Survey: Affordability does not equal discounting

Small restaurant franchisees endangered?

Despite a return to promoting value, with various versions of “McPick2,” a new consumer survey ranks McDonald’s only sixth on affordability among 12 major burger/sandwich chains. This a drop from its fifth-place ranking on the last survey, in 2014, conducted for investment firm RBC Capital markets. The surveyed companies included national competitors Burger King, Wendy’s and Sonic along with largely regional chains such as In-N-Out Burger and Culver’s.

The results challenged the idea that chains have to discount heavily to be seen as affordable, an approach McDonald’s Owner/Operators have been complaining about for years. In-N-Out and Chick-fil-A were ranked the top two most affordable chains — and also among the highest in average spend per visit. “Stable and compelling core menu prices seem to be working well” for those companies, rather than discounting and value advertising, according to RBC investment analyst David Palmer.

Palmer contends that moves to improve the perception of McDonald’s food quality – such as cage-free eggs and antibiotic free chicken – “will be a multi-year journey with slow improvement in perception rather than a quick and dramatic fix.”

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Low point for McDonald’s franchisees: will all-day breakfast help?

McDonald’s franchisees more worried than ever

A quarterly survey of McDonald’s franchisees shows operators are more pessimistic than they were three months ago, when the same poll found McDonald’s operators had the worst outlook in the survey’s 12-year history. And McDonald’s recent announcement of its plan to serve breakfast all day could make things worse.

The survey, conducted by industry analyst Mark Kalinowski and released last week, recorded its lowest-ever ratings, both on franchisees’ financial expectations and their relationship with McDonald’s corporate.

The survey also revealed skepticism about McDonald’s CEO Steve Easterbrook’s ’s turnaround plan, announced in May, which calls for streamlining McDonald’s corporate structure, cutting menu items to speed up service, and removing antibiotics and complex ingredients from food items.

But what about recent news that McDonald’s may soon roll out breakfast all day?

An all-day breakfast menu will require additional equipment and investment from franchisees whose coffers have been drained by corporate-imposed capex projects in recent years. One franchisee noted, “All the re-investments over the last five years with MRPs [major remodel projects], rebuilds and kitchen and lobby remodels – not to mention the McCafé and blended ice machine remodels – have absolutely killed the operator’s equity in their business.”

A former McDonald’s franchisee and current industry consultant argues that that all-day breakfast will only work if the current rest-of-the-day menu is significantly reduced.

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Poll: Small-Business Franchisees Face Goliath Franchisors

FRANCHISEEGRAPHIC

A new poll finds that a majority of owners of franchised businesses have taken on significant debt to buy their franchise, have experienced franchisor-imposed changes that raised costs but not revenue and have faced the threat that their franchisor will take away their business. The poll of over 1,100 franchised business owners also found that franchisees are overwhelmingly small enterprises: Most own only one unit, and most run their businesses at break-even or a loss.

The survey was conducted as franchisee rights legislation advances in California, and the poll finds that in some areas California franchisees face stiffer challenges than those in the rest of the country. The poll was conducted by FranchiseGrade.com, Inc., a leading market research and analysis firm for the franchising industry and was commissioned by Change to Win, a federation of unions that includes the Service Employees International Union, the United Food & Commercial Workers, the Teamsters and the United Farm Workers.

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