McDonald’s Corp., already struggling to sell burgers in the U.S., now must contend with a brewing franchisee revolt.
Store operators say the company, looking to improve its bottom line, is increasingly charging them too much to operate their restaurants -- including rent, remodeling and fees for training and software. The rising costs are making franchisees, who operate almost 90% of the chain’s more than 14,100 U.S. locations, less likely to open new restaurants and refurbish them, potentially constraining sales.
McDonald’s is “doing everything they can to shift costs to operators,” said Kathryn Slater-Carter, who in June joined other franchisees in Stockton, California, to brainstorm ways of getting the chain to lessen the cost burden. “Putting too much focus on Wall Street is not a good thing in the long run.
‘‘It is not as profitable a business as it used to be,’’ said Slater-Carter, who owns two McDonald’s stores and backs California legislation that would require good faith and fair dealing between parties in a franchise contract. It would also allow franchisees to associate freely with fellow store owners.
Asked if McDonald’s is shifting costs to franchisees, Heather Oldani, a spokeswoman, said in an e-mail: ‘‘We are continuing to work together with McDonald’s owner/operators and our supplier partners to ensure that our restaurants are providing a great experience to our customers, which involves investments in training and technology.”
Lee Heriaud, who chairs the National Leadership Council, a group of franchisees that meet regularly with company executives to discuss ideas and concerns, attended the Stockton meeting and others. In an e-mailed statement provided by Oldani, he said “owner/operators’ feedback and perspectives have been shared with McDonald’s and owner/operator leadership in the spirit of open dialogue.” The meetings were “productive,” he said.
Cooperation between McDonald’s and its store owners is deteriorating, according to an April 11 letter from a franchisee to other store owners reviewed by Bloomberg News.
“Many of you have said that you don’t feel that the top management understands the economic pressures that we face,” the letter said. “The tone has become much more controlling and less inclusive.”
This isn’t the first time the world’s largest restaurant company has found itself at odds with the people who own and operate its stores. McDonald’s in the mid-90s alienated U.S. franchisees when it expanded too quickly and new stores began cannibalizing other locations, said Dick Adams, a former McDonald’s store owner and restaurant consultant in San Diego.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.