ASSESSMENT
Unit: Unit 2 – Managing Financial Principles and Techniques
Learning Hours: 30 Hours.
Self-learning hours: 70 hours.
Course: Advanced Professional Diploma in Management Studies (level 7)
Term: Summer Term
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The Following Sections to be completed by the assessor:
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London College of Business
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Please note that the assessor’s signature below denotes conformation that he/she has in no way influenced the outcome of the assessment:
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Unit Outcomes
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Evidence for the criteria to pass.
Feedback
Assessors decision
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Task: Read the following case study and answer the following questions.
P1. Apply relevant forecasting techniques to obtain information for decision making.
P1.1. Forecast the cash flow using appropriate method to enable cost and revenue forecast to be constructed for MCDonald.
P1.1
P1.2- Identify and apprise the sources of funds available to the company and make a proposal for obtaining funds for the purpose.
P1.2
P 2. Examine and apply the financial appraisal techniques used to evaluate potential investment decisions.
P2.1- Use a good appraisal method to analyse competing investment project in the public or private sector and make justifiable decision
P2.1
P2.2- Select appropriate and relevant financial information for use in the process of making strategic decisions on investment.
P2.2
P2.3 Make recommendations based on a post-audit appraisal on the appropriateness of selected investment project decisions
P2.3
P 3. Interpret financial statements for planning and decision making
P3.1- Analyse financial statements usnig relevant techniques to assess the financial viability of MCDONALD.
P3.1
P3.2- Carry out a performance audit of the organization including reference to internal and external factors.
P3.2
P3.3 - Make recommendations on the strategic portfolio of the organization based on the interpretation of financial and ancillary information.
T
P1
P2
P3
Any other comments:
Grade given by the tutor:
Pass
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Notes:
1. Use a standard report structure.
2. Word-process the report.
3. Use Times New Roman script.
4. Follow Harvard referencing system.
5. Produce an academic report, detailing above issues with word limit of 4500 words.
6. Complete the title page and sign the statement of authenticity.
7. Submit the document in a folder in the form of a file on the date specified in the plan. Submission should be a soft copy and a hard copy.
Assessment will be based on analytical quality, research, report presentation & layout
And oral presentation.
8. Submit the work to the admin officer and sign the submission form of the college.
9. Collusion and Plagiarism must be avoided.
10. Start each answer on a new page.
11. Highlight each question clearly.
12. Pages should be numbered.
13. Assignment sheet should be attached in the front.
14. Bibliography at the end of the assignment.
15. All work should be comprehensively referenced and all sources must be acknowledged fully, as books and journals, websites etc--.Try to give the page numbers, publisher’s details and year of publication with the authors support.
16. Use a common format for the questions as
- Introduction (analyze the question.)
- Underpinning Knowledge (write about the relevant theory/points)
- Applied knowledge
- Conclusion (summarizing the whole scenario keeping in view pass, merit, distinction criteria.)
Assignment Guidelines.
1. During you structured Individual study (SIS), you are required to answer each question above (Outcomes assessment criteria) which has been covered separately in respective lessons.
2. Refer the handouts for better ideas.
3. Use the computer to research recommended websites and word process your assignment.
4. Follow the guidelines given after every class and the tutor tip notes.
Task for the purpose:
You want to start a franchise business with MCDONALD. Some information is provided to you for the purpose. Read the relevant information and answer the following questions. The assignment should not exceed 4500 words.
McDonald's UK Franchise
About Us
"McDonald's is run neither by one man nor by executive committee. Indeed, it is not even a single company. It is a federation of hundreds of independent entrepreneurs - franchisees, suppliers and managers - united by a complex web of partnerships and creativity…a contemporary franchise system flourishing on an unparalleled scale."
Introduction to 'Behind the Arches' by John F Love
History of McDonald's
American businessman Ray Kroc first established McDonald's in 1955. From those early days we have been a franchising company. We have relied on our franchisees to play a major role in the success of the business. Approximately 70% of McDonald's worldwide restaurant businesses are owned and operated by independent businessmen and women, our franchisees.
In the UK McDonald's opened its first restaurant, in Woolwich, in 1974. Initially all of our restaurants were owned & managed by the company. However, we started recruiting franchisees in the mid-1980 and opened our first franchise restaurant in 1986. Since that time the number of UK franchisees has steadily grown. Today over 37% of our 1,200+ restaurants are operated by franchisees.
Key Points on the McDonald's approach to Franchising
The McDonald's franchise represents a chance to run your own business without being alone. You will be supported by the world famous McDonald's system, in the areas of operations, training, advertising, and marketing to name but a few.
McDonald's franchises restaurants to individuals only. Never to companies, partnerships, family groups or passive investors. However, many of our franchisees operate their businesses as husband and wife teams.
Before an individual can become a franchisee they must successfully complete our training programmed, which usually takes around nine months (see Training).
Franchisees must have an active, hands-on, day-to-day involvement in the operation of the restaurant. No other business interests are allowed.
We franchise existing trading restaurants; it is not necessary for applicants to source sites.
Franchisees run their restaurant(s) as an independent business. They are responsible for driving the business forward and all normal business functions i.e. recruiting, marketing, accounting and administration and managing and representing the brand in the local community.
Independent companies supply all raw materials, goods and services to each restaurant. McDonald's must approve all products used in the restaurant. McDonald's restaurants are usually purchased by a combination of bank finance and personal capital. Candidates must have a minimum of 25% of the total purchase price in non-borrowed funds. The remainder cost may be financed through a bank. McDonald's does not provide any financing.
McDonald's franchise one restaurant at a time. We want our Franchisees to be successful with the aim to expanding to multiple restaurant ownership within 3-4 years. The granting of additional restaurant franchises is dependant on the franchisees ability to develop the existing restaurant(s) and maintain excellent standards.
McDonald's Franchise Agreement is for twenty years. Under this agreement the property and buildings are owned by McDonald's (or McDonald's hold the head-lease), the restaurant equipment (-kitchen equipment, decor, seating, fixtures and fittings), are purchased by the franchisee.
Franchisees are expected to maintain the restaurant décor and building fabric to a high standard. They take on a fully-repairing lease from McDonald's and are responsible for the refurbishment of the restaurant during the whole of the franchise term.
At the end of the twenty-year franchise term, a new franchise agreement (of twenty years) may be drawn up. This is dependant on the franchisees desire to take up a new franchise term (including conditions), and their track record of running the restaurant throughout the franchise term. Franchisees may only sell approved McDonald's products through their restaurants.
Financial Information
Depending on the amount of capital you have available, there are two financial routes to becoming a McDonald’s Franchisee:
Conventional Franchise - the normal practice in the UK - the purchase price will be based on restaurant profitability (cash flow) and vary from £150k upwards. Candidates should have at least 25% of the purchase price in personally owned funds i.e. unencumbered. In addition, there is a £30,000 franchise fee and £5,000 training Deposit to pay.
Business Facilities Lease Franchise - In a limited number of cases, McDonald's grants a Business Facilities Lease (BFL) franchise to candidates who excel in all qualifications but are unable to meet the financial requirements of the conventional franchising programmed. An individual must have a minimum of £35,000 of non-borrowed personal resources to be considered for a franchise under the BFL programmed. The BFL franchise allows a trained applicant a three-year period to run their restaurant and build a target equity sum from profits. These funds are then used for the outright purchase of the franchise as in the conventional franchising programmed.
Ongoing Fees
For the use of the Property as a McDonald's restaurant, McDonald's charge a monthly rent. This is based on the level of monthly net sales (Total sales less V.A.T.), and currently ranges from 5-19% (of monthly net sales). In addition, McDonald's charges a monthly royalty of 5% of monthly net sales. All McDonald's restaurants make an agreed contribution to a separately managed marketing fund. The contribution rate is currently about 5% of monthly net sales.
Who's Ideal for Us
McDonald’s continues to look for people who can help develop the global brand locally. There are opportunities to take on existing businesses throughout the UK. These opportunities are restaurants currently owned directly by the company or owned by Franchisees who are retiring. Therefore the benefits of this are that for new Franchisees, there is an existing restaurant team and cash flow to take over. For new Franchisees to the system there is no requirement to find a site and negotiate terms with a landlord thus allowing you to concentrate all your efforts on building the restaurant business.
We seek to give our successful Franchisees the opportunity to operate multiple units. Currently 74% run multiple restaurants. This normally happens within 3-4 years.
Our selection of prospective franchising candidates is based on an assessment of overall business experience and personal qualifications. We look for individuals with "common business sense", a proven ability to effectively lead and develop people, and a history of previous success in business and personal endeavors. A restaurant background is not necessary.
We franchise only to individuals, not to limited companies, partnerships, or passive investors. The following qualifications, among others, are essential to be considered for a McDonald's franchise:
§ High personal integrity
§ An entrepreneurial spirit and strong desire to succeed
§ A proven ability to manage, motivate and train people
§ The ability to manage finances - both business and personal
§ A willingness to personally devote full-time and best efforts to the day-to-day operation of the restaurant as an on-premise owner operator
§ A willingness to complete a comprehensive training program and become proficient in all aspects of operating a McDonald's restaurant business
§ Financial resources & understanding
The Selection Process
When selecting new franchisees, we take great care to make sure that we - and you - feel you're absolutely right for the business. We're going to be partners for 20 years, so a mistake will be costly for us both.
To begin the selection process, we ask you to complete an application form (contained within our franchising information pack), and return this to us, together with any other information you consider relevant to enhance your application.
If we believe you have the potential we're looking for, our franchising team will invite you to a meeting at which we'll discuss your background and experience, your achievements and financial status. We'll also be trying to discover if you have a strong business track record, coupled with the people skills, integrity and tenacity that you'll need to make your McDonald's restaurant a success. After the meeting, if we're both still interested, we will invite you to spend five days working in a McDonald's restaurant. This lets you find out more about the working environment you might be choosing for the next 20 years, and allows us to see how you adapt to life in one of our restaurants.
Assuming this 'on-job experience' is a success, our Regional Manager will ask you to visit several existing franchisees and then invite you to a final meeting at our Head Office. If this meeting is successful, you can begin your training just as soon as you're ready.
Tasks 1
P 1. Apply relevant forecasting techniques to obtain information for decision making.
1.1 Forecast the cash flow using appropriate method to enable cost and revenue forecast to be constructed for MCDonald.
1.2 Identify and apprise the sources of funds available to the company and make a proposal for obtaining funds for the purpose.
Task 2
P 2 . Examine and apply the financial appraisal techniques used to evaluate potential investment decisions.
2.1 Use a good appraisal method to analyse competing investment project in the public or private sector and make justifiable decision
2.2 Select appropriate and relevant financial information for use in the process of making strategic decisions on investment.
2.3 Make recommendations based on a post-audit appraisal on the appropriateness of selected investment project decisions.
Task 3
P 3. Interpret financial statements for planning and decision making.
3.1 Analyse financial statements using relevant techniques to assess the financial viability fo MCDONALD.
3.2 Carry out a performance audit of the organization including reference to internal and external factors.
3.3 Make recommendations on the strategic portfolio of the organization based on the interpretation of financial and ancillary information.
The
Assessment Grid indicating their pass,
Unit: Managing Financial Principles
Outcomes/criteria:
Indicative characteristics
Possible evidence
Feedback
P1. Apply relevant forecasting techniques to obtain information for decision making.
P2. Examine and apply the financial appraisal techniques used to evaluate potential investment decisions.
P3. Interpret financial statements for planning and decision making.
As per the assessment criteria specified for pass
Do
Do
P 1.1, 1.2, 1.3.
P 2.1, 2.2
P 3.1, 3.2, 3.3,
Pass Description:
Identify and apply strategies to find appropriate solutions.
. Relevant theories and techniques have been applied.
. Effective judgments have been made.
. Complex problems with more than one variable have been explored.
. An effective approach to study and research has been used.
Select/ design and apply appropriate methods/ techniques.
. A range of methods and techniques has been applied.
. A range of sources of information used.
. The design of methods and techniques justified.
. Complex information/data have been synthesized and processed.
.Appropriate learning methods/ techniques applied.
Present and communicate appropriate findings.
. Appropriate structure and approach has been used.
. Logical and coherent arguments have been presented
. Technical language accurately used.
. A range of methods of presentation has been used.
. Appropriate media used.
. Familiar and unfamiliar contexts have been used.
. It is appropriate for familiar and unfamiliar audiences.
Use critical reflection to evaluate own work and justify valid conclusion.
. Synthesis has been used to generate and justify valid conclusions
. The validity of results has been judged
. Self-criticism of approach has taken place.
. Evaluation has taken place using defined criteria
. Realistic improvements have been proposed against defined characteristics for success.
Take responsibility for managing and organizing activities.
Autonomy/independence demonstrated
Substantial activities/projects or investigations have been planned, managed and organized.
The unforeseen has been accommodated.
The importance of interdependence has been recognized.
Demonstrate convergent, lateral and creative thinking
Ideas generate and decisions taken
Self evaluation has taken place
Convergent and lateral thinking have been applied
Capacity for innovation and creative thought has been used.
Receptiveness to new ideas has demonstrated.
Unfamiliar contexts have been applied.
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