May 23, 2017

Where Are They Now? ... Don Thompson and Irwin Kruger

Ex-McDonald's CEO Thompson buys majority stake of PizzaRev chain

Irwin selling Park Avenue penthouse - list price - $18.5 million

On Vision 2020

One of the big McDonald's Operator CPA firms is sending around an E-mail concerning
V2020 suggesting that Operators coordinate with their CPA and their bankers on 
developing a plan.

That's great advice. But what about an Operator's legal advisers?

If McDonald's is trying to get Operators to make changes to their existing franchise 
agreements shouldn't Operators have someone look at the impact on the contractual relationship?

As we've discussed before - this is a great opportunity for the more powerful party to 
sneak in substantial changes to the franchise.

McDonald's Operators could be walking into a legal buzz saw.

But if changes are coming to the franchise it's likely that 90% of McDonald's Operators
will not have sought legal advice when McDonald's executives demand they "sign here".

May 22, 2017

It's Usually the College Kids

56 year old businessman charged with stealing Ronald McDonald statue

RBC Capital Studies Big vs. Small Restaurants

Analyst David Palmer discusses some of the advantages privately held In-N- Out, 
Chick-fil-A, and Culver's have over larger chains.

Understandably, David doesn't' mention the biggest advantage these three chains 
have - they don't have Wall Street leading them around like a dog on a leash.

And he should have mentioned Chick-fil-A's "operator on premise" policy.

RBC Capital's report on restaurant consumer attitudes

May 17, 2017

More On EOTF and the Four Percent Myth

When I first heard that McDonald's management was proposing a change to the 4% advertising requirement I assumed it was because of the Oak Brook management team's 
lack of knowledge of McDonald's.

But now that the idea is moving forward I'm beginning to wonder if this isn't a huge 
scam  on McDonald's Operators. Lower the franchise agreement advertising percentage 
but raise OPNAD?

As we've discussed before, the 4% is meaningless since most McDonald's Operators spend 
far above that percentage in advertising and promotion.

As a comparison - Let's say you have a store that's been paying percentage rent for years. 
Base rent and base sales are merely numbers in your lease, the important line item is the 
rent percentage you pay every month.

McDonald's comes to you and offers to lower your base rent if you do such and such. Your percentage stays the same. How did adjusting your base rent benefit your business? Or 
make any difference at all?

This proposal is/would be the same, a meaningless change to the terms of your franchise.

Since I'm not an attorney I can't give contract advice but I understand negotiations. If 
there's a deal in place, whether a handshake or a rock solid franchise agreement, once 
you open it up for changes, anything goes. Both sides can ask for changes to unrelated
terms. And the more powerful party usually prevails.

Renegotiating the contract carries a big risk for McDonald's Operators. The language 
about advertising is short and pretty simple and wide open on how an Operator should 
spend the 4%. There's no mention of Co-Ops or any kind of advertising funds. These 
things developed organically over the decades. But they could be cast in concrete by 
messing with your current agreements.

I'm not so worried about reducing the number of Co-Ops and agencies. That can all 
be normalized after this management team is gone. But negotiating  changes to your 
existing franchise agreements in any way? Don't do it.


Of course there are huge gaps in my knowledge about EOTF because I don't attend your meetings but, I keep hearing about "votes". If those votes are related to changing the advertising percentage in the franchise agreement, I don't see how that's possible. Co-Op 
votes are valid because membership is voluntary and members use a democratic process 
to decide on contribution rates, expenditures, etc. You're operating as a homogeneous  
body in a cooperative manner, hence the term "Co-Op".

But your franchise agreements are between you as an individual and McDonald's. The 
other Operators in your Co-Op or OPNAD are not a party to your franchise agreements.
They can't vote to change them.

That's why I now think this is a scam to get more control over the individual Operators 
(what's new) and getting rid of Co-Ops and agencies is the biggest power grab in the 
history of McDonald's.

Tablets? We Don't Need No Stinking Tablets!

  1. Hey, remember when tabletop tablets were going to save casual dining chains?

As MCD Follows BK Down the Path to Larger Operators

Mom-and-Pop Joints Are Trouncing America's Big Restaurant Chains - Bloomberg

May 16, 2017

Chick-fil-A Launches its First Seasonal Entrée

Restaurant News - QSR magazine

The Founder - The Movie

I've watched "The Founder" a couple of times and have to 
say I enjoyed it, at least the first half.

I've heard or read the stories about Ray Kroc and the McDonald brothers a few thousand times so it was fun to see the story dramatized on film. Ray doesn't come across as a saint but as a normal, hard working salesman.

The second part of the movie is a desperate attempt to 
make the movie interesting and is a mess. I don't know if I was around McDonald's when Ray met Joan. But, because I started in Minneapolis, I eventually knew all the folks portrayed in "The Founder". The writers pretty well messed up individual roles and much of the historical timing of those years.

So it's not historically accurate and it's certainly not a documentary. For those interested in McDonald's history, pick up a copy and watch it until the scenes with the screaming matches between Ray and the brothers. That's where the fantasy kicks in.

But is it an anti-McDonald's film like "Supersize Me"? Not at all. I think McDonald's veterans will enjoy the first part and will get a good chuckle out of the way they try to re-enact the kitchen operation. 

May 15, 2017

WSJ Article Update

Well, nuts: I used to be able to tell if an article was available to non-WSJ
subscribers by signing out of my WSJ account and then trying to access
the article. They must have changed the way their cookies work because 
on all three of my systems I can see the entire article while I'm signed out.

Sometimes when an article is behind the paywall on the WSJ site they
publish the entire thing free at, a WSJ subsidiary. 
But not this time.

Anyway, here's a couple of other publications' take on the WSJ article.

From Hayley Peterson at Business Insider

QSR mag - McDonald's opening the checkbook for franchisees

Investopedia - McDonald's desperate to modernize franchisees

Again, a big high-five to the Operators who participated in the writing of 
this article.

McDonald’s Boosts Its Payout for Franchise Upgrades - WSJ

Higher Beef and Poultry Prices?

U.S. beef market opening to China - poultry next