McDonald’s franchise owners are getting increasingly frustrated, according to a relatively small but telling franchisee survey by Janney Capital Markets.
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According to Crain’s Chicago Business, The McDonald’s franchisee survey respondents “characterized their relationship with corporate as 1.93 on a scale where 5 would be excellent and 0 awful.”
A chief complaint among McDonald’s franchisees continues to be continuing emphasis on the Dollar Menu and price promotions.
The Chicago Tribune cites one complaint of “couponing like there’s no tomorrow.”
Another respondent complained: "Every quarter we sell a smaller percentage of our menu at a full (and profitable) price."
Another McDonald’s franchisee complaint is new product introductions that have caused an “operational nightmare.”
According to a franchisee quoted in Crain’s:
"We have more complicated items, with more elements coming from the (distribution center), more equipment coming from suppliers so everyone else is making more money sending us more ‘stuff’ and we are expected to deliver a product that takes 55 seconds on the best day in less than that, do it consistently and with a smile on our face…There’s little to smile about."
The battle between McDonald’s franchisees and corporate is one that is inherent in the franchise relationship, especially with publicly traded franchisor’s.
The franchisor is concerned with increasing sales and driving its stock price.
The franchisee is most concerned with profitability, not sales, as well as operational efficiency.
…because McDonald’s is beholden to its investors, monthly sales performance is key, said John Gordon, founder and principal of Pacific Management Consulting Group, a San Diego, Calif.-based chain restaurant consulting group.
"That’s where the real rub comes in with franchisees — same-store sales," he said.
After nine years of ever-higher sales at restaurants open for at least a year, the traditional measure of retail success, the streak snapped in October.
"The good news is that the chain has had a lot of success in the last four to five years," said Jack Russo, an analyst at Edward Jones & Co. in St. Louis. "Unfortunately for owner-operators, it is bad news because the bar has been raised. (Corporate) is trying to do everything it can to get sales up."
When the priorities of franchisees and franchisors diverge, sparks fly and the the franchise industry’s characterization of franchisees being “in business for themselves but not by themselves” seems debatable, at best.
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