total turnover, which causes a slight gap, between 0.19% and 0.06%, of food sales depending on the fee. The item “Accounting and legal fees” is inflated for 1998 at 144,000 F. This sharp increase must also be linked, as previously, to the writ of summons of M. COLLORAFI against MCDONALD'S. The average of this item for all McDONALD'S lessee-managers in France is around 90,000 F; it is this latter figure that was taken into account. NEPT. - Rapport de mission - UCDONALD'S conte M. COLLORAF! - Murs 1098 • It should be noted that in these controllable expenses, the amount of depreciation and amortisation is particularly low. This is due to the fact that M. COLLORAFI for this restaurant benefited from a B.F.L., that is to say that MCDONALD'S also financed the equipment of this restaurant (approximately 2,550,000 F) and that M COLLORAFI only needed to finance the small equipment and the share capital of his company (a SARL, i.e. 50,000 F). Nevertheless, to keep the restaurant, he would have to, had the agreement not been terminated, buy back the equipment from McDONALD'S within three years, i.e. before 29 April 2000 • The preceding differences lead to a different net operating result: - 29,000 F for M. GANDUR and - 316,000 F for our calculations, i.e. a difference of 345,000 F • Another difference of 12,000 F appears at the level of administration costs: as for SA SEBOL, the amount used is 120,000 F • The gross self-financing margin corresponds to the net result before tax to which has been added the amount of depreciation and amortisation made during the financial year. The result being modified in our calculations, the gross self-financing margin is too. All these elements explain the difference (+ 339,000 F) in the amount of the bearable fee presented here compared with that of M GANDUR's report The amount of rent financially bearable by the lessee-manager is therefore 1,375,000 F, i.e. 4,000 F less than the rent currently paid by the company SARL LES PINS. But this restaurant is in the start-up phase (only 10 months of existence at the end of February 1998); its turnover will normally be higher than that estimated here by M. GANDUR SER 1 •Kapport de massion • HEDONARD'S conte M. COLLORAFT - Mars 1944 Table determining the bearable fee paid to McDONALD'S by the company SARL B & O SARL B & 0 Type of building Free-Stander 100 Sales of which food sales Total cost of food purchases Packaging Total cost of food products sold Gross margin on food sales Crew labour Travel expenses and social charges McDonald's M. Gandur kl Fo of sales Ce of sales food food 101,50% 12 600 101,50% 100,007 12+14 100,00)* 25,86% 208% 28,84% 8 834| 71.16% =050 21,354 7.54%3 0.19% 451% 0.87%% 3,20% 30) 30X 11,24% 0.64% 1.45% 2.t2) Gap 118, Local promotion External services Uniforms Operating supplies Electricity, water, gas, telephone Office supplies Cash shortages Irien Total controllable expenses Profit after controllable expenses Standard fee Equipment fee Service fee Accounting and legal fees 34.74% 23,5042 $ 342 43,03% з 492| 28,13% 23.08% Taxes and permits Depreciation and amortisation Financial charges Rents Total non-controllable expenses ? Non-food sales Total non-food Net non-food result Net operating result (S.O.D) Lessee-manager's salary Other expenses Office expenses Total administration costs Net result before tax Gross self-financing margin Loan repayment Financially bearable rent (6) 0,180% 1,73F0 5.27% 1,539% 11,38% $ 844 38,715 1x8 2f 1.29% 0,21% - 3,77%6 +20 3,36% -7,12% - 1.85% - 3.36% 18,29 %a 630! 1,35% 0.18% 1.74% + 926 39,68% 1,50% 1.24% 0.21% 408 - 11,34% 3,18% 020% 4,83% - 2 008 - 16,18% 1.348| • 10,80% 3,381% 2,44% SEPT. Mapport de mission - MEDONALD'S conte M COLORAFI Mars 1 998 Comments The purpose of this table is to determine the fee that can be borne by SARL B & O According to M GANDUR, page 30 of his report, “The level of rents and base fees presumed ‘bearable’ is that which would make it possible to achieve, after repayment of the loan instalments in principal, a zero gross self-financing margin, that is to say without worsening the financial situation.” We studied in the same way as M. GANDLR the forecast result for 1998 while noting some differences between the indications of McDONALD'S and those of M. GANDUR. Our calculations take account of the elements of the PA C (Source: McDONALD'S) which we took into account The table is divided into three main parts • The first contains the figures recorded for all the McDONALD'S restaurants, i.e. the amount of each item in kF and the percentage of this amount in relation to the turnover from food sales. • The second takes up the figures given by M GANDLR: here again one finds an amount in kF and a percentage of the turnover from food sales • The third column is intended to specify the differences between our calculations and those of M. GANDUR Sources: The sources used to determine the fee come from the report of M GANDUR, whose pages we cite, and from McDONALD'S M. GANDUR's report, page 32, arrives at an acceptable fee of 1,172,000 F for 1998, and our calculations arrive at a higher fee (+ 1,117,000 F), of 2,289,000 F. .i *i SEPr • Rapport de meven MEDONALD 'S ronde V COLLORAFI - Mars 149X This difference lies in the following differences of assessment: • The turnover that we defined is 12,700,000 F and that of M GANDUR 12,600,000 F, i.e. a small difference of 100,000 F. To calculate the turnover, we used the same method as that used by M. GANDUR in his report Page 28 of this report: M. GANDUR uses the seasonal coefficients calculated for the company SA SEBOL from the financial years 1993 and 1994 (page 14 of his report). Here, we simply added the turnover of the Antibes Nord restaurant for the month of January 1998: it was communicated to us by McDONALD'S. The seasonal coefficient for the month of January is 7.22%. This allows us to calculate the average of the annual trends with an additional data point, which refines the result We therefore obtain an average turnover of 12,728,496 F, rounded to 12,700,000 F for turnover, as the following table shows: SARL B & O Actual May 97 1 063 745| June 07 July 97 soit 97 1 337.331, ¡Septemhre 97 October 9? lorembre 97 December 17 January 98 1 036316| Monthly coeff. 7,817 10.64% 8,035. 8.82°% 7,77 c 8.77% 7,2307 Average calculated over 9 months Sources: McDonald's and Report of Monsieur GANDUR Annual trend 12 728 496j • The second difference is found in the amount of the PAC (Profit After Controllable expenses). It is much higher (+ 855,000 F) in the indications of McDONALD'S. These are calculated from a linear regression line with the equation (see annex 1.3): PAC = Food sales turnover x 0.4163 - 862,000 F Here, the Antibes Nord restaurant is a “Free-Stander 100” with drive-through service (drive). The equation of the regression line of all the “Free-Stander” type restaurants was therefore used (see above “determination of the bearable fee by SA SEBOL” for details).. J SENT • Rapport de mission - MCDONALD'S contre M. COLLORAFI - Mars 1998 • A third difference appears in the amount of non-controllable expenses: the Antibes Nord restaurant generates 82,000 F more in this type of expenses than McDONALD'S's indications. This excess lies in two items of the table: “Service fee” and “Accounting and legal fees”; for all the other items, the figures given by M. GANDUR in his report were kept. For the “Service fee”, the difference lies in the fact that M. GANDUR's calculations are not made on the turnover from food sales as is done in reality, but on total turnover, which causes a slight gap of 0.07% of food sales, all the more so as the turnover calculated here is slightly higher (+ 98,000 F for food sales). The item “Accounting and legal fees” is inflated for the year 1998 at 168,000 F. This sharp increase must be linked, as previously, to the writ of summons of M. COLLORAFI against McDONALD'S. The average of this item for all McDONALD'S lessee-managers in France is around 90,000 F; it is this latter figure that was taken into account • It should be noted that in these controllable expenses, the amount of the standard fee is calculated from the minimum fee defined by the agreement; it is 245,00D F per month, i.e. 2,940,000 F per year. The minimum fee is used if the standard fee of 20% of food sales is lower than this minimum. Nevertheless, it is necessary to recall here that in 1997 an adjustment of the fee was granted to M COLLORAFI by McDONALD'S: the rate was brought down from 20% to 17%, and the minimum fee from 245,000 F to 180,000 F per month, i.e. 2,160,000 F per year. This adjustment was valid for the whole of 1997 with retroactive effect from 1 January 1997. However this adjustment was not valid for 1998, which explains why the rate and the minimum fee used here are those of the agreement. • For the non-food result, the figure given by M. GANDUR was kept, even if the amount of non-food sales is slightly higher (+ 2,000 F) because it depends on the turnover from food sales (here 1.50%). • The preceding differences lead to a very different net operating result: - 1,408,000 F for M GANDUR and - 471,000 F for our calculations, i.e. a difference of 937,000 F • Another difference of 180,000 F appears at the level of administration costs: the amount given by M. GANDUR is 600,000 F. As for the two other restaurants, we used the sum of 420,000 F. NEPT Rapport de mission MeDONALDS conde A1. COLLORAFI 1urs 1998 • The gross self-financing margin corresponds to the net result before tax to which has been added all the depreciation and amortisation made during the financial year. The result being modified by our calculations, the gross self-financing margin is too. All these elements explain the difference (+ 1,117,000 F) in the amount of the bearable fee presented here compared with that of M. GANDUR's report The amount of rent financially bearable by the lessee-manager is therefore 2,289,000 F, i.e. 651,000 F less than the fee defined by the agreement but 120,000 F more than the adjustment of the fee granted by McDONALD'S in 1997 to the company SARL B & O. Remarks Having reached the end of this study of the three companies, it is important to note that the totality of the remuneration provided for M. COLLOFARI in the calculations of M GANDUR's report comes to the following figures: SA SEBOL SARL LESPIS SARL B & O 360,000 F 312,000 F 432,000 F Total 1,101,000 F These figures are to be compared with the negative results forecast in the same report for these three companies. Conclusions The new presentation of the fee calculations with discussion arrives at figures different from those of M GANDUR's report. Consequently, they therefore call into question its conclusions. They demonstrate a posteriori that the level of fees applied in 1997 was bearable for the three restaurants, taking into account for SARL B & O the adjustment that had been granted to it. Be that as it may, the calculations on which we have focused cannot be applied insofar as the agreements have been terminated since 2 January 1998. and AEP.T.. Rappori de massion VIDONALD'S contre M. COLLORAFI - Mars 1998 2nd Part McDONALD'S's success rests on the success of the franchisees THE CONDITIONS OF McDONALD'S's SUCCESS Created in 1955 in Des Plaines, Illinois by M. KROC, the McDONALD'S network has become, in 43 years, a major international company. It achieves under its brand turnover of approximately 34,000 M$. The network comprises 23,33 restaurants in 109 countries, which places it in the leading position, far ahead of all its competitors. The McDONALD'S brand is the benchmark of fast food, which has become synonymous with a lifestyle that is young, active and dynamic McDONALD'S's success is particularly remarkable in France: between 1987 and 1997 its turnover rose from 657 M.F. to 8,388 M.F. McDONALD'S's market share in 1987 was 30% against 70% for its competitors; ten years later the market shares have reversed, 70% for McDONALD'S, 30% for its competitors, in a market that grew from 1 to 11 billion francs. In other words, its competitors have grown since their share has reached 3.3 billion FF, but McDONALD'S even more so The development of this new market is partly due to exogenous reasons, linked to changes in lifestyles, but it is also explained by McDONALD'S's advertising and marketing effort as well as by the particularities of its restaurants. By the admission of its main competitor QUICK, these particularities helped to acclimatise the fast-food concept among the French. A franchise founded on partnership McDONALD'S now has only one concern: not to rest on forty years of success and to let the entrepreneurial spirit of the pioneers dissolve in the complexity of a multinational. To avoid this pitfall which lies in wait for all large companies, McDONALD'S uses a particular development policy: franchising, which brings together the interests of the partners. SEPT. - Rapport de aussion - McDONALD'S contre V COLLORAFT - Mars 1994 McDONALD'S thus appears as the very example of the strategic company which chooses to take its place in the long term. The logic of its franchise is clear: make its partners succeed in order to ensure its own success This logic finds its concrete transcription in the general economics of the McDONALD'S franchise • McDONALD'S finances land and premises, the franchisee buys only the equipment. The system favours access to the franchise for dynamic entrepreneurs with limited equity rather than for investors, unlike the approach of other franchisors • The fees are adapted while leaving an attractive remuneration to the franchisee • Franchisees who find themselves in difficulty can be financially supported • Most of the risk is borne by McDONALD'S. Technology : r 2.1.2.1 An original supply system McDONALD'S sells a service to franchisees. It neither produces nor sells food to the restaurants, which place orders and source from independent suppliers that they pay directly, unlike what many chains do. However, the characteristics and prices of the products are negotiated by McDONALD'S, which allows franchisees to benefit from a quality supply at the best cost, thanks to McDONALD'S's negotiating strength conferred on it by the scale of its orders. The cost of the sourcing centre is included in the 5% service fee. The system is advantageous for both parties: • the outsourcing of the manufacture of food and packaging guarantees the fairness of McDONALD'S towards the franchisees: the company derives no margin on the production of raw materials and therefore has only one interest - finding suppliers with the best quality/price ratio. This case is uncommon in the case of service franchising Moreover, the system makes it easy to adapt to the specificities of the demand of each country, by calling on national suppliers. SEPT. Rarcort de misson - MeDONALD'S conre U COLLORAFI - Mars 1998 • McDONALD'S thus avoids the costs that it would inevitably be obliged to invoice to handle the collection of franchisees' orders, pass the orders to suppliers and then manage the payments. The combination of franchising and the outsourcing of production thus allows McDONALD'S to devote itself to what makes its strength: advice and marketing (see “Le système McDo”, in Alternatives Economiques, no. 151, September 1997, see annex no. 2.1). 2.1.2.2 An active and constant policy of training, advice and assistance Even before concluding an agreement, McDONALD'S begins by giving candidates training that gives them the best chances of succeeding in operating their future franchise. It is a complete and demanding training lasting about a year. Candidates are trained in all positions, from simple crew member to the head of an SME, so as to acquire in-depth knowledge, both practical and theoretical, of how a McDONALD'S restaurant operates By way of illustration, every activity, even the simplest, within the restaurant is carefully studied and is the subject of a video cassette. McDONALD'S then provides each franchisee with permanent and personalised advice and assistance to achieve this triptych: Quality, Service, Cleanliness, which explains the success of fast food the McDONALD'S way. This training is constant, both through practice in the field and through training courses One only has to read the reports of the McDONALD'S teams visiting in the field to gauge the professionalism and precision of their observations, which enable each franchisee to undertake all the actions likely to optimise the operation of his restaurant. 2.1.2.3 A partnership-based commercial policy The 4.5% fee on food turnover excl. VAT paid for advertising by the franchisees is managed by themselves through a G.I.E. McDONALD'S, the franchisor, has no more than one vote in this G.I.E. 2.1.2.4 Constant adaptation and renewal of the offer McDONALD'S strives to react to changes in public taste, thanks to sustained marketing, which enables it to stay ahead of competitors and to prevent consumer fatigue SEPT - Rapport de mission - MCDONALD'S conte M. COLLOKAF? - Mars 1908 i a Its strategy comprises several axes: • Enrich the product range and adapt it to national tastes (by way of example, salads were introduced in French restaurants). • Widen the range of opening hours by offering for example a breakfast (savoury or sweet) called Mc Morning • Offer seasonal products to attract consumers seduced by novelty (Mc Marin for fish-based meals, etc.) • Respond to consumers' ecological concerns (Corporate Environment Plan signed with the Ministry of the Environment which provides in particular for the use of recycled materials). The permanent capacity for adaptation and renewal of its offer appears as one of the keys to the durability of McDONALD'S's success in a market marked by the rapid change in consumers' tastes and expectations and by strong competition THE GENERAL ECONOMICS OF THE McDONALD'S FRANCHISE Thanks to the lease-management agreement, the franchisees' initial investment is limited The McDONALD'S franchise combines a licence agreement and a lease- management agreement This system leaves the creation of the business (fonds de commerce) to the franchisor, making it possible to reduce the franchisees' initial investment, in such a way that good franchise candidates are not prevented from joining the McDONALD'S network for lack of sufficient personal equity To gauge the importance of the share of the investment financed by McDONALD'S at each restaurant opening, the franchise agreement should be examined, which comprises • A Licence agreement covering the grant of the McDONALD'S brand to the franchisee, who pays in return a service fee of 5% of food turnover excl. VAT (see annex 2.2 Pre-contractual information document, §2.1 p. 10 and §2.2 p. 11) • A lease-management agreement under which McDONALD'S leases to the franchisee the business, of which it remains the owner, and the premises, of which it is the owner or the tenant SEPT Rapport de mission • MCDONALD N contre V COFORAF! Mars 1998 The business includes land and buildings in the case of the so-called Straight License agreement (see annex 2.2: Pre-contractual information document, § 2.4 p. 10), or the property, land, building and equipment in the case of the so-called B.F.L. agreement (see annex 2.2: Pre-contractual information document, § 2.4 p. 11). To note that the franchisee has the option of extending a B.F.L. type agreement (term of three years) by converting it into a so-called Straight License agreement (term of twenty years) provided certain conditions are met (see annex 2.3 Lease-management agreement, art. XII p. 17 - p. 19) On the financial plan, the company McDONALD'S is remunerated for the purchase or lease of the land and the construction of the premises that it grants by lease-management (so-called Straight License agreement) by a standard fee varying according to the amount of the initial investment (see annex 2.2: Contractual information document § 3.1 p. 10) and which in fact corresponds to a rent that any franchisee in another network would have to pay in any event. When McDONALD'S also supplies the equipment by lease-management (so-called B.F.L. agreement), it receives an equipment fee of 4.5% (see Annex Lease-management agreement p. 4), but in that case the franchisee has practically no other investment to make and consequently takes almost no risk The amount of the standard fee cannot be lower than the minimum fee, a provision intended to ensure a minimum return for McDONALD'S on the investments it has financed. However, the minimum fee does not represent an absolute guarantee of remuneration for McDONALD'S because of the adjustments to fees that it grants to franchisees who find themselves in difficulty (see below) In all cases, whatever the form of agreement chosen, McDONALD'S therefore finances most of the amount of the investment needed to open a restaurant since it contributes at a minimum the land and premises. The franchisee's initial outlay is reduced, opening access to the McDONALD'S network to all those whose contribution lies only in their skill and motivation. Thus on average McDONALD'S bears 2/3 of the overall investment, against only 1/3 for the franchisee. Moreover, the proportion of the overall amount of the investment provided by McDONALD'S is higher for many sites, notably in coastal tourist areas and city centres, because of the high price of land. Lastly, McDONALD'S's investment can reach almost 100% in the case of the so-called “B.F.L.” agreements, since it also includes the equipment. J NEY Rapport de mission - MeDONALD'S contre M. COLLORAFI Mars 1998 ". i By way of example, the sharing of investments between McDONALD'S and the franchisees for the opening of nine restaurants in the south-east of France, including the three restaurants of M COLLORAFI, should be cited A quick calculation (amount of the investment made by McDONALD'S / total amount of investments) shows that the relative importance of the investments made by McDONALD'S for the opening of the restaurants cited as examples varies between 67% and 97%, with 80% on average for the three restaurants of M COLLORAFI Date created Nice Lingostière McDONALD'S investment 70% of the total amount Nice Promenade McDONALD'S investment 78% Vice INL McDONALD'S investment 75% Grasse McDONALD'S investment 72% Cannes les Allées McDONALD'S investment 78% Vallauris McDONALD'S investment 76% Antibes 1 (SEBOL, M COLLORAFT) McDONALD'S investment 67% Antibes Nord (B&O M COLLORAFI McDONALD'S investment 82% Antibes Ouest (LESPINS, M COLLORAFI) McDONALD'S investment 97% Average of M. COLLORAFI's restaurants* 80% * This percentage is calculated as follows: cumulative amount of McDONALD'S's investments in the three restaurants, including the capitalisation of the initial rent in the case of a lease / cumulative amount of all investments It is to be noted that in the case of M COLLORAFI McDONALD'S's investments were increasingly large at the opening of each new restaurant up to 97% for the last one (Antibes Ouest), whereas usually the opposite occurs: the franchisee increases the share of investments borne by him as he consolidates his financial base thanks to the income generated by the operation of his first restaurants. Rapport de mission . WeDONALD'S conte M. COLLORAFI - Hars 1998 2.2.2. Fees, but advantageous remuneration for the franchisees The standard fee is calculated in a balanced way for the franchisee even though the sharing of the investments is unequal, since McDONALD'S provides the greater part of it (so-called Straight agreements), even almost all of it (so-called B.F.L. agreements) In effect, McDONALD'S receives an adapted remuneration for the investments it makes in order to create the business (fonds de commerce). The objective pursued is the development and prosperity of the network rather than short-term profits. In this regard, M. COLLORAFI constitutes an excellent illustration of the high remuneration enjoyed by McDONALD'S franchisees. Thus his earnings between August 1987 and December 1996 (salary and dividends) amounted on an annual average to 951,117 F Return on McDonald's real-estate investment for the Antibes restaurant Investments at 15/12/1997 - 1real au badl Buildings Other (registration duties, etc.) TOTAL in KF Depreciation over 20 years, i.e. per year Financing: 100% at 10C over 20 years (constant annuities) Total over 10 years Period 1988-1997 (1987 not counted because not a full year) Total sales Standard fee received (150 or 1250) Rents (paid to Carrefour by McDonald's) . Depreciation L- financial expenses Lessee margin LEs (average gap 36,200) Net (before overheads) Source: McDonald's France, February 1998 in kF fee 209 (H01 +942 ++51 33,14% 5 170 21,101 Annual average in kF in % of invest- ment 12.38% of total sales 19.10'% 194,20l 145,10 790,70| 577,021 5,557) 2,637 3wra 6,1+% + i SEPT Kapport de messian - MOISONALD'S contre M. COLLORARI - Mars 1 098 Moreover, the existence of a minimum fee (see annex 2.3: Lease-management agreement § IX 1.3) does not guarantee McDONALD'S an incompressible return on the investments that it has made to constitute the business (fonds de commerce), insofar as it grants fee adjustments to franchisees in difficulty (see above). Lastly, as the main investor, McDONALD'S would also be the main loser if a restaurant had to close. It then risks recording a significant capital loss on the sale of the business, of which it is the owner according to the very definition of the lease-management agreement. CONCLUSION The McDONALD'S system can develop and endure only thanks to the franchise network. Consequently, to try to show that the interests of the franchisees and of the franchisor diverge is to show a total misunderstanding of the general economics of the McDONALD'S franchise, both in its legal foundation - the lease-management agreement - and in its practical reality - the partnership - since the difficulties of the franchisees have an immediate impact on the turnover of McDONALD'S and compromise the viability of its investments. Moreover, 43 years of uninterrupted success would not have rewarded such a strategy Lastly, McDONALD'S, as every franchisor must do under the code of ethics of the Fédération Française de la Franchise, itself operates a certain number of points of sale, called in its terminology restaurants. At 11 December 1997, 70 restaurants in total were managed directly by McDONALD'S, i.e. 11.1% of the 630 existing restaurants. Rapport de mussion . McDONA/SS contre 1. COLLORAFT - Mars JY0R orit 3rd Part The case of Monsieur COLLORAFI THE McDONALD'S RESTAURANTS MANAGED BY M. COLLORAFI CHANGE AND CHARACTERISTICS The history of events frames all the operations relating to this report over approximately 10 years. On 5 August 1987 the first lease-management agreement for the McDONALD'S restaurant of the Carrefour Shopping Centre in Antibes was granted to M COLLORAFI and on 31 August 1987 this agreement was transferred to the Company SEBOL controlled by M. COLLORAFI and his family. The restaurant developed normally until 1994 with an expansion rate of 288% in the first year and then 42%, to reach an average rate of 109% each year with a first slowdown between 1990 and 1991 (- 5.2%). Indeed, turnover went from 21.184 M.F. in 1990 to 22.290 M F in 1991. Likewise between 1993 and 1994 turnover underwent a slight decline (-1.66%) since it went from 27,422,009 F to 26,965,840 F, the decrease representing 456,169 F, i.e. 6 days of 1993 turnover The opening of the QUICK DRIVE restaurant took place in July 1995 about 600 m from the first McDONALD'S SEBOL's turnover for 1995 fell by 9.6%, going from 27.3721 M F. in 1994 to 24.754 M.F The QUICK DRIVE having opened in July, i.e. in the 7th month of operation, its impact only partially affected SEBOL's turnover, especially as the ramping up of a restaurant requires a certain time. M COLLORAFI himself estimates the strength of the impact of this restaurant in his letter of 17 April 1996 at between 15 and 25% (see annex 3.1) SPi. Kapport de mission. MeDONALD'S conte M. COLLORAFT. Mars 1798 RESULTS FOR 1997 FOR THE 3 RESTAURANTS In 1997, McDONALD'S's turnover figures for the three restaurants in Antibes are explicit. Indeed, whereas the year 1996 reached only turnover of 18,305,795 F - for SEBOL alone - that of 1997 reaches 31,556,286 F for the three restaurants, with a financial year of only 8 months for LES PINS Indeed SEBOL reaches 11,054,691 F, Antibes Nord 13,491,418 F and Antibes Ouest 6,410,177 F, i.e. in total 31,556,286 F OBSERVATIONS ON SITE Your assignment led us to go on site on Wednesday 4 March 1998 We were able to visit the following restaurants: • the 3 restaurants of M. COLLORAFI and the QUICK restaurant competing with the McDONALD'S Antibes Nord; the following McDONALD'S restaurants • Vallauris • Cagnes Plage • Nice Masséna • Nice Jean Médecin Our findings were as follows: 3.3.1. Antibes Centre Commercial - SA SEBOL (see photos) This “MALL” type restaurant is old. It offers 230 seats inside and 80 outside. There are nine tills at the counter. It is more than 10 years old and the decoration shows it. The state of cleanliness leaves something to be desired but this is probably due to the current circumstances. The restaurant is now outside the main flows of traffic. Indeed until 1995 entrance no. 1, 50 m from the McDONALD'S, was the only entrance to the Shopping Centre from the car park, which has about 500 spaces. SAPI • Rapport de mission NODONALD'S conie M. COLORAFT. Mars 1998 Since 1995 more than 2,700 additional spaces have been created on the other side of the roundabout. The main entrances (no. 2 and no. 3) are fed by these very large car parks. The link between the two zones (the old and the new) is delicate: a single narrow road. People present in or accessing the large car park cannot see the McDONALD'S Moreover there is no McDONALD'S advertising on site This restaurant is currently marginalised both by its appearance and by its location Antibes Nord - SARL B & O (see photos) This is a “FREE-STANDER-DRIVE” restaurant of medium size: 104 seats inside and 150 outside, 3 floors with terrace. Five tills at the counter and two tills for drive-through sales This restaurant is very well placed on the roundabout of the route de Grasse and faces the QUICK which, although larger, is less visible from the road This restaurant came late, a year after the QUICK, but strategically prevented the latter from developing, which we will prove in the analysis of the impact Antibes Ouest - SARL LES PINS (see photo) This “FREE-STANDER-DRIVE” restaurant is the smallest of the three with 51) seats and 40 outside. Five tills at the counter and one for drive-through sales This restaurant is ahead of its market since the zone located towards the sea (at 350 m) is still under construction (several hundred dwellings), but it is placed on a roundabout and access for cars is easy, which facilitates drive-through sales It achieved in 1997 turnover 34% higher than that of its twin, the Vallauris restaurant operated by M. GILARSKI, opened the same day, 29 April 199? NET! Kapport de mirson • MEDONALD'S conte M COLLORAF! Mars 1999 THE PARTICULAR CASE OF M. COLLORAFI 3.4.1. A comfortable situation The result is plain. For 10 years M. COLLORAFI paid himself substantial remuneration His gross remuneration, declared benefits in kind included, reached between 1992 and 1996 52,083 FF per month. To this remuneration must be added that of his wife, which reached in 1996 10,040 F per month The majority shareholder of the company SEBOL, M. COLLORAFI, moreover takes part of the profits arising from the company the dividends paid reach 400,000 F in 1993 1,850,000 F in 1995 900,000 F in 1994 and 1,000,000 F in 1996 That is the equivalent of 154,100 F per month in 1995 and 83,333 F per month in 1996. Now in 1996 precisely the company SEBOL showed the combined difficulties due to the change in customer flows in the Shopping Centre and to the impact of the QUICK restaurant opened in July 1995 The result of this financial year reaches only 352,000 F Yet M COLLORAFI nonetheless paid himself remuneration of 625,000 F to which he added that of his wife, 193,400 F, and dividends of 1,000,000 F The total of M. COLLORAFI's withdrawals from the company SEBOL reaches in + T 1,000,000 FF 625,000 FF 193,400 FF 1,818,400 FF Now, in February 1997, i.e. six months later, M COLLORAFI found himself unable to finance the share falling to him in the creation of the restaurant of ANTIBES LES PINS and asked his franchisor to substitute itself for him by converting the “straight” agreement into a “B.F.L” agreement. "АРУ - Rapport de massan - MeDONA/!:S contre M. COLLOKAFI • Mars 1998 The following table summarises well the change in M. COLLORAFI's personal income over the years and his financial situation: Year Result Yet Franchisee (a) Wife (2) 1987 over 5 months 198X 199+ 19%6 /Total Average over the first 10 Average over (last Average over 2 • 1 602 959 (h) ib! 395!HKH 62? 145 625 0xMt! 1h) 192 330| 625 (HM) 193,490 + 587 280| 5 043 669 1 002 268| Equity 1 941806! 1 735+66 68? 280 Dividends Total income 1.30 (M) 270 (NH) 395 (мн)| 7X* 145 1200GEX 1 850 (00) 2 667 3.111 + 150 000 10 195 937 +15 000; 625 735, 1 +25 000 Source: McDonald's France, February 1998 (a) Direct or indirect remuneration, excluding expenses relating to company vehicles (b) Data not available Average net result over the first 10 financial years Share capital i.e. a financial return of 183.5% per year In total over 9 years and 5 months, M COLLORAFI's remuneration reached an amount of Remuneration Payment of dividends 5,043,669 F 4,150,000 F TOTAL 9,193,669 F As the wife's remuneration is not all known, the amount of the latter's remuneration over 7 years nevertheless reaches the total amount of 1,002,268 F, which in sound logic should be added. Lastly, in the financial years 1995 and 1996 alone, Mr and Mrs COLLORAFI paid themselves in salaries and dividends 4,185,820 F, i.e. 2,212,910 F per year. J SEPT Rapportde mission MCDONALD'Srende M COLLORAFT-Mars 1998 Recourse to the franchisor Even while paying himself 1,000,000 F of dividends, M. COLLORAFI carried out on 28 January 1997 a particular operation. He borrowed 350,000 F over 3 years in the name of SEBOL at the rate of 4.625% per year, which led him to reduce further the financial means of the company SEBOL, while favouring his personal interests (see annex 3.3) Previously, moreover, M COLLORAFI had carried out similar operations. On 1 January 1990 he had borrowed from McDONALD'S in the name of SEBOL a sum of 415,283.35 FF over a period of 6 months. Yet in 1989 his results were already profitable to the tune of 311,000 F. This agreement was moreover the extension of a first loan of the same amount taken out with the franchisor on 14 December 1988 Moreover, on 15 April 1990, a second loan agreement was taken out in the amount of 336,417.41 F for a period of 12 months 3.4.3. A strategic error 3.4.3.1. The impact Observation of the fast-food market shows that the impact of a new restaurant, whether it bears the same brand or a different brand, depends on several factors without any one of them dominating a priori, namely: - proximity, • the type of market, • the type of restaurant. - Proximity Two restaurants spaced barely 300 m apart can quite well each achieve significant turnover (+ more than 18 M F), as is the case in Nice with not only two restaurants but with the three restaurants of Nice Masséna, Nice Jean Médecin and Nice Promenade. Sarr Rapport de naisson LEDONALD'5 rontre M. COLLORAFY Mars 109R - The type of market In Nice again, the market of the Nice Jean Médecin restaurant is that of a run-down and working-class station district, undergoing reconversion. Opened in 1982 it achieved turnover of 18,077,250 F in 1997 Nice Masséna, located 300 m further on along the same avenue towards place Masséna, is on the contrary at the heart of the shopping district. Opened in 1986 its turnover reached 23,886,436 F in 1997 Nice Promenade is aimed mainly at tourists. Opened in 1990 its turnover reached 21,941,384 in 1997 Thus, these three restaurants each achieve turnover of more than 18 M F, while the distance separating them is half that separating the Antibes Nord and Antibes Centre Commercial restaurants. - The type of restaurant The strategy followed by McDONALD'S which, let us recall, enabled this group to occupy 70% of a market of 11 billion francs in 10 years, rests on a systematic occupation of large cities and then of medium-sized towns. The types of restaurant are accordingly multiple. Three types are distinguished • The “mall” type located in a shopping centre, its activity is tied to the opening hours of the centre • The “in-stores” type: this is a classic city restaurant with on-site sales and takeaway sales. • The “free-stander-drive”, located at a crossroads or on a road, this restaurant offers motorists the possibility either of stopping or of ordering from their vehicle Regardless of their type, these restaurants can offer from 50 to 300 seats not counting the terrace. Thus in Antibes the Centre Commercial restaurant is of the “mall” type and those of Antibes Nord and Antibes Ouest are “free-stander” SANT • Happort de mission . MEDONALD'S conre dr. COLLURAF vars 1998 3.4.3.2. The effects of the impact The documents attached in annex (no. 3.2) show three impact studies in France on three different towns: Le Mans, Cholet and Brive la Gaillarde. For Cholet, the catchment area is 55,000 inhabitants and for Brive 64,000 inhabitants. Let us recall that Antibes has a catchment area of 75,000 inhabitants. These areas are therefore quite comparable. As for Le Mans, the catchment area is 189,000 inhabitants, but this case is particular because it concerns openings of new restaurants very close to one another. Le Mans 1/ Created in 1992, restaurant no. 1 is “impacted” twice in the same year in 1993. The first time on 7 July by the creation of the Le Mans Centre restaurant (no. 2), the second time on 4 December by the creation of Le Mans Nord (no. 3). 2: The total turnover of McDONALD'S in Le Mans in 1993 is 18,167,831 F but in 1993 it reaches 24,887,196 F, then in 1994, 35,529,588 F. In two years, McDONALD'S's turnover practically doubled in the Le Mans market 3! The impact on the turnover of restaurant no. 1 ceases in November 1994, i.e. twelve months after the opening of restaurant no. 2 → No. 2 is “impacted” only for three months by no. 3; indeed after three months of falling turnover between September and December 1994, it resumes its growth 5/ When the Le Mans “Bonne Table” restaurant (no. 4) is created on 10 September 1996, the three preceding restaurants are “impacted” but this impact stops • for no. 1, nine months later in June 1997 • for no. 2, a year later in September 1997 • and for no. 3, on the same date, in September 1997 Thus, the impact lasts no more than a year and a half in the case of Le Mans Cholet For Cholet, restaurant no. 1 was created on 3 February 1993 SATI ¡upport de mission. MrDONALD'S contre 11. COLLORAM - Mars 1008 . i The impact of restaurant no. 2 “Cholet la Louisière” created in March 1996 on restaurant no. 1 ceases from April 1997, that is to say on the anniversary date one year later. Brive la Gaillarde Restaurant no. 1 was created on 24 November 1993; the impact of Brive no. 2 “Malemort”, created in August 1996, on the first restaurant also ceases in the 12th month, in August These various elements underline repeatedly the particularity whereby the impact of a new restaurant generally ceases one year after the opening of the competing restaurant. 3.4.3.3 The study of the impacts in Antibes taking into account the QUICK restaurant Restaurant McDONALD'S ANTIBES (S.151:B0L) MCINALDS ANTIBES NORD (SARIB&0) QUICE AVTIBES Turnover Turnover Evo- Turnover lulion! d'affaires lution Turnover tution 8,639 183057051.25.700 3633°0) I6 270 620 - 14.19% Total MCDOXALI, ANTIBES CEST(SARI DES PINS) Total with Antibes Ouest 26 965 84031 745 799 17,739 37 965 252| 19.59°C| 30 058 489| 2,88C4 6 +10 177 17.736 37065252| 19.50 +5 108 6(x 19.70% frure: MeDonald's France, Février 1908 & IV.P 1 The Antibes Centre Commercial restaurant is first “impacted” at the end of July 1995 by the QUICK restaurant. This QUICK restaurant achieved over four months turnover of 7,106,959 F in 1995* *QUICK's turnover figures come from the INPI; QUICK closes its accounts at 30/09 and McDONALD'S at 31/12. An adjustment had to be made. QUICK's first financial year ends on 30.09.96 and has a total length of 14 months. For 1995, there are five months between the end of July (opening date) and the end of December (McDONALD'S year-end): lacking detailed knowledge of the monthly figures, we took 5/14ths of the financial year ended 30.09.96. For 1996, we added 9/14ths of the financial year ended 30.09.96 and 3/12ths of the financial year ended 30.09.97. For 1997, we took as a basis the turnover of the financial year ended 30.09.97. It must be higher than reality because the restaurant, as the table shows, was also “impacted” by the Les Pins restaurant. We did not calculate the impact over the last three months of 1997 and kept the 1996 figures for this same period SEPT. Rappors de mession - MrDONALD'S conte M. COLLORAFI - Mars / 008 In 1996 QUICK achieves turnover of 16,270,620 F. Antibes Centre Commercial 18,305,795 F and Antibes Nord, created opposite the QUICK on 9 October 1996, achieves turnover of 3,388,837 F. In 1997, in its turn, Antibes Nord, created in October 1996, “impacts” the QUICK restaurant located opposite since the latter, instead of growing, falls from 16,270,620 F to 13,912,380 F, i.e. by 14.49%. In fact, McDONALD'S achieves in total in this sector 25,146,109 F, i.e. approximately the 1994 figure, and moreover stopped the growth of QUICK. In other words, thanks to Antibes Nord, McDONALD'S erases the impact created by QUICK in 1995. Lastly, if one adds the Antibes Ouest Les Pins restaurant, M COLLORAFI comes out the winner of this struggle with a total turnover of 31,556,280 F, i.e. a gain of 17% on the turnover achieved in 1994. This strategy enabled M. COLLORAFI 1. To progress in the Antibes market. 2. To prevent QUICK from establishing itself without real opposition and from developing "APT Rapport de misston . ArDONALD S contre M. COLLORAFI Mars 1498 Glossary McDONALD'S's reports use certain words of American origin. To make reading easier, we have translated some of them: BFL Drive-in Free-stander Impacter In-store Mall PAC Straight License Business Facility Licence: agreement under which McDONALD'S also invests in the equipment Drive-through restaurant. These restaurants are in fact mixed, drive-through service and traditional service. Restaurant independent of any other building. Most are equipped with a drive-through service. Effect of the impact of the opening of one restaurant on another Classic city restaurant. Restaurant located in a shopping centre. Restaurant managed by McDONALD'S. Profit after controllable expenses calculated from an equation adapted to the type of restaurant. Agreement under which McDONALD'S invests in real estate and construction. The franchisee invests in the equipment. SEPT . Rappore de mission MADONALD'S contre M. COLLORAFI - Mars 1908