McDonald’s franchisees’ business outlook and relationship with the franchisor is at an all-time low, according to a key investment analyst’s quarterly survey that has tracked McDonald’s franchisee opinion for the last 11 years. Franchisees cite flagging sales, expensive mandates and conflicting priorities—for example, adding new premium burgers while streamlining the menu overall—as cause for concern at the chain, according to Janney Capital analyst Mark Kalinowski.
McDonald’s franchisees’ pessimism was borne out on April 22 when McDonald’s released its quarterly results. US comparable sales fell 2.6 percent and operating income dropped 11 percent, among other dismal performance indicators.
McDonald’s CEO Steve Easterbrook said on the company’s most recent earnings call that he would announce a new turnaround plan on May 4, but there is significant franchisee skepticism about the company’s ability to execute the old turnaround plan. For example, after Easterbrook detailed the new “experience of the future”—including a customizable menu—at the recent McDonald’s “Turnaround Summit” in Las Vegas, one franchisee observed: “I came away from the summit completely confused … McDonald’s management does not know what we want to be. Expensive (and slow) custom burgers in the same restaurant where we sell the Dollar Menu?”
The Janney Capital survey is anonymous, and public franchisee criticism of McDonald’s is rare, says Cathy Ruckelshaus of the National Employment Law Project, since McDonald’s controls whether franchisees stay in business. For example, one McDonald’s franchisee who supported California franchisee rights legislation that McDonald’s opposed found that the chain refused to renew her franchise. Renewal protections are one of the rights that franchisees have won in some states and we hope to see in other. Protections from unfair nonrenewals means that losing their business would be one less thing for franchisees to worry about – at McDonald’s and other chains.