Report: McDonald’s operators feel ‘cash-strapped’

Report: McDonald’s operators feel ‘cash-strapped’

Franchisees say the chain’s complex menu is hurting speed of service

McDonald’s operators feel “cash-strapped” and hampered by the growing complexity of the restaurant’s menu, which is hurting speed of service and creating labor challenges, according to a recent survey of franchisees.

The poll, obtained and published this week by restaurant analyst Mark Kalinowski, was commissioned by franchisee advocacy group National Leadership Council. The group is not affiliated with the National Owners Association, an independent franchisee group that formed late last year.

The report, which polled 1,154 McDonald’s operators, described two primary categories of concern for operators: economics and operating platform.

Specifically, operators in the survey said McDonald’s is launching “too many expensive initiatives” that don’t necessarily pay off. The report did not provide specifics about which initiatives were dragging down sales but did mention hardships from the company’s remodeling program.

McDonald’s said the company would not “comment on internal discussions.” However, the chain said it is “committed to continuing to work closely with our franchisees so they have the support they need to run great restaurants and provide great quality experiences and convenience for our guests.”

The Chicago-based chain has made the modernization of its stores a priority.

By the end of 2018, McDonald’s was expected to have about 7,000 restaurants, or half of its U.S. system, sporting the new Experience of the Future look. The overhauled stores feature modern furniture, kiosks, curbside pick-up, upgraded drive-thrus, power outlets for charging devices and pick-up counters for Uber Eats.

Some remodels of aging buildings are so extensive, they require franchisees to raze restaurants and rebuild from scratch. Remodel costs range from $160,000 to about $750,000, depending on the scope of the project, McDonald’s has said.

Some restaurants must be closed during the remodel, which hurts operator revenue, the NLC report stated.

Similar concerns have been cited by National Owners Association, a self-funded alliance created in the fall to represent franchisee interests.

In late November, the chain adjusted its remodel timeline.

Instead of forcing operators to be done by 2020, McDonald’s said franchisees can have until 2022 to convert restaurants. However, those that take the extra two years will get less financial support from McDonald’s.

On the operating side, surveyed franchisees provided more insight into the internal problems they face with the company’s ever-evolving menu.

Specifically, the $1 $2 $3 Dollar Menu, which rotates often, “strains employees” and reduces speed of service because staff is constantly having to be trained on new items, the report states.

In 2018, CEO Steve Easterbrook made a big push to introduce more value offers and bundled meal deals to consumers. The company is also pushing menu innovation to improve consumer perception about its food.

Last year, the company tested made-to-order chicken meals in 160 restaurants in Western Washington state and added new breakfast sandwiches to the morning menu, which is slated to see more new additions this year.

According to the survey, menu complexity has led to another issue for operators: employee retention.

The survey states that operators are having trouble retaining employees because of low morale, a tight labor market and the growing “complexity of the job.”

The report said the franchisees are concerned about corporate pushing a “one size fits all” mentality.

“[Owner-operators] feel like their regional and local concerns are disregarded for the sake of a one-size-fits all approach,” the report states. “This not only limits their entrepreneurial freedom but hurts their sales because things that work in one region don’t necessarily work in another.”

Contact Nancy Luna at [email protected] 

Follow her on Twitter: @fastfoodmaven

Update, Jan. 7, 2019: This story has been updated with a comment from McDonald's

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