Introduction & Company Overview
The first McDonald's restaurant opened in 1930 in San Bernadino, California as their first drive-in store. In 1948, McDonald's was transformed into a complete restaurant with a wider concept and variety of foods ( Mieth 4). From then on, the McDonald's has grown into a massive chain of restaurants all over the world, and not just in the United States of America. In every corner, you can always find a McDonald's store, especially in large cities and metropolis.
McDonald's Abu Dhabi Corniche will be the focus of this internal control project. The store is located in Abu Dhabi, just next to the Adnoc Station, Al-Corniche Street. It is a franchise-owned McDonald's store in the United Arab Emirates region. This is just one of the McDonald's stores that are scattered throughout the region. Other McDonald's stores in the United Arab Emirates can be found in the Abu Dhabi Mall, Manar Mall, Sharjah City Center, and many more.
The main competitor of McDonald's in the region is Burger King. Burger King Branches in Abu Dhabi can be found in the Abu Dhabi Women's College, ADNOC - Airport Road, Hamdan Street, and Marina Mall, among others. This speaks that the competition in the region is very high and steep that it is necessary for McDonald’s ADNOC to remain competitive and gaining. Burger King ADNOC is the direct competitor of McDonald’s and they are fighting for consumers from around the airport area. As much as there are much people in the airport area, it is necessary for McDonald’s to gain from its own advantages to out-win the Burger King branch.
In this paper, I will be reviewing McDonald’s business procedures and operations, and the different internal business controls used by the organization. This includes a detailed analysis of McDonald’s control environment, risks, control activities, information and communication, and monitoring controls. I will be keeping a contrast with the way Burger King does their own internal business control to see a comparative overview on how franchises of these two global brands.
Business Procedures and Operations
McDonald’s ADNOC has a single manager who oversees the operation of the store. The manager is responsible in taking care of the supply chain of the organization to ensure that all needed supplies for the operation of the business are met to avoid disruption and delays of the store’s operation. The job description includes the supervising of the day-to-day operations of the kitchen and the entire restaurant to ensure that not a single thing is missed.
The day-to-day operation of McDonald’s ADNOC is focused on meeting and providing for the demands and needs of its customers. Customers take a line in the counter to give their orders to the person in charge. Of course, the customer has to pay for the amount of his or her order. The policy of the restaurant is to accept orders only when payment is already made. After the person in charge takes the order, the order will be dispatched to the kitchen personnel who will check if the order is available or not. If the order is available in the kitchen, the person in charge gets the order and gives it to the customer. However, if the order is not available in the kitchen, the person in charge of the register will ask the customer to wait for some moment while the order is prepared in the kitchen.
In instances that the order is not available, customers proceed to available seats of the store. Then, when the kitchen has already prepared the order of the customer, a crew will bring the order to the table of the customer. McDonald’s ADNOC uses a simple numbering system to determine what order should be given to whom. In the restaurant business, time and perfection are two things that should go together.
Internal Control Environment
According to Rittenberg, et.al. (2011), "a company such as... McDonald's that serves fast food across thousands of locations must be able to monitor the workings of its controls at each location." This means that it is very important to have clearly written policies and procedures to ensure control of the production, waste disposal, sales recording and inventory, and supervision of employees. Due to the fact that the operation seems to be daunting and big, McDonald's ADNOC introduces policies and procedures for the control of the business internal processes and operation.
While McDonald’s ADNOC maintains policies and procedures, its competitors such as Burger King ADNOC also introduces its own set of policies and procedures. The final acid test in this regard is what’s the best business internal control between the two – whether Burger King’s or McDonald’s.
Business Control Environment
For the smooth process and operation of the business, the top management is expected and should clearly set the rules, policies, and procedures that will govern the operation and conduct of the business. Otherwise, it would be hard for the business to have an organized and orderly operation. McDonald's international management, even though the ADNOC branch is not company-owned, introduces policies that will guard the business process and operations to ensure that the reputation and name of McDonald's.
Mainly, the business internal control works on the value of the role and responsibilities of employees. With clearly set and written task descriptions, it is easier for employees to function in the organization without insubordination or usurpation of power, which poses a big problem to the business operation. When people of the organization are not properly briefed on what their roles are, they tend to fight against each other. This result to chaos in the organization, and for McDonald’s ADNOC, chaos among employees is behind imagination to avoid disruption of the business operation.
For the proper conduct of the management of employees, the HR department has the right to hire and fire employees. This is a good internal control to ensure that employees follow written ethical and values rules of the organization. This means that employees are regularly evaluated to see how well they work for the organization and what should be done to suit their performance.
On the other hand, in terms of internal audit, the franchise store of McDonalds has an overseeing department that looks at the financial and accounting records of the store to ensure that these statements follows the standard for financial reports and papers. This ensures that the stakeholders of the store are given proper records of the company.
Assessment of Risk
For the fulfillment of the standard rules and principles of accounting, both internal and external audits are done. This audit checks out the financial records to see risk areas and to recommend possible ways to minimize, if not eliminate, the impact of these risks. For the business internal control, it is very important to understand the significance of the risk to the on-going business concern of the organization. By categorizing risks of the store, the manager can easily address concerns that must be given immediate attention due to their weight. In the same manner, it sees the risk factors of the organization and checks the reality of resolving issues together with the concern parties or departments of the organization.
Controlled Activities
For the operations management of the organization, McDonald's maintains control over specific activities of the organization. These activities are the following:
a. Separation of Duties. As I have discussed earlier, the HR department is assigned to design the task description of the employee. This is separation of duties to increase performance and this also fosters an environment of respect and order.
b. Physical Control. The goal of the business internal control is to ensure the optimum use of the assets and resources of the store. McDonald's ADNOC has been investing on several fixtures that can be used by the organization. With the aid of control over assets, these items are protected from imminent destruction due to lack of monitoring system.
c. Documentation.With the advent of advanced technologies, the documentation process has been modified and straightened to fit the demands and needs of the time. With this paperless technology, it is easy for one to record orders and entries.
d. Authorization. Employees of the organization should understand the value of chain of command. There are times that employees follow orders without respect to who really has the authority. Rules, such as who can ask the kitchen personnel to cook foods or increase the prepared food, are designed to keep the harmony between employees of the organization.
e. Check and Balance. It is very important for the organization to have an internal audit and private external audit. These audits are used to keep good check and balance of the organization. Of course, it is very important for the organization to have an internal audit, but the same may not present or report information honestly and properly. In this case, it is important for the company to hire an external audit to check the company.
Information and Communication
McDonald's ADNOC follows the same information and communication system used by several other companies, even by its competitors. These tools include the use of sales and cash receipts as physical documentation and source of information. On the other hand, for the virtual tool, McDonald's uses the point of sale system to record all business transactions and ensure that the financial account and value of the organization are proper and real. Businesses should always keep a balance between the physical and virtual source of communication.
Monitoring
The success of the organization can be traced to how the manager rectifies errors within the shortest possible time. It is necessary for the organization to be properly addressed. In the same manner, the monitoring process also includes the satisfaction of the person and to ensure that these perceptions and opinions of the people are given proper discussion on why they should come to church and give to missions.
References:
Mieth, H. (2007). The History of Mcdonald's. GRIN Verlag.
Rittenberg, L., et.al. (2011). Auditing: A Business Risk ApproachCengage Learning.