Few people know it, but the idea for the Big Mac came from a
McDonald's franchisee. Same with the Egg McMuffin. Ronald
McDonald? The brainchild of an eager and innovative owner-operator
of a McDonald's store. Perhaps the fact that McDonald's
management listens so carefully to its franchisees has something to
do with the burger empire being named Entrepreneur's
number-one franchise for 1997. Maybe it's the structure of the
McDonald's franchise system. Or could it be the special
sauce?

Whatever the combination of ingredients that has made
McDonald's a legend, the company has reason to be proud.
"We have set the stage for modern franchising," says Jack
M. Greenberg, chairman of McDonald's USA. And with nearly
20,000 stores worldwide, McDonald's is poised for continued
growth.

Beyond Burgers

All franchise operations have a franchisor and franchisees. The
differences between franchises become apparent, however, when you
compare how those two groups get along with each other from system
to system. McDonald's, for one, has a reputation for warm
franchisor-franchisee relationships.

"Some of the philosophies Ray Kroc established when he
started the business in 1955 have made an important difference in
the quality of our relationships with our franchisees," says
Greenberg. To wit:

*The McDonald's franchise system is built on the premise that
the corporation should only make money from its franchisees'
food sales. Unlike some franchise operations, McDonald's
headquarters doesn't sell equipment, food or packaging to its
franchisees. All of that is purchased from company-approved
third-party suppliers.

"There's nothing our licensees are buying--in terms of
seating, signs, equipment or food--that we're making a profit
on," says Greenberg, "so we avoid a whole area of
potential conflict of interest that exists in so many franchising
operations."

*McDonald's is also different, Greenberg says, because its
nearly 2,700 U.S. franchisees are all independent, full-time
licensees rather than conglomerates or passive investors. That
means owners are there, in the store, seeing firsthand--and
affecting on-the-spot--what goes on. Greenberg sees this as a huge
competitive advantage because owners can make sure the
customer's experience is a good one. They're also friends
and acquaintances of the people who frequent the restaurant.
"[Our licensees] are small-business owners who work in their
local communities," says Greenberg. "That's the
hallmark of McDonald's."

McDonald's franchisees, though part of a system, are
bona-fide entrepreneurs--and the more fiery their entrepreneurial
spirit, the more successful they are. "Once you accept the
fact that you're going to follow the rules, there's an
enormous opportunity to be entrepreneurial," says
Greenberg.

Such as? "How you build and manage your own organization so
you can expand is very entrepreneurial," he says.
"Training and developing [employees] so you can handle a
second and third store is entrepreneurial. Although McDonald's
has a lot of tools, a lot of help and a lot of training, at the end
of the day the individual restaurant owners are in charge of
building organizations and motivating their employees."

Creativity is encouraged as well. Bingo nights, breakfast
buffets and family dinner nights for their customers are just a few
ideas franchisees have cooked up; others include good-grades
incentives for their student employees. (For more examples, see
"Breaking The Mold," below.)

Bigger And Better

Although most of McDonald's growth comes from its rapid-fire
international store openings, the Hamburglar's favorite hangout
still managed to multiply to the tune of 2,500 new units worldwide
last year. With such astonishing growth, does saturation--a serious
worry for many fast-food franchisors--concern Greenberg?

Well, he's not exactly in denial. "We know,
intellectually, there's some limit to this," he
acknowledges. "Saturation will inevitably occur, but I
don't know when."

And apparently, there's no reason to worry yet: Those 2,500
new units opened without causing any drop-off in sales at existing
restaurants. Indeed, the more McDonald's restaurants there are,
the more sales increase. Forbes and Crain's Chicago
Business have dubbed the phenomenon "Greenberg's
Law," but Greenberg expresses no surprise at the mounting
numbers.

"Wherever we've measured this," says Greenberg,
"we continue to see that if you pick the right site and the
location is easy to use and convenient and has lots of traffic,
you'll get more business out of the marketplace." More
business, to be more specific, means 33 million customers a day and
counting.

Roll Model

McDonald's isn't just a model for franchising; it's
a model for businesses everywhere. Its logo, its standards, its
methods, its service, its legendary consistency--all these things
have changed the way American companies do business, as well as the
way U.S. companies are perceived abroad.

"We've had a unique business success over the years for
thousands of people," says Greenberg. "Because we're
so rigorous in our selection process, in our training and in the
help we give new licensees, success, while it isn't guaranteed,
is far more likely than in most other business ventures."

Given such a track record, it's little wonder that when
Greenberg gazes into his prophetic sesame-seed bun to predict
McDonald's future, he sees more of the same.

"I see us [earning] more income next year than we did this
year," Greenberg says. "I think we'll open 2,500
restaurants or more in 1997. More than two-thirds of them will be
outside the United States."

After all, why mess with success? Greenberg puts it best, with
characteristic understatement: "McDonald's has got a lot
of momentum, and I expect that to continue for a long
time."

Breaking The Mold

Contrary to what some people may think, being part of a huge
franchise system doesn't mean giving up your entrepreneurial
freedom. McDonald's is a case in point. Sure, no matter where
you go, Big Macs taste like Big Macs; that you can count on.
But not all McDonald's locations look alike--and plenty of them
offer little extras. Some restaurants are styled to look like
'50s diners; others have breakfast buffets and bingo nights.
"It's enormous, the kind of innovation you see in running
a local business under a national brand," says Jack M.
Greenberg, chairman of McDonald's USA.

LeRoy Walker Jr.'s downtown Jackson, Mississippi,
McDonald's restaurant is a perfect example. Walker owns and
operates 10 restaurants in metropolitan Jackson, but one of them
stands out: It's an unconventional franchise where patrons
regularly play chess while sipping coffee or feasting on apple
turnovers. On any given day, there may be as many as 10 chess buffs
playing and more people watching.

Walker started the program in 1989 at the request of his
customers. He bought five chessboards and pieces to match, and
customers have been playing ever since.

Walker knew the chess idea would have the support of
McDonald's corporate. "An operator has the autonomy to
make decisions that are in the [best] interests of the
community," he says. Other than making his chess-playing
customers happy, how has the program helped him? "I'm a
little bit sharper in my chess game," says Walker--which can
do nothing but help a businessman.

On the other side of the country, one of Isabelle
VillaseÃ±or's seven McDonald's restaurants is decorated
in a floral motif top to bottom. A love of flowers passed down to
VillaseÃ±or by her late father, a gardener, has manifested
itself as a Cypress, California, McDonald's franchise peppered
with paintings of irises and Calla lilies, and bouquets of silk
flowers throughout. VillaseÃ±or's decorating panache earned
the restaurant the San Diego Region Decor Award--and the
distinction of being a unique McDonald's franchise.