McDonald’s Operators: We Need Help

McDonald’s Operators: We Need Help
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McDonald’s Corp.’s U.S. franchisees are losing faith that a turnaround in their business is coming, judging by comments from 29 operators (who own a total of 208 restaurants) compiled by Mark Kalinowski. The six-month outlook average of 1.69—on a scale where 1 is poor and 5 is excellent—is the lowest it has been in the 11+ years that Kalinowski has conducted the survey.

These operators say June same-store sales were down 2.3%. McDonald’s will announce June sales next week.

McDonald’s franchisees always complain about management and no doubt always will. But a tone of resignation in many operators comments should alarm the company. Several suggest that corporate ignores them and the problems caused by continual remodeling, high rent, new-equipment investments, and changing menus. That has left at least one operator feeling dizzy: “Create Your Taste, TasteCrafted, all Day Breakfast, etc. etc. We are going in so many directions at the same time. I guess that’s what a progressive brand does?”

McDonald's Creae Your Taste

Required investments in initiatives such as Create Your Taste anger some franchisees.

Says another franchisee: “The only thing saving many operators with the high rents that they have now would be the low interest rates. All the re-investments over the last five years with MRPs [major remodel projects], rebuilds and kitchen and lobby remodels—not to mention the McCafé and blended ice machine remodels—have absolutely killed the operator’s equity in their business.”

A McDonald’s Corp. spokesperson responded to the survey, “Approximately 3,100 franchisees own and operate McDonald’s restaurants across the U.S.  Less than 1% of them were surveyed for this report. We value the feedback from our franchisees and have a solid working relationship with them.”

Another operator said, “We need some relief in rents/service fees, yet McDonald’s continues to push new systems like Create Your Taste ($150,000 per store), breakfast all day, new drink systems ($600 per month) and still pushing MRPs that don’t come close to the numbers they promised.”

Another operators says, “McDonald’s has destroyed operator equity by forcing up into expensive rebuilds and relocations, and then penalizes us for having too much debt. They only care about shareholders, not the operators.”

One franchisee offered pointed criticism of corporate investment in technology, saying the company “has pretended that they are savvy in all things digital and now seeks to jump into this arena by hiring a bunch of smart people. They are looking at this as another profit center, where they can push the costs onto the operators in the form of more technology fees, and the cost is now approaching $100 million and there is nothing to show for it except the same old idle promises of ‘Wait ‘til you see what we have in the works for you.’ I’m afraid the emperor has no clothes.”

One operator’s simple conclusion: “Fix the food; building upgrades should come later.”

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