As McDonald’s Corp. prepares to report its fourth-quarter earnings Wednesday, an analyst’s survey of franchisees suggests the company will continue to face pressure from operators frustrated by top-down mandates.
In the latest “McDonald’s Franchisee Survey” by Kalinowski Equity Research, analyst Mark Kalinowski noted a “high level of McDonald’s U.S. franchisee involvement” in the National Owners Association, or NOA.
Members of the independent association, formed last October, have expressed concern about eroding profits, lack of control over menu pricing and costs tied to the “Experience of the Future” remodel program. The self-funded group says it represents more than 400 U.S. McDonald’s franchisees, but NOA leaders and members have yet to talk directly to the media about their concerns.
Several franchisees outlined the NOA’s priorities in Kalinowski’s report. A majority of the more than 20 franchisees surveyed said they attended one, or both, of NOA’s two meetings, which were in October and December. The franchisees surveyed own and operate more than 200 stores.
“We believe that it [NOA] will lead to a healthier McDonald’s U.S. system overall in the long run, which will be a good thing for [McDonald’s] shareholders,” Kalinowski said in his report.
Kalinowski offered quotes from franchisees about the aspirations of the NOA:
- “To unite the operators to force McDonald’s to (1) stop the cash flow losses, (2) fix overly complex production/service systems, (3) change how McDonald’s deals with operators, and (4) open and honest communication from McDonald’s.”
- “Negotiate some sense into top management, get back to local co-ops for advertising and marketing, simplify menu and operations, get a consistently better chicken product using pressure fryers (should be a regional issue).”
- “To truly be my advocate when it comes to things of national or regional importance.”
- “Representation and communication without corporate influence and control.”
When it comes to NOA and potential conflicts with franchisees, McDonald’s has repeatedly stated that the company won’t comment on internal discussions with operators. However, the company maintains it is working with them.
“We are 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,” a McDonald’s spokesperson previously told Nation’s Restaurant News.
The Chicago-based chain has also made a few changes since the NOA formed last fall.
In November, McDonald’s agreed to push back the 2020 deadline for remodeling 14,000 U.S. locations. McDonald’s told franchisees they have until 2022 to convert restaurants to the “Experience of the Future” model. However, franchisees who delay remodels will get less financial support from McDonald’s.
Earlier this month, the chain confirmed it was going forward with plans to allow franchisees more flexibility when it comes to media buys.
“We continue to work closely with our franchisees and this effort is simply about offering additional local media buying flexibility to them so they may support their business and connect with customers as they see best,” the company told NRN in a statement.
McDonald’s will report its fourth-quarter earnings before the stock market opens Wednesday.
The NOA plans a third national franchisee meeting April 1 in Washington, D.C.
Contact Nancy Luna at [email protected]
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