McDonald’s pushes for franchisee kitchen upgrades

Independent operators may need to pay $100K (U.S.) per store for new equipment

CHICAGO— McDonald’s Corp. is making a new push to get franchisees to upgrade their kitchen equipment, aiming to win back customers with improved fried chicken and higherend desserts. It won’t be cheap.

The company’s independent operators, who own about 92 per cent of the more than 14,000 McDonald’s restaurants in the U.S., may have to shell out about $100,000 (U.S.) per store for new equipment, along with upgrades such as LED lighting, according to internal company documents provided to Bloomberg. The documents were part of a presentation package from corporate headquarters to franchisees this month.

The new costs would be on top of those that are part of the chain’s ongoing Experience of the Future modernization program, which can run as high as $700,000 per restaurant. The corporate office pays 55 per cent of the cost of those upgrades. The average U.S. McDonald’s restaurant has annual sales of $2.57 million, according to the research firm Technomic.

The plan may increase tension between McDonald’s and its franchisees, which have a history of occasional strife. The parent company has started shedding mom-and-pop owners in favour of larger operators who can afford pricey renovations and new technology. And a franchisee survey from 2015 showed that McDonald’s owners were pessimis- tic about the company’s turnaround efforts after a prolonged sales slump, even amid the rollout of all-day breakfast.

Under the new program detailed in the documents, franchisees may have to buy new espresso machines, a baked-goods display case and a cream-and-sugar dispenser to improve the company’s McCafé line of coffee and drinks. Some may balk at the required spending for upgraded equipment.

“They never take it well initially,” said Fred LeFranc, founding partner at restaurant adviser Results Thru Strategy. “The inherent cynicism is that it is for the benefit of the franchisor, who is top-line focused.”

As part of the most recent push, McDonald’s started testing buttermilk fried-chicken tenders earlier this year in Charlotte, N.C. The idea is to create the “next generation” of chicken — all white meat with no artificial flavours or preservatives. The aim is for McDonald’s to provide the “best” chicken among quickservice restaurants, according to the documents sent to franchisees. While McDonald’s sells poultry that was previously frozen, rivals such as KFC prepare it fresh.

For the past two years, McDonald’s has been focused on improving its business following a prolonged sales slump.

McDonald’s declined to comment on the documents. The company is working on “better value, core menu enhancements and restaurant modernization,” spokesperson Lauren Altmin said in an email. “We are committed to moving faster than ever before to become a better McDonald’s.”