HI5015: Legal Aspects of McDonald's Operations in Australia, 2017

This report provides an analysis of the legal and regulatory environment impacting McDonald's operations in Australia. It begins with a brief overview of McDonald's, including its incorporation, industry, employee numbers, and global headquarters location. The report then identifies and discusse...Read More

0Running head: LEGAL ASPECTS
Legal Aspects

1LEGAL ASPECTS
Table of Contents
Introduction................................................................................................................................2
McDonald’s Incorporation.........................................................................................................3
Industry of the Company........................................................................................................3
Number of Employees in Australia and Globally..................................................................3
Location of global Headquarters............................................................................................3
Regulatory Framework Affecting McDonald’s in Australia.....................................................4
Impact of Treaties, Conventions, and Agreements on McDonald's...........................................5
Conclusion..................................................................................................................................8
References..................................................................................................................................9

2LEGAL ASPECTS
Introduction
Multinational corporations have to comply with various regulatory frameworks and
hindrances that are necessary to be examined in order to achieve customer satisfaction and
enhancing the value of the corporation. The regulatory framework defines a set of regulations
and laws that apply to a corporation which provide various guidelines that are necessary to be
fulfilled by the company. Being global leaders, firms have to properly comply with such
regulations in order to maintain a positive brand image and fulfil their corporate duties.
Government treaties and conventions are legal agreements between two nations that focus on
improving relationships by providing grants or exemptions to corporations. This report will
focus on ‘McDonald’s’ and analyse its regulatory framework in Australia. Further, the report
will focus on the impact of agreements, treaties and conventions over McDonald’s operations
in Australia.

3LEGAL ASPECTS
McDonald’s Incorporation
McDonald's is one of the most prominent organisations that is situated in Australia; the
corporation has a positive reputation which assists in expanding its business overseas. The
company was founded in 1940 in San Bernardino, California, United States. The firm offers a
wide variety of fast food products to its customers and offers other quick options such as
drive-thru, online booking, cashless payments, and other. The revenue of the company in
2016 was US$24.622 billion globally (McDonalds, 2017).
In Australia, McDonald’s is popular as “Macca’s”, and the company has embraced its
nickname, and some of its restaurants have changed its signs as “Macca’s” (The Telegraph,
2013). McDonald's is known for its franchise business in which it allows other small business
to get a franchise and open their McDonald’s restaurants. The company started its operations
in Australia in 1971 by opening its first restaurant in Sydney suburb of Yagoona. McDonald's
is known for their high-quality services, clean restaurants, family facilities, competitive
prices, similar structure and others (Soontiens and Lacroix, 2009).
Industry of the Company
McDonald's operates in fast food restaurants industry, and it is located in more than 35,000
locations in more than 120 countries, and it serves around 68 million customers each day. In
Australia, more than 869 McDonald’s restaurants are situated which serves around 1.7
million customers visiting each day. McDonald’s economic contribution in Australia is
equivalent to 0.2 percent of the GDP in Australia (McDonalds, 2017).
Number of Employees in Australia and Globally
McDonald's has more than 375,000 employees globally who are dedicated to delivering high-
quality food and services. In Australia, the company has more than 90,000 employees
working which are equivalent to 7 percent of the total working population in Australian café,
takeaway food service and restaurants (McDonalds, 2012). The company has 258 franchises
in Australia and 9000 suppliers which provide material to the restaurants. McDonald's is
world’s second largest private sector employer, the first one being Wal-Mart.

4LEGAL ASPECTS
Location of global Headquarters
The global headquarters of McDonald's is situated in Oak Brook, Illinois, United States,
which operates all functions relating to the franchise, food, services, offers, and others
(Corporate Office, 2017).
Regulatory Framework Affecting McDonald’s in Australia
A multinational corporation that is operating in foreign countries needs to comply with the
legislative, regulatory guidelines of the nation carefully. The firm is required to implement
such regulation into their business policy to ensure proper compliance. In case of
McDonald's, the company maintains a positive reputation, and it creates a strong connective
with its stakeholders, therefore, it is critical for them to comply with the regulatory
framework. The corporation is situated in the service industry, therefore, the top-level
managers’ focus on bringing diversity to the employees and establishing a workplace
environment which is free from discrimination and nepotism (McDonalds, 2017). This
initiative assists in providing equal opportunity to each employee, and it increases their
productivity. The company focus on establishing healthy diversity in the operations without
any discrimination against people from different race, caste, colour, gender or disability by
abiding the provisions of Disability Discrimination Act 1992 (Australian Government, 2017).
As per Australian regulations, McDonald's has to pay Corporation Tax of 30 percent on its
profits before distributing them to shareholders (Australia Taxation Office, 2017). The
company pays a significant amount to Australian government as taxes to ensure they ethically
comply with legal provision; the amount of tax contributes to the Australian economic
development. The corporation tax works favourably for the Australian government, but it has
an adverse impact on the company’s business since they have to pay a large amount to the
government. On the other hand, McDonald's has to comply with Fair Trading Act in
Australia which is implemented by the government to ensure that each company gets good
opportunity to practice in an industry efficiently and it reduces monopoly of the large firms.
Many firms such as Coles and Woolworth have been sued for not complying with the
provisions of fair trade act (Nottage, 2009).
McDonald's effectively operates with the assistance of local suppliers, therefore, the company
is required to assess and implement the provision of the fair trading act. Any failure of
regulation by a McDonald's franchisee resulted in a negative image of the company since it

5LEGAL ASPECTS
represents the entire brand. The corporation has to comply with the productions of Product
Liability Regulations that provide provision regarding proper handling of tangible products.
The regulations are enforced by the Australian Competition and Consumer Commission
(Richards, Lawrence, Loong and Burch, 2012). The corporation can be held liable for its
casualness towards the quality of products which may result in health issue of the consumers.
Each outlet tests the quality of food sold by them to ensure they are not against the food
health standards. The Australian government ensures that the food and services provided by
the corporation to customers meet the entire health quality requirement, so they are not
detrimental to their health. The Food Safety Regulation applies to restaurants industry since it
provides consumer products and food services. Organisations such as McDonald's have to
comply with several food safety requirements because carelessness can cause serious health
issues for customers (Australian Institute of Food Safety, 2017).
In 2012, McDonald's was sued for not complying with the food safety requirements, and it
had to pay a fine of $180,000; the company conducted breach in food storage, presence of
pests and cleanliness (Stewart, 2012). From 2000, Australian government started levying
Goods and Services Tax which is imposed on the products and facilities provided by the
corporations. Currently, the GST rate in Australia is 10 percent which applies to consumer
products and food services (Australian Taxation Office, 2017). The Environmental Protection
and Biodiversity Conservation Act 1999 compel each corporation whether domestic or
foreign to maintain appropriate standards for the protection of the environment and reducing
their carbon footprint. McDonald's deals in food products which creates a lot of waste and the
company is required to properly dispose of such waste to ensure it did not pollute the
environment. McDonald's is known for high-quality services which include cleanliness,
safety, and environmental friendliness; therefore, they have comply with environmental
regulations to maintain their reputation.
Impact of Treaties, Conventions, and Agreements on McDonald's
Treaties are the agreement between two or more counties in order to improve trade, social
and political relations to enhance the economy and GDP of the company. Most of the times,
treaties assist corporations in improving their business, but sometimes they act against the
operations of the business. McDonald’s Australia Enterprise Agreement 2013 is the original
contract that drives the operations of McDonald's in Australia (SDA, 2016). The agreement
defines various method of functionality and procedure of service that is necessary to be

6LEGAL ASPECTS
compiled by the company. The Fair Work Act approves the agreement, and it consists of five
main parts. Firstly, the clause provides provision such as shift supervisor, employer, weekly
employees and other related condition. The entire process is structured in a way to promote
transparency and objectivity. Further, the part provides provision for classification and wage
rates which include various topics such as working hours, leaves, long service leave and
others.
The agreement contains several clauses for the protection and welfare of employees and
environment which are necessary to be compiled by the firm. To regulate the food standards
between Australia and New Zealand, a treaty called FSANZ has been established by the
governments. The Food Standards Australia and New Zealand Act 1991 provide provision
relating to standardising the food quality that is offered by the corporations in both countries
(Tapsell, 2008). The treaty monitors the activities of fast food corporations such as Subway,
KFC, and McDonald's and ensures that these companies are complying with the
requirements. Due to this treaty, the corporations are able to sell their products in both
countries without any hassle which assist in improving their performance and market share.
McDonald’s should carefully comply with the requirements of this treaty because it improve
and ensure that the quality of food is according the health requirements which eventually
increase McDonald’s reputation (Henderson, Coveney, Ward and Taylor, 2009).
The Free Trade Agreement between Australia, Japan, USA, China, Malaysia, Indonesia and
Singapore assist McDonald's in providing its services without the hassle and at a minimum
expense. The agreement benefits McDonald's because it is able to get supplies at lower costs
and provide its services effectively. The treaty conducted between Australia and China, China
Australia Free Trade Agreement (ChAFTA), assists McDonald's because it helps in
establishing its services in China without any legal problems. The tax treaty conducted
between the United States and Australia assists US-based multinational corporations to
reduce tax liabilities in Australia. McDoanld’s can use this treaty to avoid double tax, tax
evasion, and fiscal evasion (Australian Taxation Office, 2017). Also, the corporations have
right to bring business profits to the countries of their origin which is a significant benefit for
the firm. Multinational companies such as McDonald's provide various benefits to Australian
economy such as employment, national income and competitive market and other.
In order to promote multinational corporations to establish their business in Australia, the
government enters into various treaties to provide various benefits such as taxation reliefs,

7LEGAL ASPECTS
business profit attribution, and other. The Comprehensive Economic Cooperation Agreement
(CECA) conducted between Australia and New Zealand assist firms in providing their
services in both countries. It increases the business of firms between the countries that create
new business opportunities for local businesses. McDonald's has to pay dividends from its
Australian profits, and due to the taxation treaty, it saves a lot of its profit. Therefore, the
treaty assists in inviting the investments from the US to Australia which aid in the expansion
plan of McDonald's and it helps them maintain a positive position in the competitive market
environment. McDonald’s top-level management is required to assesses and evaluate various
treaties between governments and use them to their advantage because they assist the firm in
expanding its operations globally.

8LEGAL ASPECTS
Conclusion
From the above observations, it can be concluded that multinational corporations are required
to comply with various international regulatory frameworks to properly operate in the foreign
country. Every international company has to assess its regulatory framework and implement
it into the business model to effectively operate in the foreign country. McDonald's is a
multinational corporation which operates in multiple countries; the company is required to
analyse various regulatory frameworks and properly comply with them to maintain a positive
brand image. In Australia, the corporation deals with several legal regulations such as
Disability Discrimination Act 1992, corporation tax, goods, and services tax, food safety
regulations, Environmental Protection and Biodiversity Conservation Act and others.
Treaty is an agreement between two or more countries to improve and promote trade, social
and political relations among them. Australia has entered into various treaties that benefit the
business of McDonald's such as Food Standards Australia and New Zealand Act,
Comprehensive Economic Cooperation Agreement, McDonald’s Australia Enterprise
Agreement and many others. The Australian government has established various taxation
treaties that provide various benefits to McDonald's and its shareholders. It can be said that
various tax treaties and conventions assist McDonald's in expanding its business in Australia
and other countries.

9LEGAL ASPECTS
References
Australian Government., 2017. Disability Discrimination Act 1992. [Online] Australian
Government. Available at: https://www.legislation.gov.au/Details/C2016C00763 [Accessed
on 6/12/2017]
Australian Institute of Food Safety., 2017. Food Safety Laws. [Online] Australian Institute of
Food Safety. Available at: https://www.foodsafety.com.au/resources/videos/food-safety-laws
[Accessed on 6/12/2017]
Australian Taxation Office., 2017. Company tax rates. [Online] Australian Taxation Office.
Available at: https://www.ato.gov.au/Rates/Company-tax/ [Accessed on 6/12/2017]
Australian Taxation Office., 2017. GST. [Online] Australian Taxation Office. Available at:
https://www.ato.gov.au/Business/GST/ [Accessed on 6/12/2017]
Australian Taxation Office., 2017. What are tax treaties. [Online] Australian Taxation Office.
Available at: https://www.ato.gov.au/General/International-tax-agreements/In-detail/What-
are-tax-treaties-/ [Accessed on 6/12/2017]
Corporate Office., 2017. McDonald’s Corporation. [Online] Corporate Office. Available at:
http://www.corporate-office-headquarters.com/mcdonalds-corporation [Accessed on
6/12/2017]
Henderson, J., Coveney, J., Ward, P. and Taylor, A., 2009. Governing childhood obesity:
Framing regulation of fast food advertising in the Australian print media. Social Science &
Medicine, 69(9), pp.1402-1408.
McDonalds., 2012. Our Business. [PDF] McDonalds. Available at:
https://mcdonalds.com.au/sites/mcdonalds.com.au/files/CH2_McDonalds_CR&S_OurBusine
ss.pdf [Accessed on 6/12/2017]
McDonalds., 2017. Annual Reports. [Online] McDonalds. Available at:
http://corporate.mcdonalds.com/mcd/investors/financial-information/annual-report.html
[Accessed on 6/12/2017]
McDonalds., 2017. Macca’s People. [Online] McDonalds. Available at:
https://mcdonalds.com.au/about-maccas/people [Accessed on 6/12/2017]

10LEGAL ASPECTS
McDonalds., 2017. Macca’s Story. [Online] McDonalds. Available at:
https://mcdonalds.com.au/about-maccas/maccas-story [Accessed on 6/12/2017]
Nottage, L., 2009. Consumer law reform in Australia: Contemporary and comparative
constructive criticism. Queensland U. Tech. L. & Just. J., 9, p.111.
Richards, C., Lawrence, G., Loong, M. and Burch, D., 2012. A toothless chihuahua? The
Australian Competition and Consumer Commission, neoliberalism and supermarket power in
Australia. Rural Society, 21(3), pp.250-263.
SDA., 2016. McDonalds Australia enterprise agreement 2013. [Online] SDA. Available at:
http://www.sda.org.au/document/mcdonalds-australia-enterprise-agreement-2013-pdf/
[Accessed on 6/12/2017]
Soontiens, W. and Lacroix, A., 2009. Personality traits of franchisees-McDonald's restaurants
in Australia. Problems and Perspectives in Management International Research
Journal, 7(1), pp.238-244.
Stewart, 2012. McDonalds Outlet in WA Fined $180,000 for Food Safety Branches. [Online]
Australian Institute of Food Safety. Available at:
https://www.foodsafety.com.au/news/mcdonalds-outlet-in-wa-fined-180000-for-food-safety-
breaches [Accessed on 6/12/2017]
Tapsell, L.C., 2008. Evidence for health claims: A perspective from the Australia–New
Zealand region. The Journal of nutrition, 138(6), pp.1206S-1209S.
The Telegraph., 2013. McDonald's rebrands to Macca's in Australia. [Online] The Telegraph.
Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/
9787581/McDonalds-rebrands-to-Maccas-in-Australia.html [Accessed on 6/12/2017]