Franchise in Restaurants

Comparative Study of McDonalds Franchises

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Biswajit Mishra Karthikeyan Annamalai Sriram K Thwar Vidit Jain (P122056) (P122018) (P122045) (P122051)

Table of Contents
Table of Contents...................................................................................................2 INTRODUCTION......................................................................................................3 LITERATURE REVIEW..............................................................................................4 THE INDIAN FAST FOOD MARKET - AN OVERVIEW..............................................4 COMPARISON STUDY..............................................................................................5 McDONALDS...................................................................................................... 5 NIRULAS.............................................................................................................. 6 WIMPYS...............................................................................................................6 ABSTRACT..............................................................................................................6 METHODOLOGY......................................................................................................7 SERVQUAL..........................................................................................................7 ANALYSIS...............................................................................................................9 RECOMMENDATIONS............................................................................................17 DISCUSSION AND CONCLUSION...........................................................................19 REFERENCES........................................................................................................19

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INTRODUCTION
The restaurant industry is a demanding sector that stresses the provision of high-level customer service and continuous quality improvement. As lifestyles change and dining out becomes more and more commonplace, customers desire new flavours, comfortable ambience and pleasant memories. What is more, they prefer an excellent overall dining experience. Dining experience is comprised of both tangible and intangible elements. While tangible elements can easily be improved, the intangible part of restaurant service requires considerable attention. Researchers have noted that the ability to deliver high quality service will provide long-term financial viability and sustainable business success. Hence, restaurants that provide customers with quality services can gain a stronger competitive position in todays dynamic marketplace

Traditionally over the ages, fast food for the average Indian customer meant having breads i.e., paranthas, rotis etc. with sabzi or achaar. These were the traditionally available snacks or in the form of samosas etc. All the items were available at the roadside dhabas or the local sweet shops. There were no established eating places or restaurants for the average Indian customer. It was the Nirulas family way back in 1920s that started the trend of opening good eating places in the city. Nirulas initially when they entered the restaurant business were more into catering and hotel business. It was only in the late 50s and early 60s that they decided to open up a restaurant serving snacks and fast food. By 70s they had a pastry shop, snack place and Hot Shoppe. This started the trend of eating joints in the city and over the country. Nirulas was considered to be the pioneer in fast food business. Seeing its success in the country other local fast food joints and restaurant started coming up in the 80s. With the coming up of these local joints Nirulas was not left behind. It had a well-established fast food chain over the next decade. However seeing the potential in the country in the 90s due to the changing life styles, the established chains world over made their entry into the Indian food market. However the tastes and the style of the kind of food which these MNCs we offering the Indian customer has been made familiar to him by Nirulas only. Although the concept was introduced to the Indians way back, but in the true sense market for fast food has been developed only after the entry the various MNCs starting with Wimpys to McDonalds, Pizza Hut, TGIF, Dominos etc., with many more to come over the next few years.

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LITERATURE REVIEW
THE INDIAN FAST FOOD MARKET - AN OVERVIEW
Up to the year 1995 Indian food market was predominantly dominated by the traditional dhabas, potential restaurants in the customers colony and some restaurants in a five star hotel. Having fast food i.e., burgers, pizzas etc., was considered to be an option for eating out. It was not at all synonymous with the American concept of fast food as a quick takeaway bite or a substitute for lunch. Apart from fast food being available at the local colony restaurants and at some five star restaurants, Nirulas was the only fast food chain existing in the country with its restaurants expanding with every passing year since its inception. It has been almost 50 years now since its set up and there is hardly anyone who doesnt know that Nirulas exists. Nirulas was the first one to bring fast food to India back in the 50s since then it has evolved into an eating place with tremendous brand equity and brand recognition. It proved to be a perfect eating place for an average middle class who wants to eat out at an affordable price that cant afford the five-star restaurants and would not want to go to the local dhabas. Nirulas almost had a monopoly for decades due to the way it has been placed. It is a place where a person from an average middle class group to upper class group can go to eat out. Its popularity has increased over the decades. With the trends changing and the incomes rising almost anybody who can afford to eat out could go for a snack at Nirulas. However the year 1995-96 witnessed a drastic change. 1996 is considered to be the year of Indias entry into the world food market. International giants such as McDonalds, KFC, TGIF, Dominos and Pizza Hut all bombarded the Indian food market. Before these, UK-based joint called Wimpys had established its chain in the country in 1990. By year 1996 it had about three to four joints established in Delhi. However it did not pose much of a threat to Nirulas reason being lack of variety and that Wimpys was looked at more of a hangout place rather than eating out with the family. Its been the American international giants i.e., McDonalds, Pizza Hut etc., who have targeted their restaurants to the families. Apart from the foreign and Indian fast food chains setting up shop, there are a range of specialty restaurants offering varied fare such as Chinese, Mexican, French, Italian etc. These places however offer range of items different from burgers, pizzas etc, but they definitely are competition to both foreign and Indian fast food chains.

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However, restaurant business is such which is surrounded by threat from everywhere be it Indian joints or foreign joints. It is only these international joints and specialty restaurants which are gradually coming up and some Indian restaurants which have made up the food market. Prior to this it was only the local restaurant that became visible while passing by or through local banners etc., and the five star restaurants were for the elite class out of reach by the average middle class customer. There was hardly any awareness or promotion to beat competition. Each of the foreign food joints that have come into the country has their own strategy lined up to differ from the rest. Each of these studied the Indian tastes and style and thereby targeted the Indian customer. An average Indian restaurant goer is no convenience eater, unlike the Americans. If he is paying, he is paying for food that tastes good (Spicy, soft, savoury etc.), not for how pleasantly the stuff is served or how spotless the widows are. He wants food for that can make him come back to the restaurant. An Indian food joint owner would definitely understand this but an American company, which comes and places it directly without knowing the customer is definitely in for trouble. Customer loyalty in a restaurant business is essentially low. A customer when he comes to a restaurant usually looks at the quality of food, variety, ambience, speed of delivery and the location. The variety would influence the frequency of visits since taste is a dominating factor to the Indian customers. Almost all the fast food chains both Indian i.e., Nirulas and foreign i.e., McDonalds etc., are targeting the families. This serves to be an advantage because the turnaround time is short and family has higher propensity to spend because different members order larger variety of dishes. Each of these restaurants delivers quality, value and services in its own way through its line of strategies. The emphasis is on the value that the restaurant is delivering to the customers.

COMPARISON STUDY
McDONALDS

McDonalds serves its customers with high quality products. There are extensive quality tests at the supplier and all products are examined again in the restaurant to ensure that they are of highest quality possible. McDonalds provides fast, friendly service. Any customer visiting McDonalds is usually served within 60 seconds.
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McDonalds menu is priced in such a way that the largest segment of Indian consumers can afford. It has a wide variety of products at different prices to be affordable to as many as possible. McDonalds has limited range of items in its menu. However, to get an item included in the menu approval has to be made from the high tech kitchens at McDonalds headquarters in suburban Chicago.

NIRULAS
The consumer has a wide variety of items to choose from at Nirulas (Both Indian and Western). These items are constantly modified keeping the consumer preferences in mind. Nirulas brand loyalty has not changed (at least till now) despite the coming in of the MNCs. Home delivery services started by the restaurant have improved its customer base. This would prove to be an added advantage in the long run.
The restaurant does not provide with fast and friendly service. At

times it takes about 30 min for a meal to be served.

WIMPYS
Wimpys serves its customers with a wide variety of items. The

consumer has a list of items to choose from the menu. The crewmembers at the restaurant are friendly and meals are served in about 5 to 7 minutes from the time of its order. At certain restaurants meals are even served immediately after the order is placed. The restaurant is a clean and spacious enough to have a comfortable meal. Does not adhere to strict service standards at all its restaurants in a similar way. If a meal is provided at one restaurant in 60-90 seconds, it should be provided at the second restaurant in the same time limit.

ABSTRACT
The purpose of this study is to determine restaurant service quality. The aims are to: (a) Assess customers expectations and perceptions & (b) Establish the significance of difference between perceived and expected service quality. Group - 2 Page 6

The results of this study would help to identify the strengths and weaknesses of service quality and implement an effective strategy to meet the customers expectations.

METHODOLOGY
SERVQUAL
Our study comprised comparison of services provided by three different Franchises of McDonalds restaurant located in Gurgaon.
SERVQUAL is the most popular instrument to ascertain service quality. The research presented in this paper intends to discuss the applicability of SERVQUAL to restaurant services and to analyze the inclusion of customer expectations in such environment. The SERVQUAL instrument contains two sections. One section consists of 22 items that measure consumers expectations. The other section includes 22 corresponding items that measure consumers perceptions of the service they received. The 22 statements represent the five service dimensions that consumers use to evaluate service quality: tangibles, reliability, responsiveness, assurance and empathy.

SERVQUAL is measured on 5 aspects of service quality: Tangibility: The appearance of the physical facilities, equipment, communication material and personnel Reliability : The ability to perform a promised service dependably and accurately Responsiveness: The willingness to help customers and to provide prompt services Assurance: The knowledge and courtesy of employees and their ability to inspire trust and confidence in customers Empathy: The caring individualized attention a firm provides its customers The SERVQUAL instrument itself is discussed, and a demonstration of how it can be used by restaurants in assessing quality service is included. The managerial implications of using SERVQUAL as an assessment tool include
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meeting and managing customer expectations, managing the physical design of the product, educating service customers, developing a total quality management program, achieving continuous quality through automation, and engaging in periodic review of the procedures, personnel, and property of the operation. With the assessment knowledge generated by such a review, restaurants may then begin to manage their strengths and weaknesses productively. SERVQUAL has its detractors and is considered overly complex, subjective and statistically unreliable. The simplified RATER model however is a simple and useful model for qualitatively exploring and assessing customers' service experiences and has been used widely by service delivery organizations. It is an efficient model in helping an organization shape up their efforts in bridging the gap between perceived and expected service.

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ANALYSIS
The comparative analysis based on the RATER for the 3 franchises is as follows: McDonalds 1:
Expectation (E) The restaurants should have latest equipment The restaurants physical facilities (shelves, counters, computers, lights, tables, etc.) should be attractive Their employees should be well dressed and trimmed The appearance of physical facilities of these restaurants should be clean When these restaurants promise to do something within a certain time, they should do so When customers have problems, these restaurants should show sincere interest in solving it These restaurants should be dependable They should provide their services at the time they promise to do so They should keep their records accurately 5.2 5.5 Perception (P) Tangibility The restaurants have 5.6 latest equipment The restaurants 5.4 physical facilities (shelves, counters, computers, lights, tables, etc.) are attractive Their employees are 5.2 well dressed and trimmed The appearance of 5.2 physical facilities of these restaurants are clean Average Tangibility SERVQUAL Score Reliability When these restaurants 5.1 promise to do something within a certain time, they do so When customers have problems, these restaurants show sincere interest in solving it These restaurants are dependable They provide their services at the time they promise to do so 4.9 Gap Score (P-E) 0.4 -0.1

5.8 5.8

-0.6 -0.6

-0.225 -0.5

5.6

-1.1

5.2 5.7

4.6 5.3

-0.6 -0.4

5.2

They keep their records 4.3 accurately Average Reliability SERVQUAL Score Responsiveness

-0.9 -0.7

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Employees of these restaurants should not be expected to tell customers exactly when services will be performed Employees should give prompt service to customers Employees always have to be willing to help customers Even if the employees are busy they should be willing to respond to customer requests promptly The behaviour of employees in the restaurants should instil confidence in customers Customers should be able to feel safe in their transactions with these restaurants employees Their employees should be polite Their employees should get adequate support from the restaurants to do their jobs well These restaurants should not be expected to give customers individual attention Employees of these restaurants cannot be expected to give customers personal attention The employees should not know the specifics of their customers These restaurants should not have their customers best interests at heart They shouldnt be Group - 2

5.9

6 4.6 4.6

Employees of these restaurants are not expected to tell customers exactly when services will be performed Employees give prompt service to customers Employees are always willing to help customers Even if the employees are busy they are willing to respond to customer requests promptly

5.5

-0.4

5.8 4.1 4.8

-0.2 -0.5 0.2

Average Responsiveness SERVQUAL Score Assurance 5.1 The behaviour of 5.2 employees in the restaurants instils confidence in customers Customers are able to 5 feel safe in their transactions with these restaurants employees 5.7 Their employees are 5.6 polite 5.5 Their employees get 4.7 adequate support from the restaurants to do their jobs well Average Assurance SERVQUAL Score Empathy 4.11 These restaurants are 4 not expected to give customers individual attention 4.33 Employees of these 4.56 restaurants are not expected to give customers personal attention 4.5 The employees dont 3.4 know the specifics of their customers 4.5 These restaurants dont 3.7 have their customers best interests at heart 5.2 They dont to have 4.6 5.6

-0.225 0.1

-0.6

-0.1 -0.8

-0.35 -0.11

0.23

-0.9 -0.8

-0.6 Page 10

expected to have operating hours convenient to all their customers

operating hours convenient to all their customers Average Empathy SERVQUAL Score -0.436

Note: The survey questions 18 to 22 are reverse coded for carrying out the analysis.

From the above gap score table, it is clearly evident that the average Reliability SERVQUAL score is the highest. This shows that McDonalds in MGF Metropolitan Mall lacks in reliability. It means that this franchise fails to develop reliability. Customers feel that this franchise is not dependable as the service is not delivered on time. They also have the feeling that this franchise does not focus on customer issues and their concerns.

McDonalds 2:
Expectation (E) The restaurants should have latest equipment The restaurants physical facilities (shelves, counters, computers, lights, tables, etc.) should be attractive Their employees should be well dressed and trimmed The appearance of physical facilities of these restaurants should be clean When these restaurants promise to do something within a certain time, they should do so When customers have problems, these restaurants should show sincere interest in solving it These restaurants Group - 2 5.6 5.5 Perception (P) Tangibility The restaurants have 5.4 latest equipment The restaurants 5.4 physical facilities (shelves, counters, computers, lights, tables, etc.) are attractive Their employees are 5.4 well dressed and trimmed The appearance of 5.4 physical facilities of these restaurants are clean Average Tangibility SERVQUAL Score Reliability When these restaurants 5.1 promise to do something within a certain time, they do so When customers have problems, these restaurants show sincere interest in solving it These restaurants are 5.2 Gap Score (P-E) -0.2 -0.1

6.1 5.9

-0.7 -0.5

-0.375 -0.4

5.5

6.3

-1.1

4.6

4.6

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should be dependable They should provide their services at the time they promise to do so They should keep their records accurately Employees of these restaurants should not be expected to tell customers exactly when services will be performed Employees should give prompt service to customers Employees always have to be willing to help customers Even if the employees are busy they should be willing to respond to customer requests promptly

5.6

dependable They provide their services at the time they promise to do so

4.7

-0.9

5.2

5.8

6 4.1 4.2

They keep their records 4.2 accurately Average Reliability SERVQUAL Score Responsiveness Employees of these 4.7 restaurants are not expected to tell customers exactly when services will be performed Employees give prompt 4.9 service to customers Employees are always willing to help customers Even if the employees are busy they are willing to respond to customer requests promptly 3.3 4.1

-1 -0.68 -1.1

-1.1 -0.8 -0.1

Average Responsiveness SERVQUAL Score

-0.775

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The behaviour of employees in the restaurants should instil confidence in customers Customers should be able to feel safe in their transactions with these restaurants employees Their employees should be polite Their employees should get adequate support from the restaurants to do their jobs well These restaurants should not be expected to give customers individual attention Employees of these restaurants cannot be expected to give customers personal attention The employees should not know the specifics of their customers These restaurants should not have their customers best interests at heart They shouldnt be expected to have operating hours convenient to all their customers

4.8

Assurance The behaviour of employees in the restaurants instils confidence in customers

4.6

-0.2

5.4

5.6 6.2

3.6

3.3

4 4

Customers are able to 5.3 feel safe in their transactions with these restaurants employees Their employees are 5.8 polite Their employees get 4.6 adequate support from the restaurants to do their jobs well Average Assurance SERVQUAL Score Empathy These restaurants are 2.5 not expected to give customers individual attention Employees of these 2.7 restaurants are not expected to give customers personal attention The employees dont 2.7 know the specifics of their customers These restaurants dont 2.7 have their customers best interests at heart They dont to have operating hours convenient to all their customers 4.5

-0.1

0.2 -1.6

-0.425 -1.1

-0.6

-1.3 -1.3

4.6

-0.1

Average Empathy SERVQUAL Score -0.88 Note: The survey questions 18 to 22 are reverse coded for carrying out the analysis.

The above table shows that McDonalds franchise-2 has the highest gap score in empathy. This is majorly because of its customers opinion that this franchise is not empathetic enough in treating them. Customers feel that the employees are not treating them properly.

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McDonalds 3:
Expectation (E) The restaurants should have latest equipment The restaurants physical facilities (shelves, counters, computers, lights, tables, etc.) should be attractive Their employees should be well dressed and trimmed The appearance of physical facilities of these restaurants should be clean When these restaurants promise to do something within a certain time, they should do so When customers have problems, these restaurants should show sincere interest in solving it These restaurants should be dependable They should provide their services at the time they promise to do so They should keep their records accurately Employees of these restaurants should not be expected to tell customers exactly Group - 2 6.1 5.8 Perception (P) Tangibility The restaurants have 5.4 latest equipment The restaurants 5.3 physical facilities (shelves, counters, computers, lights, tables, etc.) are attractive Their employees are 5.9 well dressed and trimmed The appearance of 5.5 physical facilities of these restaurants are clean Average Tangibility SERVQUAL Score Reliability When these restaurants 5.2 promise to do something within a certain time, they do so When customers have problems, these restaurants show sincere interest in solving it These restaurants are dependable They provide their services at the time they promise to do so 5.3 Gap Score (P-E) -0.7 -0.5

5.7 5.6

0.2 -0.1

-0.275 -0.5

5.7

5.9

-0.6

5.7 5.6

4.8 5

-0.9 -0.6

5.4

5.5

They keep their records 4.3 accurately Average Reliability SERVQUAL Score Responsiveness Employees of these 4.7 restaurants are not expected to tell customers exactly when

-1.1 -0.74 -0.8

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when services will be performed Employees should give prompt service to customers Employees always have to be willing to help customers Even if the employees are busy they should be willing to respond to customer requests promptly

5.7 3.8 5.1

services will be performed Employees give prompt service to customers Employees are always willing to help customers Even if the employees are busy they are willing to respond to customer requests promptly

5.2 3 5.3

-0.5 -0.8 0.2

Average Responsiveness SERVQUAL Score

-0.475

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The behaviour of employees in the restaurants should instil confidence in customers Customers should be able to feel safe in their transactions with these restaurants employees Their employees should be polite Their employees should get adequate support from the restaurants to do their jobs well These restaurants should not be expected to give customers individual attention Employees of these restaurants cannot be expected to give customers personal attention The employees should not know the specifics of their customers These restaurants should not have their customers best interests at heart They shouldnt be expected to have operating hours convenient to all their customers

5.6

Assurance The behaviour of employees in the restaurants instils confidence in customers

4.8

-0.8

5.5

5.7 5.7

3.9

4.3

4.2 4

Customers are able to 4.9 feel safe in their transactions with these restaurants employees Their employees are 6.1 polite Their employees get 5.2 adequate support from the restaurants to do their jobs well Average Assurance SERVQUAL Score Empathy These restaurants are 3.1 not expected to give customers individual attention Employees of these 3.2 restaurants are not expected to give customers personal attention The employees dont 3.1 know the specifics of their customers These restaurants dont 3 have their customers best interests at heart They dont to have operating hours convenient to all their customers 5.3

-0.6

0.4 -0.5

-0.375 -0.8

-1.1

-1.1 -1

5.6

-0.3

Average Empathy SERVQUAL Score -0.86 Note: The survey questions 18 to 22 are reverse coded for carrying out the analysis.

The above gap score table shows that this franchise also fails in showing empathy like the franchise 2. The employees of this franchise are not showing much interest on customer convenience.

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RECOMMENDATIONS
From the above analysis, the unweighted SERVQUAL score table of three franchises has been arrived as follows: Franchise 1: Unweighted SERVQUAL Score Table
Average Tangible SERVQUAL Score Average Reliability SERVQUAL Score Average Responsiveness SERVQUAL Score Average Assurance SERVQUAL Score Average Empathy SERVQUAL Score Total Average Unweighted SERVQUAL Score -0.225 -0.7 -0.225 -0.35 -0.436 -1.936 -0.387

From the above table, it can be inferred that there is a big gap between the customers perception and exception in terms of reliability and to some extent sympathy. Apart from that, this franchise has done well to meet the customer satisfaction levels. The recommendations for the franchise to improve its score are as follows: Employees of this franchise should express interest to solve customer issues, their concerns and also be proactive instead of being reactive. Employee training about better customer service also has to be done. The franchise can make their customers know that, whatever takes place or has been agreed upon, they can be sure that their best interests are kept at heart. Franchise 2: Unweighted SERVQUAL Score Table
Average Tangible SERVQUAL Score Average Reliability SERVQUAL Score Group - 2 -0.375 -0.68 Page 17

Average Responsiveness SERVQUAL Score Average Assurance SERVQUAL Score Average Empathy SERVQUAL Score Total Average Unweighted SERVQUAL Score

-0.775 -0.425 -0.88 -3.135 -0.627

The above table shows that this franchise is facing problems in meeting customer expectation in three of the five factors with empathy having the largest gap. The overall gap is the highest because of the work force as most of them are newly joined. By implementing the following recommendations, this franchise can narrow down the service quality gap.

The attrition rate should be taken care of as it is the highest when compared to other franchises. The franchise should train their employees to treat the customers with empathy. The employees should be concerned about the customers and should be interested not just in solving their problems but solving them in a friendly and spontaneous way. Though developing a better bonding with the customers is difficult in these types of restaurants, even showing that intent would please the customers.

Franchise 3: Unweighted SERVQUAL Score Table

Average Tangible SERVQUAL Score Average Reliability SERVQUAL Score Average Responsiveness SERVQUAL Score Average Assurance SERVQUAL Score Average Empathy SERVQUAL Score Total Average Unweighted SERVQUAL Score -0.275 -0.74 -0.475 -0.375 -0.86 -2.725 -0.545

From the above gap score table, it can be concluded that this franchise lacks in developing reliability and showing empathy to its customers. It is recommended that

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The franchise has to take steps to increase the reliability by training the employees of customer value and importance of delivering promised service The franchise should train their employees to treat the customers with empathy

DISCUSSION AND CONCLUSION

Thus, the SERVQUAL scale provides important insights about how well actual service performance meets customers expectations. Hence, it is justified to employ this scale modified for McDonalds restaurants to see whether delivered service meets, exceeds or falls below customers expectations. From the gap score table, it is clearly evident that all the Franchises under study have gaps in dimensions namely empathy and reliability, major reason for this being the working model of McDonalds. Anyways, these gaps could be minimised by implementing the above recommendations.

REFERENCES
Services Marketing, Integrating Customer Focus Across the Firm 5th Edition, Mary Jo Bitner , Valarie A. Zeithaml, Dwayne D Gremler, Ajay Pandit Links: http://en.wikipedia.org/wiki/SERVQUAL http://indiafoodfranchise.blogspot.in/2011/12/mcdonalds-franchise-set-togrow-focus.html http://www.mbaknol.com/management-case-studies/case-studymcdonalds-business-strategies-in-india/ http://www.mcdonaldsindia.net/pressreleases/McDonald's%20india %20(North%20%20East)%20-%20Media%20Fact %20Book_October_2011.pdf http://www.scribd.com/doc/11520753/Marketing-Strategies-of-McDonalds http://www.slideshare.net/hemanthcrpatna/a-project-on-mc-donalds8319978

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http://www.icmrindia.org/Short%20Case%20Studies/Services %20Marketing/CLSM017.htm

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