McDonald’s Franchise Owners Consider Forming an Independent Franchisee Association

McDonald’s franchisees are contemplating whether the time has come to have an independent franchisee association that advocates specifically for them, like some of their major competitors have. 

Franchisees and their consultants tell me that the problem with franchisee advisory boards, which McDonald's Corporation has, is that they are typically used and manipulated to sell franchisees on what a franchisor wants. Getting the unvarnished truth from a franchisee standpoint and pushing on what franchisees really need can be difficult within the franchisor's advisory committee. Advisory committee members in some franchising systems are even handpicked by the franchisor. Then there are the nice perks that a franchisor can give to certain franchisee members for being so nice as to vote or advocate its way. That can add up to a whole lot of franchisor spinning for a franchisee to try to see through, and manipulating that goes on even if the truth becomes evident.

If those factors weren't bad enough, consider this: Advisory committees are set up to advise the franchising firm. Period. If their advice is heeded by a listening franchisor, wonderful. If it falls on deaf ears, next subject please.   

Enter the franchisees' own association.

It focuses solely to realize the needs of franchise owners, such as boosting cash flows and bottom lines for restaurants that outpaces mandated capital expenditures, and then it pushes for systemwide policies that realize that. What it wants does not go away when a franchisor says no.

Julie Jargon of the WSJ reports ($$):

A group of franchise owners plan to meet Wednesday in Tampa, Fla., to discuss forming an advocacy group to press McDonald’s management to address their concerns that the burger giant’s sales growth isn’t keeping pace with the cost of remodeling restaurants.

“We believe it’s critical for us to come together to discuss the state of the business, unvarnished and unedited,”  hosts of the meeting said in a letter to franchisees reviewed by The Wall Street Journal. “It’s only through honest dialogue that we will get to real solutions.”

… One franchisee said his cash flow is shrinking while he is also taking on debt to remodel restaurants in line with new specifications from McDonald’s executives.

McDonald’s has been pushing franchisees to rebuild or remodel outdated restaurants to attract more guests. The company said last year that it would help cover the costs of improvements, including self-order kiosks and upgraded dessert counters.

Nearly four years into a turnaround effort, McDonald’s still isn’t delivering the U.S. sales growth investors want. U.S. same-store sales growth of 2.6% in the second quarter fell short of forecasts for 3% growth.