Project management report

Launch of McDonald’s’ First Outlet In Pakistan 1
Project Management
Report
Launch of McDonald’s’
First Outlet in Pakistan

Executive Summary
Our group has chosen to delineate the country launch of McDonald’s first eatery in Lahore, as a
case-study for our project management course. For this purpose, we visited McDonald’s’ Lahore
head-office and interviewed the appropriate personnel in order to know the preparation that went into
the debut of McDonald’s in Pakistan.
In the definition phase, we have given the relevant activities as well as a little historical background
on McDonald’s and analyzed their motivation behind choosing Pakistan.
During the planning stage, we have given the structure of the resources, the budget that was allocated
and the assessment of the risk and the counter-measures they took. Also we have discussed their
market assessment and the marketing strategy they chose based on the assessment.
The execution period describes the actual steps taken to acquire the land and then construction of the
restaurant, including interior decoration, while conforming to the international standards set by
McDonald’s. Also training of their low-level employees, basically, the operations department to
prepare them to deal with customers etc. is also discussed. We have also analyzed the success of
McDonald’s’ marketing strategy which was in place by this time. We have also documented the issue
logs for this project.
At the time of delivery, some staff was re-assigned, while a couple of new departments were set up. By
now McDonald’s was ready to serve the Lahori population for their first ever taste of international
standard McDonald’s’ trademark food. We have also mentioned the lessons learnt by Pakistan’s
McDonald’s’ management by the end of this project.

Table of Contents
Executive Summary ............................................................................................................. 1
1 Definition .............................................................................................................................. 3
1.1 History: McDonald’s ............................................................................................................. 4
1.2 Country: Why Pakistan? ....................................................................................................... 5
1.3 City: Why Lahore? ................................................................................................................. 6
1.4 Location: Why Gulberg? ...................................................................................................... 6
1.5 Goals & Specifications ......................................................................................................... 7
1.6 Responsibilities & Teams ..................................................................................................... 7
2 Planning ................................................................................................................................. 9
Appendix A ........................................................................................................................... 22
Project Scope ............................................................................................................ 23
Major Characteristics of the Project ..................................................................... 24
Strategic Management Plan .................................................................................... 25

Definition

1.1 History: McDonald’s
McDonald’s is the world's leading food service retailer with more than 30,000
restaurants in 119 countries serving 47 million customers each day. It is one of the
world’s most well-known and valuable brands and holds a leading share in the
globally branded quick service restaurant segment of the informal eating-out market
in virtually every country.
Richard and Maurice McDonald were pioneers of McDonald’s and the quick service
restaurant industry. Ray Kroc was the founder of McDonald's Corporation.
McDonald’s’ success today is rooted in the work of all three. They converted their
barbecue drive-in with car hops into the world's first McDonald's limited-menu, self-
service, drive-in in 1948, in San Bernardino, California.
In 1954, Ray Kroc was granted exclusive U.S. franchising rights by the brothers. He
opened his first McDonald's in Des Plaines, Illinois in April 1955, and founded the
company that evolved into McDonald's Corporation. The strong foundation that he
built continues today with McDonald's vision and the commitment of the talented
executives to keep the shine on McDonald's arches for years to come.
The world's leading food service organization is headquartered just outside Chicago;
in Oak Brook, Illinois. Approximately 2,800 employees provide a wide variety of
support functions to the 30,000 McDonald's restaurants in 119 countries around the
globe through a network of divisional, regional and local-country offices.
McDonald’s has always been a franchising company and has relied on its franchisees
to play a major role in its success. McDonald’s remains committed to franchising as a
predominant way of doing business. Approximately 70% of McDonald’s’ worldwide

restaurant businesses are owned and operated by independent businessmen and
women.
1.2 Country: Why Pakistan?
By the end of 1996, McDonald’s had gained strong foothold in major parts of the
world. McDonald’s opened its door to India in October 1996. Due to the
overwhelming response from their Indian customers and its commitment to
expansion, McDonald’s next target was none other than the neighboring county,
Pakistan.
In order to introduce McDonald’s to Pakistan, they had to first determine whether a
demand for what they were offering existed or not. One of the questions posed was
how the Pakistani market would react to a foreign brand. After all, who would eat
burgers and chips at a higher price when there is a more affordable alternative of
“bun-kebabs” and Mr. Burger etc?
According to Mr. Raza1
, a feasibility report had been conducted which concluded that
living standards in this part of the world were increasing. People enjoyed a much
higher level of income than their predecessors. Also there was certainly more
awareness of the hygiene and quality of food they ate. The communication medium
had also developed which was a necessity so as to enable the top management to
correspond with their country managers. Internet had revolutionized the country and
people had become more conscious about foreign brands. Furthermore, its
competitors like KFC and Pizza Hut were already enjoying their share of the market.
So basically, the ground work was laid and all set for McDonald’s to stamp their mark
and conquer the food-loving Pakistani population.
1
Mr. Raza was one of the people we interviewed, he holds the position of Marketing Head at McDonald’s,
Lahore.

McDonald’s had to determine whether the conditions in Pakistan were conducive to
their style of management and one big concern was procurement. McDonald’s
success is dependent on the support from the local authorities and quality suppliers.
For example, McDonald’s can only serve Coke’s soft drinks with their food since
they have a partnership with them; hence they needed to ensure a smooth supply of
Coke.
1.3 City: Why Lahore?
Being two of the largest commercial hubs of Pakistan and enjoying a large population
with reasonable incomes, Karachi and Lahore were the most suitable cities to kick off
the project. McDonald’s had decided to inaugurate their outlet in both cities at the
same time. Two independent teams were formed and both had their own schedule.
The Lahore team managed to finish on schedule while Karachi experienced a delay2
,
so the top management decided to go ahead with the opening of Lahore outlet.
Karachi followed suit in a week’s time.
1.4 Location: Why Gulberg?
To serve most people of Lahore, the location of the first outlet had to be worked out.
The major requirements were that it had to be easily accessible by the potential
customers of Lahore. Being a fast food restaurant, the potential customers were
identified to be employees working in offices, people in shopping plazas and students
from educational institutions. What all these customers had in common was how they
valued time. So minimizing the time that would have to be spent in driving or
2
The reasons for which we were unable to find out since the Lahore office had no knowledge as to the
cause of the delay.

walking to the restaurant, the area to be chosen had to be highly concentrated with
these customers. Gulberg suited all these requirements well as it is the heart of the
city. Moreover, the presence of other restaurants also made it the most productive
area in town. So the ground work of the very first outlet started at a piece of land in
Gulberg.
1.5 Goals & Specifications
For the sake of clarity, we felt the goals and specifications were better explained
through the various documents we have submitted in Appendix A.
1.6 Responsibilities & Teams
Integration at various levels of the organization was required in order to successfully
complete the project in time. The major departments involved in the launch were;
(i) Finance: & Information Technology:
(ii) Development
(iii) Purchasing
(iv) Human Resources
(v) Corporate Affairs
(vi) Operations
(vii) Marketing
(viii) Quality Assurance & Product Development
(ix) Legal and Company Secretarial

At the grass root level crew members were to be appointed and then in order to
supervise them, Floor managers and Restaurant manager were to be appointed. The
restaurant manager holds a key position and is given the following responsibilities:
• A Restaurant Manager is responsible for running an independent, multi-crore
restaurant.
• Training, motivating and leading a team of 50-100 employees.
• Independently managing the restaurant's operations in terms of sales,
profitability and community relations.
• Delivering 100% Total Customer Satisfaction to every customer - every time.
The organizational structure set was quite transparent and possessed all key
ingredients required to make a successful employee force.

Planning

2 The Plan
After reviewing the above factors and making the necessary adjustments, it was time
for the next phase. This essentially dealt with how the Joint Venture system had to be
set up and operated.
A three year plan was drawn which addressed all likely occurrences during the growth
phase. But we believe, had it been a five or ten year plan, it would have been even
more beneficial. In the short run a three year plan is good enough but as the
organization aimed at capturing the local food market and in order to vision the
target properly, a long term plan would have been much more beneficial. This is
important because there is usually little opportunity to make structural changes once
franchise agreements have been signed by your first franchisees.
The following were addressed under the business plan:
2.1 Reviewing the Market
A thorough analysis was undertaken of competitive food-chains and eateries, and the
trends applicable to the product and services to be provided by McDonald’s. This
gave the management a better knowledge of the market and its demands, and enabled
them to plan with more confidence and understanding.
It was appropriate to conduct the market survey for better analysis, but an aspect that
came out of this activity was not incorporated. The public was of the opinion that
along with having traditional McDonald’s burger and assorted fried food, they would
also like to have fast-food made according to local and cultural taste. Here
McDonald’s suffered in comparison to their competitors; Pizza Hut came up with
dishes like “Chapli Pizza” and “Chicken-tikka Pizza”. McDonald’s finally had to
adopt this strategy as well but the delay caused them to lose out on market share. In

today’s world, customer opinion has tremendous weight attached to it; since
ultimately customer satisfaction means more sales which is the bottom line for any
successful venture.
2.2 Management & Corporate Structure
There was a need to put the right people in the right place to have a competent
operating structure which would enable the franchise to grow and mature. The
organization provided training through a very structured method that consisted of
both classroom and practical training as per the standards set by McDonald's
International.
We feel that since the organization was of a substantial size, a separate department
for training would have suited their needs more efficiently. Professional advice and
management consultancy could also have been followed.
2.3 Expansion and Premises
The organization aimed at expanding its business into all corners of the country over
a short period of 8 years. An initial plan was set up in order to target the land to be
leased and an approximate estimate was made when to open at the respective sites.
The parent company wanted to have the following features in the site:
• Minimum square footage for a McDonald’s site 32,616 square feet
• Corner or corner wrap with signage on two major streets
• Signalized intersection
• Ability to build up to 5,500 square feet of building at any time

• Parking to meet all applicable codes
• Ability to build a minimum height of 22 feet
2.4 Advertising and Marketing
A national marketing campaign was launched in order to create awareness among the
masses of the impeding McDonald’s launch.
Considering that the restaurant was initially only set up at Lahore and Karachi, most
of the budget should have been allocated to media campaigns in respective cities
instead of concentrating more on national campaigns. No doubt the organization
targeted the country as a prospect since it was a country scale debut for McDonald’s,
but initially to establish itself firmly it would have been more beneficial to market the
brand in Karachi and Lahore..
Throughout their promotional campaign, the management propagated the launching
only through print media, choosing to ignore television which is a strong advertising
tool today. When this was pointed out by us during our interview with the marketing
manager of the organization, he clarified that the McDonald’s products can only be
afforded by 30% of the urban population. Therefore they did not consider
campaigning through television as they believed that the cost of reaching per person
was too high to be justified in the cost-benefit analysis.
2.5 Budget
A budget of U.S$ 1000000 was set aside initially, in order to launch the project. It was
an estimate which had to be increased by $ 200,000 at later stages. The total budget

was proportioned among McDonald’s International, Lakson Group Pakistan and
Akbar Group in the following manner
McDonald’s International : 50 %
Lakson Group: 25 %
Akbar Group: 25 %
The group decided to share the revenues generated from the restaurant in the above
manner.
The organization could have prepared a five year financial forecast based on their
business plan. At least the first two years should be projected on a monthly basis.
This would have ensured that you are aware of your own financing requirements
before you start the organization.

Execution

The execution phase involved the following tasks:
3.1 Acquiring Land
The administrative authorities in the organization chose Lahore to be one of the ideal
cities for the launch of their brand. The residents of Lahore because of their
traditional love of food forced the authorities to make this decision. Gulberg was
ideal due to its easy accessibility from every corner of the city. With the location and
area defined for the first outlet, the authorities, after facing some initial difficulties3
,
did manage to acquire land and ultimately a two story building was constructed at 63
Main Boulevard Gulberg 11 Lahore.
By looking at the results initially, one could have easily said that the authorities had
done a great job in choosing an immaculate location. But if one analyzes, the
authorities focused on short term benefits only and left out long term goals while
they were involved in the land acquiring process.
This flaw is reflected when they cared less to address the issue of parking for their
customers. Moreover they had limited space, so any extension plans in the future
would be hampered. The limitation on the number of floors by legal authorities also
ruled out the possibility of further extension. They should have negotiated with LDA
and McDonald’s International about this issue.
Therefore, though the authorities at McDonald’s were successful in planning an
amazing launch of the brand, they lost focus on long term goals which is reflected by
a decline in their success graph.
3
We have discussed the issues faced later on in the report

3.2 Construction
The construction of the outlet involved a few external personnel. An architect was
involved in designing the outlet structure according to the specifications provided by
the parent company and the administrative authorities such as the LDA. The
architect’s goal was to make the outlet as appealing and inviting as possible.
Apart from constructing the building itself, McDonald’s enhanced their environment-
friendly image by also building a park adjacent to their outlet for public use. This
served as a good marketing tactic.
Following is a blue-print provided by McDonald’s International which was adhered
to during the construction phase.

3.3 Interior Decoration
All fixtures and fittings were imported to furnish the interior. Even the sanitary and
toiletry were not local. This requirement was specified by the parent company as they
didn’t want to compromise on the quality of the material involved. An interior
designer was hired to give the outlet an inviting look.
Even though the interior design of the outlet seems to be immaculate, the cost
involved in achieving this was astronomical. Had the management negotiated with
the parent company to install local quality fittings, they would have avoided the much
higher cost of importing them.
3.4 Training of Employees
The training department at McDonald’s had done it’s best to impart quality servicing
skills to its crew. Restaurant Managers were sent to the prestigious Hamburger
University to take the Advanced Operations Course. Similarly employees from other
departments were sent abroad to attend various training programs. The primary goal
of these training programs was to provide quality service and a clean and hygienic
environment to their customers, while adhering to the guidelines laid down by the
parent company.
Even though McDonald’s has been successful in providing their customers with
quality service, one might think that they could have done a better job in terms of
service providence had they incorporated local cultural norms. For example, unlike
the western culture, having a female employee in a western outfit at the reception
might not be appreciated in the local culture. To conclude, the authorities at
McDonald’s Pakistan would have done a better job had they been more innovative in
their approach towards servicing their customers.

3.5 Implementing Marketing Strategies
The marketing team at McDonald’s did an amazing job as far as popularizing the
brand in the market was concerned. The prior awareness of McDonald’s as a leading
fast food chain globally made their job a lot easier. Nevertheless, they had to market
the brand locally in order to make the project a success.
They approached the youth through offering special deals in schools. They attracted
kids by arranging birthday parties and offering gifts. Free passes were given to
Pakistani celebrities to attract customers. Thousands of posters and banners with
McDonald’s’ trademark sign, the “golden arches” scattered the streets.
Despite facing tough competition from fast food chains already in the market, the
marketing team was successful in gaining the attention of consumers. This is reflected
in the fact that the day McDonald’s was opened; it was so crowded that one of their
doors got broken. Though they could have avoided such a mishap, this clearly
suggests the implementation of effective marketing strategies by the marketing
department.
3.6 Issues Log
1. Difficulties in hiring female workforce: The McDonald’s management
faced problems initially in hiring females to work in the outlet due to the cultural
inhibitions and parent’s reluctance. But eventually McDonald’s was able to persuade
them by show of good faith and promising strict action against any case of complaint
or harassment.

2. Beautification of surroundings: In the initial project plan, there was no
requirement to build a park next to the outlet but they had to deviate from their
original plan to incorporate this requirement which was later set by the area
authorities. This constraint the budget further.
3. Real estate problem: problem acquiring land
4. Machinery not installed properly: When the imported machinery arrived at
the project site, the crew faced problems in installing and operating the machines.
Due to this a technical team from abroad had to be called in to rectify the situation.
5. LDA rules to be incorporated with parent company’s requirement:
6. Budget went overboard due to imports: McDonald’s made the mistake of
importing pretty much everything for their first outlet. This is true not just for the
food and raw materials but also for very insignificant things such as paper napkins
and cups etc. This alone caused their budget for this project to go overboard which
had to be revised later on.
7. Import duty increased: During the construction phase, the government
increased the duty on imports by a significant amount which again placed a strain on
the budget.
8. Political instability: Conflict and uncertainty created due to the nuclear tests
carried out in May 1998, caused the parent company to re-consider investing in
Pakistan. Freezing of foreign currency accounts was especially a big blow to them,
but since the project was near completion they decided to go ahead.

Delivery

Since this project consisted of inaugurating a restaurant, there were not many typical
project related activities at this stage. However the following tasks took place:
4.1 Release of Unnecessary Resources
Redundant staff of various departments such as real-estate was cut down since there
was not much need for them once the leasing and construction had been done. A
minimal staff was maintained for future openings in Lahore.
4.2 Reassigning & New Departments
A couple of new departments like Maintenance and I.T are opened at the time of the
launch, since they have no purpose during the launch itself. Maintenance is, as it
name suggests, for maintaining the premises and the equipment to ensure 100%
performance and that equipment doesn’t malfunction during work hours. The I.T
department is responsible for the networking and computers so that the McDonald’s’
offices and departments are well-connected and easily accessible.
4.3 Lessons Learnt
The mistakes made and hence the lessons learnt for McDonald’s from their
inauguration in Lahore were as follows:
1. Home-delivery: Secondly, initially when McDonald’s opened they did not
plan for home delivery. This caused a loss in revenue since at this time; KFC and

Pizza Hut were offering free home delivery. But they quickly rectified this oversight
and in fact innovated and are currently providing the only drive-in service in Pakistan.
Currently 50% of all sales at the Gulberg branch are through take-away.
2. Local suppliers not up to the mark: Even though the management realized
that importing every single thing from abroad was not feasible for them, they could
not compromise on the quality. But they didn’t make the same mistake for the outlets
that they came to open later on. Instead of relying completely on foreign imports
such as bread and ketchup for their food, they eventually signed agreements with
Dawn and Knorr respectively. They had special machines imported and installed in
their plants to ensure that they adhere to their international standards of quality.
3. Location of outlet: They should have developed the first outlet further into
the middle class location since high income class can reach the restaurant regardless
of location.
1. They should have developed the first outlet further into the middle class
location since high income class can reach the restaurant regardless of
location.
2. budget went overboard because raw materials such as even the toilet fittings
were imported from abroad. This was an unnecessary expense.
3. The original blue print given to LDA for approval was rejected since it didn’t
meet the local construction requirements; hence amendments had to be made
which delayed the project.
4. Installation of the imported machinery was problematic and a team of
technicians had to be called in from the
5. Instead of sending personnel for training to Malaysia, a department needs to
be opened here so that training can take place locally since in the long-term
when more outlets are opened, they will need to train more people.

6. marketing approach taken did not take into account the local cultural theme.
They alienated the customers by promoting a totally foreign image. For
example, Spicy burger.
7. Inauguration could have been held on a day of some nationalcultural
significance like Basant etc.
8. Combos / deals again did not take into account the local sensibilities. For
example an offering of rice with a big Mac does not make sense.

Appendix A
Project Scope
Project Objective:
To launch a leading food franchise in Pakistan.
Deliverables:

• A 32616 square feet finished building.
• Kitchen must be equipped with latest machinery, imported from USA.
• Train the employees.
• Organize the suppliers.
Milestones:
• Completion of building on 1st
June, 2002.
• Interior decoration to be finished by 1st
July, 2002.
• Start operation from 1st
September, 1998.
Technical Requirements:
• Restaurant must meet local building codes.
• Interior must be in accordance with the franchise rules.
• Parking to meet all applicable codes.
• Ability to build a minimum height of 22 feet.
Limits and Exclusions:
• The organization will be built to the specifications and designs of the original
blueprints provided by the parent company.
Major Characteristics of the Project
1. The project was aimed at successfully launching McDonald’s in Pakistan and
establishing a stable market in this region.

2. The project was to be completed within a time period of 18 months, starting
January 1, 1997 and ending on August 31, 1998.
3. Integration at various levels of the organization was required in order to
successfully complete the project in time. The major departments involved in the
launch were:
(i) Finance and Information Technology Department
(ii) Development Department
(iii) Purchasing Department
(iv) Human Resource Department
(v) Corporate Department
(vi) Operations Department
(vii) Marketing Department
(viii) Quality Assurance
(ix) Legal and Company Secretarial
4. This project was conducted for the first time in Pakistan; therefore it
possessed high risks and challenges.
5. The key to success depended on satisfying the customers, which was the focus
throughout the project, although the project also had time, cost and performance
requirements.
Strategic Management Plan
1. Definition of Organizational mission
“Customer satisfaction is the key to success.”

The mission of the organization was to become the leading food franchise in Pakistan
within a short span of time (5 years).The main focus of the organization was that the
general public should develop a taste for burgers and along with it other side-
products such as french-fries , milk-shakes etc. The company was set up with a
mission to provide quality food to masses at affordable prices.
2. Long-Range Goals and Objectives
In order to materialize the ideas, it was necessary to set the goals of the organization
at the start. It helps the employees move ahead in the right direction or rather make
them concentrate on a directed path.
• The goal was to target the general public and not a specific social class.
• The progress shall be measured in term of increased customers and volume
sold.
• The goal was to become leading food chain in Pakistan.
3. Analyze and Formulate Strategies to Reach Objectives
Marketing strategies were set up to grab the customer focus. A huge budget was
allocated for advertisements and other media campaigns .The environmental and
cultural aspects, such as female waitresses were analyzed in order to have a better
understanding of the customers and their preferences.
4. Implement Strategies through Projects

To have better skilled labor, employees were hired form the local market and were
sent abroad for a month’s vigorous training exercise, in order to serve better to the
customers.
Organization was set up as a matrix organization so that there can be better
interaction among the employees, to avoid implementation gaps. Latest equipment
was imported into the country and an IT Department was set up in the head-office,
in order to have an updated record system to continuously monitor the progress of
the organization.
All this measures helped the organization in attaining the goals set initially by the
management.

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