McDonald’s franchisees say the company’s turnaround plan is going to fail and eventually force operators out of business, according to a new survey.
“The system is broken,” wrote one franchisee in response to the survey by Janney Capital Markets. “There is no leadership, no plan, no respect for operators or their investment or bottom line.”
Another wrote, “The future looks very bleak. I’m selling my McDonald’s stock. The morale of franchisees is at its lowest level ever.”
Added a third, “We will continue to fall and fail.”
The franchisees’ six-month outlook for McDonald’s US business was the worst in more than 11 years of the survey.
Franchisees operate about 90% of McDonald’s roughly 14,000 locations in the US.
They were surveyed following following a summit where executives from the company’s headquarters in Oak Brook, Ill. unveiled their plans McDonald’s future. Those plans include adding upscale, customisable burgers to the menu and improving food quality.
More than a half dozen operators said the summit was a complete waste of their time.
“Instead of acknowledging and solving the real problems facing us today, they chose to pretend that everything is normal and to look at what the restaurant of the future will be,” wrote one franchisee. “They did nothing to address what the REAL problems are in our system: Significant financial problems for owner/operators and menu complexity… It’s as if they have NO CLUE of what our world looks like.”
Another said the costs of the upgrades would force some franchisees out of business.
“Why go out to a cheerleading camp when you don’t have a direction in mind and the team is in shambles,” the franchisee wrote. “This is going to take some time. Only the franchisees with minimal or no debt can ride it out. There will be a lot of fallout and many franchisees will be forced to leave the system with little or nothing.”
Most franchisees cited costs as a major hurdle to the turnaround plan. They said McDonald’s aggressive promotions, along with lagging sales, have bankrupted them and they can’t afford any new investments in their stores.
Equipment for the new customisable burgers, called Create Your Taste, will reportedly cost between $US120,00 to $US160,000.
“Leadership is out of touch with the financial realities that owner/operators are facing. This is not the time to ask us to take on significantly more debt,” wrote one franchisee. “The restaurant of the future will cost a lot of money and will be even more labour-intensive than the stores already are. This is a step backwards.”
Many franchisees also complained that the menu keeps expanding, despite promises from corporate that it would be slimmed down to help speed up customer service.
“They say they are going to simplify the menu and then add the Sirloin Burger and new ingredients,” one franchisee wrote. “They are continually forcing new products on the owners to try and drive sales, but the new products continue to slow service and frustrate managers and crew in the restaurants.”
Others complained that executives appear to be confused about what kind of restaurant they want McDonald’s to be.
The chain is trying too hard to be “all things to all people,” one franchisee wrote.
Another said, “I came away from the summit completely confused. McDonald’s management does not know what we want to be. Expensive (and slow) custom burgers in the same restaurant where we sell the Dollar Menu?”
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