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McDonald's Offers to Pay Most of Franchisees' Extensive Remodeling Costs

McDonald's is determined to regain customers it has lost to rivals by banking on extensive changes, including expensive restaurant upgrades. To get its U.S. franchisees on board the costly program, it is sweetening the deal by telling them, in writing, it will pay most of the expenses.

The company is offering to pay 55% of the costs associated with what it is calling the “Experience of the Future” initiative, according to a commitment letter McDonald’s sent to U.S. franchisees Wednesday [May 10, 2017], which was reviewed by The Wall Street Journal.

A McDonald’s franchisee who asked not to be identified because of company policy prohibiting franchisees from speaking publicly, said the company’s move is “unprecedented,” not only because of the level of investment McDonald’s is kicking in, but because the upgrades are part of a “holistic” plan, rather than a piecemeal approach to upgrading equipment or décor.

Another McDonald’s franchisee estimates about half of the company’s U.S. restaurants are outdated and many franchisees haven’t wanted to put up the money to upgrade them, something that was difficult to do in recent years as sales lagged. — Julie Jargon, The Wall Street Journal

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