The franchisor-franchisee relationship can be a heated one, especially when corporate asks the operators to spend more money for one of their initiatives.At McDonald’s, remodeling investments, marketing campaigns and discounting are touchy subjects right now.
Mark Kalinowski, lead restaurant analyst at Janney Capital Markets, spoke with a bunch of McDonald’s franchisees to gauge how they felt about what’s going on, reports Scott Hume and Burger Business.
The 30 operators Kalinowski spoke with had some pretty strong words:
- “We are bankrupting the system in the name of ‘rebranding’ the system!”
- “Major Remodel Projects are wiping out our cash flow and our equity.”
- “Cash flow is trending up, but not as fast as McDonald’s cash flow is.”
- “McDonald’s Operators cannot absorb all these costs, do all this discounting, and still pay to remodel our landlord’s (McDonald’s) building.”
One franchisee elaborated:
“Commodity increases along with construction project upgrades are draining whatever cash flow we might bring in. The Dollar Menu has limited our ability to cover these costs by raising rest of menu prices. This has created a huge gap between high- and low-end, driving more consumers down to supposed Extra Value Menu items which have no useful upside profit potential. Next year projected service cost increases (insurance, utilities, tech fees, etc.) are going to be a backbreaker. Just increasing Transaction Counts is not going to work if they are unprofitable ones. We have created a scenario of working harder for less. There needs to be a window of time to just make profits without giving them all back.”
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