Fran­chi­sees to Pres­sure McDo­nald’s

L'Opinion - - The Wall Street & I'Opinion - Ju­lie Jar­gon

Some 400 McDo­nald’s Corp. fran­chi­sees ga­the­red for a rare mee­ting Wed­nes­day to dis­cuss their concerns about the bur­ger giant’s plans for im­pro­ving weak sales.

The U.S. res­tau­rant ope­ra­tors met at the of­fice of a large fran­chi­see in Tam­pa, Fla., in a ses­sion that be­came so crow­ded two tents had to be set up out­side, ac­cor­ding to one of se­ve­ral at­ten­dees in­ter­vie­wed.

The at­ten­dees, who re­present about one-quar­ter of U.S. fran­chi­sees, agreed to pro­ceed with steps to form an in­de­pendent ope­ra­tors’ as­so­cia­tion. The group pas­sed out pledge cards as­king fran­chi­sees to contri­bute $200 a res­tau­rant to form the as­so­cia­tion. Ma­ny si­gned, ac­cor­ding to some fran­chi­sees who at­ten­ded. No for­mal vote has been ta­ken or sche­du­led.

Fran­chi­sees of other fast­food chains – in­clu­ding Dun­kin Brands Group Inc.; sand­wich chain Sub­way, ow­ned by Doc­tor’s As­so­ciates Inc.; and Tim Hor­tons, a unit of Res­tau­rant Brands In­ter­na­tio­nal Inc. – have crea­ted in­de­pendent fran­chi­see groups to agi­tate for change. But this is the first time such a large group of McDo­nald’s fran­chi­sees has ta­ken se­rious steps to or­ga­nize.

A group of Jack in the Box Inc. fran­chi­sees on Tues­day cal­led for the chief exe­cu­tive of that chain to step down be­cause of concerns about a lack of mar­ke­ting sup­port and la­ck­lus­ter sales.

McDo­nald’s fran­chi­sees, who have been tas­ked with up­da­ting stores, buying new re­fri­ge­ra­tors to store fresh beef and ins­tal­ling touch-screen kiosks as part of the com­pa­ny’s tur­na­round stra­te­gy, say the cost of those up­grades is be­co­ming a bur­den while sales aren’t gro­wing fast en­ough to yield a suf­fi­cient re­turn.

A spo­kes­wo­man for McDo­nald’s said the com­pa­ny is com­mit­ted to a col­la­bo­ra­tive dia­logue with its fran­chi­sees and said that res­tau­rants that are ful­ly mo­der­ni­zed in the U.S. ty­pi­cal­ly re­cord mid-single-di­git­per­cen­tage sales in­creases in the first year. She ad­ded that al­rea­dy-re­mo­de­led res­tau­rants that add ele­ments such as the sel­for­der kiosks usual­ly re­cord a 1 % to 2 % sales in­crease. McDo­nald’s is sha­ring in the cost of up­grades.

One fran­chi­see who at­ten­ded Wed­nes­day’s mee­ting said the in­ter­nal goal for U.S. fran­chi­sees was to achieve 5 % same-store sales growth this year and for each of the next two to achieve po­si­tive cash flow af­ter re­mo­de­ling res­tau­rants. McDo­nald’s pos­ted U.S. sa­mes­tore sales growth of 2.6 % in the se­cond quar­ter, short of ana­lyst fo­re­casts for 3 % growth.

McDo­nald’s is in­crea­sin­gly re­lying on fran­chi­sees around the world to ope­rate its res­tau­rants as it moves to an “as­set light” mo­del that has gai­ned fa­vor in the res­tau­rant in­dus­try. The com­pa­ny col­lects royal­ties for the use of the brand name and other sup­port. About 95 % of the more than 14,000 McDo­nald’s res­tau­rants in the U.S. are ope­ra­ted by fran­chi­sees.

The group plans to meet again in De­cem­ber. It in­tends to nar­row its concerns to one or two prio­ri­ties where it will seek changes from McDo­nald’s ma­na­ge­ment, ac­cor­ding to one of the fran­chi­sees who at­ten­ded.

The fran­chi­sees ha­ven’t de­ci­ded how to com­mu­ni­cate their concerns to the com­pa­ny’s exe­cu­tives; some fran­chi­sees said a face-to-face mee­ting is pre­fer­red.


McDo­nald’s fran­chi­sees have been tas­ked with up­da­ting stores with ele­ments such as touch-screen kiosks, as part of the com­pa­ny’s tur­na­round stra­te­gy.

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