McDonald’s franchisees are furious over the company’s recent decision to raise wages for some of its employees.
Franchisees say the decision — which affects just 10% of McDonald’s US employees — was an “embarrassing” marketing stunt that has backfired against them, according to a survey by Janney Capital Markets.
“McDonald’s has stabbed us in the gut,” one franchisee wrote in response to the survey. “My ‘partner’ has only itself in mind it has declared war on the operator.”
The pay raise affects only employees of company-owned restaurants, which account for one tenth of the roughly 14,000 McDonald’s restaurants in the US.
The rest of McDonald’s restaurants are owned by franchisees, who are now under pressure to raise wages for their own employees.
But franchisees say they can’t afford more payroll costs because sales are plunging and McDonald’s corporate is bankrupting them with fees, aggressive promotions and costly restaurant upgrades.
“Relations between McDonald’s Corporation and the operators are the worst I have ever seen,” one franchisee wrote. “Operators feel betrayed. We have been struggling with profitability for the last year. We thought our partner understood this.”
The decision to raise wages for just 10% of employees “did nothing to quiet the labour issues and seems to have poured fuel on the fire,” the operator added.
Franchisees pay a lot of extra money to the company (which corporate-owned restaurants don’t owe) for advertising, rent, and other expenses. The company charges a service fee equal to 4% of gross sales and rent can cost franchisees up to 12% of gross sales, according to a 2013 Bloomberg report.
Operators also have to pay for restaurant upgrades, including the new “Create Your Taste” digital displays that will allow people to customise their burgers. The equipment will cost operators between $US125,000 and $US160,000, according to franchisees cited in the Janney survey.
With all the financial pressure they are facing, franchisees said they wished the company had at least warned them about its decision to raise wages instead of blindsiding them.
“None of us knew until the last hour… it’s embarassing,” one operator wrote. “What the hell is McDonald’s Corporation doing to our great company.”
Restaurants like Chick-fil-A, Panera and Five Guys are killing McDonald’s and “It’s going to take years if we ever turn this around,” the operator wrote.
Another franchisee suggested that McDonald’s has irreversibly damaged its relationship with operators.
The wage announcement “sent a wave through the operator community,” the franchisee wrote. “An already-strained relationship was fractured and I don’t know if they can recover.”
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