Franchisees to Pressure McDonald's -- WSJ
11 October 2018 - 6:02PM
Dow Jones News
By Julie Jargon
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 11, 2018).
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 fast-food 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-digit-percentage sales increases in the first year. She
added that already-remodeled restaurants that add elements such as
the self-order 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. same-store 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.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
October 11, 2018 02:47 ET (06:47 GMT)
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