Franchising as a (Highly Structured) Entrepreneurial Option: The Case of Mike Luna and McDonald’s

 

As the class learned yesterday–from a long-time practicing McDonald’s franchisee–franchising can represent a special type of entrepreneurial venture. No one probably knows this better than Monmouth’s McDonald’s franchisee Mike Luna, who has been with McDonald’s in some capacity almost continuously since 1960. As Mr. Luna told the class, he opened McDonald’s store #154; of the roughly 35,000 the company now has around the world. Learn more about franchising at McDonald’s at the link below.

http://corporate.mcdonalds.com/mcd/franchising.html

One thing we learned by sharp contrast yesterday was the vast variety in level of structure—inversely, the level of freedom to do exactly as one pleases—within entrepreneurism. Previous guest John “Beefy” Huston dropped by as an “audience guest” yesterday. As Mike Luna talked to the class about the various corporate rules he is contractually obligated to abide by as a McDonald’s franchisee the point came up that we were probably witnessing the bi-polar extremes of structure faced by entrepreneurs; “Beefy” Huston who pretty much does as he pleases and Mike Luna who must abide by a long list of corporate rules (in place to ensure the success of individual McDonald’s stores). Nevertheless, both entrepreneurs love what they do and are highly successful in the Monmouth area.

Enough from me… Class blogger Landon Walker tells us more about Mike Luna’s story of franchising as an entrepreneurial opportunity below.

Have a nice weekend!

Prof. Gabel

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Last Thursday, our Midwest Entrepreneurs class had the opportunity to gain insight from Mike Luna. Mr. Luna is not the common entrepreneur around the United States. He is what we call a “franchisee”. Mike has been a McDonalds franchisee for a long time and is very skilled at what he does.

Mr. Luna has been around McDonalds since he was a teenager. When he was 16 he was working at a McDonalds in Galesburg, Il. Mike later went off to school, but eventually made his way back to McDonalds. Mr. Luna had the opportunity to buy into a store in Kewanee, Il. He took the opportunity and learned lots before opening his own store. He now owns a store in Monmouth, Il that he opened in 1990.

Mr. Luna credits most of his learning from a longtime friend he calls “chief”. Mike also learned lots from being a part owner of the store in Kewanee before selling his share to open his own store. Although Mr. Luna enjoys owning his McDonalds in Monmouth, Il, he does express the cons to being a franchisee.

When buying into McDonalds one must pay $45,000 every 20 years to the organization. Every year the franchisee has to pay at least 9% of earnings (depending on where the store is located) to the organization. Each owner has to go through what is called the “3 legged stool” system. This is where the McDonalds corporation decides what the suppliers/distributors carry and then the owner has to buy supply from the supplier. The corporation decides what stores will look like, what machines are used, where the store is located, and even what wallpaper is in the store.

Mr. Luna treats his employees well and, in turn, he expects his employees to treat the customers well. Mike described the importance of customer base as “you can’t run a restaurant without people”.

Mike Luna is a great example of an entrepreneur in the United States. He has taken risks all throughout his career and continues to work hard and succeed. He stated in class that he has finally started taking two days off work a week. This should give an idea of how difficult it is to be a successful entrepreneur in the world today. Just like Mike, if someone works hard at whatever business they so desire, it will have a chance at taking off. You just have to take the risk to find out.

Landon Walker

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About Terrance Gabel

Terrance G. Gabel is currently an Associate Professor in the Department of Political Economy and Commerce at Monmouth College. Originally from Keokuk, Iowa, Dr. Gabel earned his BBA (Marketing) from the University of Iowa, his Master of Science degree (Marketing) from Texas A&M University, and his Ph.D. (Marketing) from the University of Memphis. He possesses three years of business-to-business sales experience, one year of executive-level marketing management experience for a heavy industrial international trade services firm, and one year of product management experience for a large banking organization. He was also a freelance business writer and consultant for approximately three years.

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