The Reasons Why McDonald’s is Not in Bangladesh Yet?

Why McDonald’s is not in Bangladesh yet

McDonald’s is one of the largest Fast food chains. According to statista, as of 2020, McDonald’s operated and franchised a total of 39,198 restaurants in over 120 countries and territories worldwide. It is also the second largest private employer in the world and the largest restaurant chain by revenue. According to Forbes magazine, McDonald’s is the 10th most valuable brand of 2020, with a market cap of 183.82 billion dollars as of September 2021.

McDonald’s is also the pioneer of the ‘Fast Food’ industry. The concept of ‘Fast Food’ came along with the company itself and was introduced to the global market. The golden arches logo of McDonald’s is one of the most iconic logos in the world and the clown character of McDonald’s, called ‘Ronald McDonald’ is considered a more famous character than Santa Claus.

But the king of the Quick Service Restaurant (QSR) chain has not arrived in Bangladesh yet.

McDonald’s: An Overview

McDonald’s was founded in 1940 by Richard and Maurice McDonald, together known as the McDonald brothers. Ray Croc, a businessman, purchased the original restaurant from McDonald Brothers in 1961 and founded the McDonald’s Corporation.

McDonald’s was founded in 1940 by Richard and Maurice McDonald

He introduced the fast food chain model and brought scalability in the business. He began to expand the business globally through franchisees. It also spreads American culture and way of life throughout the globe. Even during the global recession in 2008, McDonald’s opened 600+ outlets in new locations. Currently. They have more than 38,000 outlets in over 100 countries.

During expansion, they had to face a lot of hurdles including lack of disposable income to establish a franchisee, cultural differences, religious views, differences in taste preferences, political issues, food regulation issues and many more. In some countries like China, Japan, Saudi Arabia, India, and South Africa, they have overcome the challenges and have been operating smoothly. But there are about 90 countries where McDonald’s hasn’t arrived yet. In the African continent, 4 countries – Morocco, Egypt, South Africa, and Tunisia, out of 54 countries have McDonald’s outlets.

McDonald’s has closed their outlets in some countries. All McDonald’s outlets in Iceland were closed in 2009 due to the country’s economic crisis and high cost of importing food items for the restaurants. All 6 McDonald’s outlets in Macedonia were also shut down due to a dispute between franchisees and the company. Bermuda’s ‘law’ banned foreign franchisees and ‘protest of people’ stopped an ongoing construction of a McDonald’s outlet. Iran and North Korea even banned McDonald’s due to political conflict with the US.

Fast food restaurant industry has had a boom in the past couple of years in Bangladesh. Many international fast food chain brands have come and are operating in BD, including KFC, Pizza Hut, Domino’s Pizza, ChicKing, Herfy, Burger King, etc. Some more are in the process of coming to Bangladesh. McDonald’s has been operating in our neighboring countries including India and Pakistan for a long time. But why haven’t they come to the BD market yet? Let’s find out the reasons behind it.

McDonald’s has been operating in our neighboring countries including India and Pakistan from 1998

The Reasons

Business Model (Update)

The business model of McDonald’s is different from other food chains. They focus more on real estate revenue, rather than fast food and franchisee/royalty revenues. According to an article by wallstreetsurvivor, McDonald’s owns nearly 45% of the land and 70% of the buildings of their total outlets and the rest are leased by the company. So, basically they buy or lease the property and give it to franchisees on a rent. Among more than 39000 outlets all over the world, 93% of them are franchises. According to investopedia, nearly 82% of the revenue comes from franchise, and only 16% of the revenue comes from the company owned outlets. Franchisees have to pay a downpayment of 40% of total outlet construction costs, a franchise fee of $45,000 for 20 year contract, a royalty fee of 4% of monthly sales and the rent for the outlets. The average rent of any typical restaurant is quite higher in Dhaka, compared to other cities in Bangladesh or any other megacity in Asia. According to Entrepreneur Magazine, a franchisee required almost $1- $2 million for starting a McDonald’s from scratch. 

McDonald’s requirements for location also don’t come cheap. They usually prefer a corner location, from where they can access two major roads. The land should be approximately 50,000 square feet, in which they can construct approximately a 4,500 square feet building with plenty of parking space. In Dhaka city, it is difficult to find an empty land in such a location. It will be tough for Bangladeshi franchisees to cope up with the business model of McDonald’s and start business in Bangladesh.

Strict Food Safety Regulations

Maintaining proper hygiene & food safety is McDonald’s top priority and one of the core values since they have started. They have developed a new Global Food Safety Strategy and maintain it with the collaboration of everyone in the value chain. They work closely with farmers who produce the raw ingredients, train the procurement team, teach the method of storing, cooking, and packaging in order to ensure food hygiene in every step. They validate the quality of the food by a third party to ensure there are no harmful viruses, bacteria, chemicals or foreign objects. Bangladesh may not have much goodwill to ensure strict food safety. McDonald’s won’t be interested in compromising the rules and regulations and will become reluctant to come to Bangladesh.

Logistics Support

Strong logistics support is also important to meet the international standard of McDonald’s. A franchisee has to buy most of the ingredients and equipment including meat, sausage, ketchup, wrapping paper, straws, and napkins from McDonald’s. It doesn’t matter how cheap you can buy them from the local market. Importing food ingredients is costly and time consuming for heavy custom duty and poor transportation system in Bangladesh. As a result, the final price of the product will be high and McDonald’s will not be able to offer an affordable price. Apart from that, McDonald’s requires a strong supply of fresh and organic food items like tomatoes, lettuces and onions. Sourcing them in fresh condition everyday will be a hassle for a city like Dhaka. Farmers do not grow vegetables in Dhaka. They source them from rural areas. All the fresh vegetables purchased in Dhaka might be at least 2 days old from harvesting. McDonald’s is also known for its fastest delivery of orders. So, it is very important for them to get timely and strong logistics support. McDonald’s also needs support from some local businesses. For example, A local bakery which makes burger buns has to meet the McDonald’s standard. Without proper logistics support, McDonald’s won’t be interested in coming to Bangladesh. If people find quality differences in Bangladeshi McDonald’s compared to foreign outlets, it will create a big issue for the company’s image. McDonald’s won’t compromise their global reputation and brand value by not providing the ‘McDonald’s standard’ service in Bangladesh.

Extensive Training System

McDonald’s has one of the most extensive training systems for their franchisees. They have their own university called ‘Hamburger University’. The university courses cover ‘Systems Management’, ‘Restaurant Management’, ‘Business Management’ and ‘Preparing for Ownership’ lessons for new franchisees. Newcomers also had to participate in several self driven training, conferences and seminars led by McDonald’s authority and instructors. In addition to that, they had to work on an existing McDonald’s outlet for close inspection and practical training for a few months. McDonald’s also has strict criteria in choosing a perfect franchisee. A company or personnel who has experience in retail business, has a success history, ability to work well with a franchisor, knowledge of the real estate market, has enough cash, and willing to participate in the training session will be an ideal candidate to receive McDonald’s franchisee. This could be a hurdle for companies of Bangladesh and a reason to not be interested in McDonald’s franchise.

Competitive Market

A lot of foreign companies have come to Bangladesh so the fast food industry has become very competitive.

In recent years, The fast food industry has become very competitive in Bangladesh. A lot of foreign companies have come to Bangladesh in the last decade (2010-2019). Some local food chains also started operating at the same time. Chinese, Mexican, American, Italian, Japanese, and Korean foods have become quite popular in Bangladesh. The charm of foreign foods no longer attracts the foodies. The taste bud of Bangladeshi people is also different. Foreign companies often seem reluctant to change their authentic taste according to localities. We have seen foreign companies like Burger King have lost their charm very quickly and not doing quite good business in Bangladesh. That could be a reason for McDonald’s not coming to Bangladesh.

McDonald’s must have done research on the Bangladeshi market and analyzed its potential. They might have come to a conclusion that Bangladesh is not economically viable for the company right now. Once a Bangladeshi person put a question on McDonald’s website asking about the plans for coming to Bangladesh. In reply, McDonald’s said, “McDonald’s does not have any plans to open restaurants in Bangladesh in the foreseeable future. McDonald’s is focused on improving our existing restaurant base rather than opening restaurants in countries where we do not have a presence.” But we can hope that one day we will see the presence of McDonald’s in our Beloved country.

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