McDonald's routinely enters into contracts for franchise agreements. They should expect to encounter agency problems and Resourceful Enterprising Maximizing People. The goals of a franchisee may not align with the policies of McDonald's, and franchisees may not want to comply with prescribed operating practices. A well-run organization anticipates these possibilities and undertakes strategies and initiatives to prevent agency problems from occurring, and they also anticipate the possibility of non-compliance.

1. Provide three significant examples of management controls McDonald's corporate management should consider when establishing management controls designed to promote goal congruence and increase the likelihood that a franchisee will comply with important operating standards developed at corporate and Hamburger University.
2. What provisions should McDonald's management include in their franchise contracts in anticipation of situations when franchisees, who after acquiring a franchise, repeatedly fail to follow and implement important operating standards developed at corporate and Hamburger University.
3. Standards are often time consuming and expensive to develop, and the more they are utilized the better the economic return on the investment needed to develop a system of standards. This rewards large scale enterprises. When you consider the autonomy that an owner-operator of a diner in a single location enjoys in comparison to a McDonald's franchisee in the United States, it becomes very obvious that goal congruence has taken precedence over autonomy in structuring McDonald's franchise contracts in the United States. Clearly, McDonald's is concerned that greater autonomy could damage the McDonald's brand. In some countries McDonald's has granted considerably more autonomy to franchisees than is typical in the United States. What is the rationale for advocating that McDonald's should grant greater autonomy to franchisees in the United States to make decisions related to menus items and interior design?