Regulatory Framework Essay: McDonald's In Australia.

Evaluate the regulatory framework face by McDonald's in Australia.

Multinational companies which operate their business in more than one country have to comply with various international requirements to ensure that firms are ethically operating their business. The governments provide regulatory frameworks that are necessary to comply by the international firm to operate their business efficiently. Treaties are the agreement between two or more nations to improve trading relationship by providing tax exemption or grant to the multinational firms. The treaties can affect a company’s business in both negative and positive way; organisations have to analyse them to ensure they are able to take advantage of various expansions. This essay will evaluate the regulatory framework face by McDonald's in Australia and evaluate various laws apply by the company. Further, the essay will examine various treaties between Australia and other countries that influence the business of McDonalds.

McDonald’s incorporation is an American multinational company which was founded in 1940; the company has a positive brand reputation which helps it becoming one of the most prominent corporations in Australia (McDonalds, 2017). McDonald’s is known for their high-quality food and fast checkout services that expand the business of firm globally. The corporation offers various services to its customers in Australia such as online ordering, cashless transactions, drive-thru and others. In 2016, the corporation generated revenue of US$24.622 billion from their worldwide operations (McDonalds, 2016).

In Australia, McDonald’s is known as “Macca’s”, and the company also embrace its nickname by changing its sign as Macca’s for Australian day (Wang, 2013). McDonald's expanded its business by franchising its brand and giving local small business a chance to own McDonald’s brand restaurant. The firm started its operations in Australia in 1971, and the established its first restaurant in Sydney suburb of Yagoona (McDonalds, 2017). The corporations have a reputation for offering affordable, fast food with high-quality ingredients and excellent services; the company maintains a level of similarity in their restaurants, so its customers feel familiar with their services throughout the world.

McDonald's operates in the restaurant industry, and it provides fast food services to its customers; it is situated in more than 120 countries and serves more than 68 million customers each day from more than 35 thousand locations. The corporation is situated throughout Australia in more than 869 locations, and it serves more than 1.7 million customers each day. The firm’s contribution to the Australian economy is equivalent to 0.2 percent of its GDP (McDonalds, 2012).

Industry

The corporation has more than 375,000 employees worldwide, who perform dedicatedly to satisfy the requirement of its customers and provide them high-quality services. McDonald's has more than 90 thousand employees in Australia which are equal to 7 percent of the total working population in Australia in restaurant, food, and café service industry. The firm works along with 9 thousand suppliers that provide them food material; it also has 258 franchises in Australia. In terms of global employment, the company is a second largest employer in the private sector, right after Wal-Mart (McCarthy, 2015).

McDonald’s global headquarters is situated in Oak Brook, Illinois, United States; the main head office is responsible for managing its franchise, offers, and other food-related services. It is expected that company will move its head office to Chicago (Garfield, 2017)

Being a multinational corporation, McDonald’s is required to comply with various regulatory frameworks provided by the government in different countries. These frameworks ensure that company is ethically performing its duties. Following are examples of regulatory frameworks that apply to the operations of McDonald's.

Corporate Tax: In Australia, the companies are subject to a corporate tax of 30 percent on its profits before distributing them to the shareholders (Australia Taxation Office, 2017). McDonald's pay the amount of tax on the profit it generates from its Australian operations. The tax contributes to the economy of Australia and government use it to increase the facilities of people. The corporation tax is favorable for the Australian government, but it has an adverse impact on firm’s business since it reduces its profits.

Fair Trading Act: This act has been implemented by the Australian government to ensure that equal trading opportunity is received by each company whether small or large. The act provides and promotes the trading opportunities for small and medium companies to ensure that the large organisation does not crush them (Business, 2017). The act reduces the monopoly of large corporations to provide equal opportunities to SME because they contribute to the country’s economy. The government can take legal actions against a company for noncompliance with fair training act; the government has taken legal action against Woolworth and Coles for noncompliance with the requirements of fair trading act.

Disability Discrimination Act 1992: McDonald's has to maintain a positive reputation in the Australian market to attract a large number of customers; the company comply with the necessary requirement and promote local communities’ development to maintain their positive reputation (Austrlian Human Rights Commission, 2017). The corporation is also known for establishing a strong connection with different stakeholders that assist them smoothly operates their business in foreign countries. The top-level management of McDonald's focuses on establishing diversity into their workplace, and they promote and support a positive organisational environment which is free from nepotism and discrimination. The initiatives of the company provide equal opportunities to each worker, and it also focuses on improving their performance. The corporation complies with the regulation of Disability Discrimination Act 1992 to ensure that they are establishing a diverse environment by avoiding discrimination based on race, colour, caste, gender, and disability.

Number of Employees

Product Liability Regulation: These regulations are enforced by the Australian Competition and Consumer Commission over different companies. The regulations provide guidelines that are necessary to comply by the corporations while handling tangible products (International Comparative Legal Guides, 2017). These regulations determine the liability of firms regarding protection of tangible products.

Food Safety Requirement: The corporations which deal in food products can be held liable for casually handling the quality of food products; proper safety standards should be maintained by the firm to ensure that the food did not cause any health issues to the consumers. The regulations of food safety provide necessary security standards that are maintained by restaurants or fast food chains to ensure that their products are not detrimental to the health of customers. McDonald's was sued by the government in 2012 for not maintaining appropriate standards for foods safety, and the company had to pay a penalty of $180,000. The corporation failed to maintain safety standards for food storage, cleanliness, and presence of pests (Thomson, 2012).

Goods and Services Tax: Australian government started levying GST on companies from 2000; the current rate of GST in Australia is 10 percent (Australian Taxation Office, 2017). The GST applies to food services and consumer products offered by the companies to their customers. It provides a uniform tax rate system for restaurant industry which makes it easier for them to levy taxes on different products.

Environmental Protection and Biodiversity Conservation Act 1999: The requirement of environmental products regulations is growing, and multinational companies have to comply with such requirements to maintain their reputation (Department of the Environment and Energy, 2017). This act requires every domestic and foreign firm to maintain appropriate measure for disposing of the waste caused by them. McDonald’s operates in the food industry, and they deal with a significant amount of food waste, the company has to ensure that proper guidelines have been established for waste disposal system, so they are no pollution their local environment.

Treaties are agreements between two or more countries with an objective to promote trade relationship by providing various exemptions and grants to multinational companies because it assists in improving the GDP of both countries. The Australian government has entered into various treaties and agreements that influence the business of McDonald's. The government of Australia and New Zealand entered into a treaty to regulate the food quality standards in both the countries; the treaty is called Food Standards Australia and New Zealand Act 1991 (Fletcher and Bartholomaeus, 2011). This act provides regulations regarding the food quality standard that is necessary to be maintained by the companies which operate in this field. The provision of this treaty applies to food corporations such as KFC, Subway, Hungry Jack’s, McDonald's and many others. The treaty enables these companies to sell their products and offer their services without complying with strict government regulations, and they can improve their performance in both countries. McDonald's is required to comply with the provision of this treaty carefully since it provides policies regarding food safety that improve the quality of food to ensure it is according the food safety standards provided by the government.

Location of Global Headquarters

Many countries such as China, Malaysia, Australia, Japan, Indonesia, Singapore, and USA have entered into Free Trade Agreement which assists McDonald's in providing its services in these countries without complying with strict legal requirements. The agreement enables McDonald's to provide its services and buy supplies at low costs. The agreement between US and Australia enable US-based companies such as McDonald's to enter into and operate their business in Australian markets easily. The China Australia Free Trade Agreement (ChAFTA) assists corporations such as McDonald's to easily offer their product and services in the countries, and it increase their operations without hassling with complicated legal requirements (Jiang, 2010). The agreement between US and Australia provide various grants and exemptions to multinational companies such as tax evasion, double tax, and fiscal evasion; in return, the companies contribute to countries economy, increase their national income, create employment and establish a competitive market. The government of India and Australia entered into a Comprehensive Economic Cooperation Agreement (CECA) for the benefit of both the countries. The agreement promotes the business of multinational enterprises between the countries to create new business opportunities for local firms (Department of Foreign Affairs and Trade, 2017).

The McDonalds Australia Enterprise Agreement 2013 provides various provisions that are necessary to be fulfilled by the company; it provides structure for the operations of McDonald's (SDA, 2015). The agreement includes various policies, structure, and guidelines that are compiled by the firm to ensure that it is performing its operations ethically. The agreement provides guidelines for working hours, shifts, weekly hours, working condition and others. It also ensures that enterprise is performing its operations with a high level of objectivity and transparency. The government provide tax exemptions to multinational corporations to attract them into a country; the treaty between Australia and US provide various tax exemptions to the company which resulted in increasing its profits. The corporations can distribute a large number of dividends by getting tax exemptions which resulted in increasing their shareholders. Therefore, companies such as McDonald's are required assessing various treaties to ensure they get benefits from them.

Conclusion

In conclusion, multinational companies have to comply with various regulatory framework impose by governments to ensure that they perform ethically. In Australia, McDonald's comply with various regulatory requirements such as corporate tax, disability discrimination act, GST, food safety regulations, environmental protection and biodiversity conservations act and many others. McDonald’s is required to access the regulatory framework which applies to its operations to ensure that it did not breach any legal requirements. Effective compliance with regulatory framework result in improving the reputation of the company in public and people prefer to use its services or buy its products. The Australian treaties which affect the business of McDonald's include McDonalds Australia Enterprise Agreement, Comprehensive Economic Cooperation Agreement, Food Standards Australia and New Zealand, and many others. McDonald's benefit from the treaties of Australia because it provides them various tax exemptions; it is also easier for McDonald's to expand its operations in other countries due to treaties of Australia. The treaties and agreements assist McDonald's in operating its business effectively, and it also helps in sustaining its future growth.

References

Australian Taxation Office. (2017). Corporate Tax Rates. Retrieved from https://www.ato.gov.au/Rates/Company-tax/

Australian Taxation Office. (2017). GST. Retrieved from https://www.ato.gov.au/Business/GST/

Austrlian Human Rights Commission. (2017). A brief guide to the Disability Discrimination Act. Retrieved from https://www.humanrights.gov.au/our-work/disability-rights/guides/brief-guide-disability-discrimination-act

Business. (2017). Fair trading laws. Retrieved from https://www.business.gov.au/info/run/fair-trading/fair-trading-laws

Department of Foreign Affairs and Trade. (2017). Australia-India Comprehensive Economic Cooperation Agreement. Retrieved from https://dfat.gov.au/trade/agreements/aifta/pages/australia-india-comprehensive-economic-cooperation-agreement.aspx

Department of the Environment and Energy. (2017). Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). Retrieved from https://www.environment.gov.au/epbc

Fletcher, N. and Bartholomaeus, A., 2011. Regulation of nanotechnologies in food in Australia and New Zealand. International Food Risk Analysis Journal, 1(2), pp.33-40.

Garfield, L. (2017). McDonald's suburban hometown is worried because the company is abandoning them for Chicago. Retrieved from https://www.businessinsider.in/McDonalds-suburban-hometown-is-worried-because-the-company-is-abandoning-them-for-Chicago/articleshow/59687622.cms

International Comparative Legal Guides. (2017). Product Liability 2017. Retrieved from https://iclg.com/practice-areas/product-liability/product-liability-2017/australia

Jiang, Y., 2010. China's pursuit of free trade agreements: Is China exceptional?. Review of International Political Economy, 17(2), pp.238-261.

McCarthy, N. (2015). The World's Biggest Employers [Infographic]. Retrieved from https://www.forbes.com/sites/niallmccarthy/2015/06/23/the-worlds-biggest-employers-infographic/#538b3137686b

McDonalds. (2012). Our Business. Retrieved from https://mcdonalds.com.au/sites/mcdonalds.com.au/files/CH2_McDonalds_CR&S_OurBusiness.pdf

McDonalds. (2016). 2016 Annual Report. Retrieved from https://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Annual%20Report.pdf

McDonalds. (2017). Macca’s Story. Retrieved from https://mcdonalds.com.au/about-maccas/maccas-story

McDonalds. (2017). Our History. Retrieved from https://www.mcdonalds.com/us/en-us/about-us/our-history.html

SDA. (2015). McDonald’s Australia Enterprise Agreement 2013. Retrieved from https://www.sdansw.org.au/mcdonalds-australia-enterprise-agreement-2013

Thomson, C. (2012). Serial offending Rockingham McDonald’s. Retrieved from https://www.oneperth.com.au/2012/10/06/rockingham-mcdonalds/

Wang, R. (2013). WATCH: Australia’s McDonald’s Gets a New Name. Retrieved from https://newsfeed.time.com/2013/01/09/watch-australias-mcdonalds-gets-a-new-name/