Coalition of Franchisee Associations

December 20, 2009

Big Ad Attacks

Crains' Chicago Business reports on the competitive ads being
run by McDonald's competitors.

I think McDonald's competitors saw an opportunity to
focus on food and value while McDonald's wasted half
of 2009's advertising on McCafe.

Crain's article is HERE


December 9, 2009

Burger King Lawsuit

Nation's Restaurant News reports extensively on
franchisee's lawsuit against Burger King Corp.

You'll find discussion about price fixing by some
of our favorite attorneys and analysts.


December 8, 2009

Advertising Wisdom

Nineteenth century retailer John Wanamaker illustrated how difficult it was to reach potential customers using traditional advertising by saying "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Fortunately, McDonald's Owner/Operators know the answer to that quandary - it's the half of their advertising budget being spent on McCafe.


November 13, 2009

An Owner/Operator Comments on McCafe

In THIS BusinessWeek article


Thompson on McCafe

McDonald's manangment continues to claim McCafe is
"exceeding expectations". I finally figured out what
that means - based on the four years of testing
manangment only expected a store to sell 40 a day!

In this article Don Thompson
told analysts, "The question I get is, has McCafe
been good for our business? And I confidently say
'yes.' Were it not, you might not see me here today,"


McDonald's Operator Cash Flow?

During the November 12th ananlyst meeting MCD
investors were told:

"The average US McDonald's franchisee unit had
operational cash flow of $314K/unit last year
likely pre-debt service), and average equity of
$4.7M per owner/operator."

One analyst's take is HERE


September 12, 2009

To OPNAD or not to OPNAD

As McDonald's Owner/Operators stew over signing their next OPNAD
pledge card they should note the fine print at the top of the automatic
debit signature card:

"Participation in OPNAD and PAL$-OPNAD is voluntary"

Also, as you provide feedback to your OPNAD and Co-Op reps keep in
mind that the past five months have proven without a doubt that
McCafe advertising does not build sales. How many hundreds of
millions of voluntary contributions will be spent trying to change
the tastes of McDonald's customers?

And, a lot of your money is about to be used experimenting with
internet advertising and social media. "Experimenting" because unlike
TV and radio there are no "experts" in this field as it's so new and
ever changing. There are certainly thousands of technical and advert -
ising people out there eager to spend your money but none of them
really have any experience or know anything. Because it's my job I
think I know more about the internet and its uses than 99% of Owner/
Operators and I suggest you go very slow in this area. Again, it's a
huge experiment - nothing else - yet.

The past five months have proven that spending an advertising
budget equivalent to the GNP of Canada does not guarantee a sales
increase if you're advertising the wrong products.

With McCafe and social media USA Owner/Operators could waste half
of their advertising contributions in 2010.

And then be forced into more discounting to build sales.


August 29, 2009

There Goes the Rest of Your Equity!

We're hearing more talk
about reimaging older
stores to the "Eyebrow"
look when rewriting
franchises in buildings
less than 20 years old.

I drove extensively around the Midwest in
August saw many McDonald's stores of varying
types. It's impossible to believe that the
eyebrow look is a sales builder vs. the roof

If fact, when traveling the freeways one can't
depend on the freeway sign to locate the actual
McDonald's. The roof beams do that job much
better than a bland brick box.

(The picture above is a remodel to the eyebrow
look with the mansard trusses left intact.)


August 20, 2009

Speaking of McDonald's Real Estate

Accountant Richard Sparkmon has posted an interesting article
on his website recommending "Items to consider when buying a
restaurant". One of the items listed is:

"If the real estate is not owned by McDonald’s Corporation,
verify the terms of the lease and ownership of the land."

That's good advice but I'd take this a step further. There was
a time when the McDonald's real-estate business was pretty easy
to figure out, a site was either owned by McDonald's Corp. or
it was leased from a completely separate third party.

Because of the nefarious real estate dealings of today's McDonald's
through the use of secretive entities and the company's ability to
manipulate ownerships with zero transparency the buyer of a
McDonald's franchise needs to do more legwork than in the past.

This is too complicated to describe in a short blog post but
there two things a buyer should tackle:

A) Do a study of the sites at the local governmental agency
responsible for recording deeds and property titles. Study the
current ownership as well as recent transfers of ownership for
the subject parcel(s).

B) Do not rely on the McDonald's real estate files or the
oral representations of any McDonald's employee (at any level).

Taking these measures when buying a store or two should be
pretty light work. If you are acquiring a large package of
stores you'd be really smart to hire a local real estate
attorney to develop a profile on each site.

Here's a link to the Sparkmon article:


Time To Discount McCafe?

Starbucks Lowering Some Prices


July 17, 2009

Got Another $150K Per Store?

I get the sense that the Wall Street types
know more than the "Bridge Operating Platform",
the replacement for the MFY kitchens, than
domestic McDonald's Owner/Operators.

The analysts ask about it all the time and
this firm even mentions it in their latest
report - Wedbush Morgan coverage is HERE


July 15, 2009

You Know More Than You Think

When discussing the prospect of communicating
with Wall Street investors franchisees often
express a concern about not feeling know -
ledgeable about the inner workings of the
stock market.

I've been working with Wall Street analysts
for a decade and a half and have rarely
discussed share prices or the securities

I've made it my practice to never express
opinions on the relative value of a company
or make projections on any share price. That's
not what the analysts are seeking. They're
interested in what franchisees running real
stores think about happenings in their

Analysts don't expect you to understand their
side of the business They're interested in
what you think about your business.


Fidelity Covers Both Sides of the Bet

Fidelity is now Starbuck's largest shareholder
and is also a major shareholder of MCD Corp.

McDonald's is 74% owned by institutional & mutual
fund owners, Starbucks just under 70%.




July 13, 2009

Burger King Franchisees Vote NO! (Again)

"Franchisees were concerned that their profits would be squeezed"

Franchisees concerned about profits and standing up to the
corporate browbeating - What a concept!



July 10, 2009

And So Begin the 2009 Burger Wars

While I don't have any names there must
be former McDonald's executives working
at Burger King Corporation.

They sure handle the arm twisting during
advertising votes in the same fashion!

Crain's Reports on the internal struggle


July 9, 2009

Vote 'Til You Get It Right

Burger King Operators have voted down the
$1.00 Double Cheese so management has scheduled
another vote for Friday.

Boy that sounds familiar!

Dow Jones Reports

The New Price Point - Free!

Posted below is the Oak Brook press release about
free McCafe Mondays - as if it's a good thing.

Neil Golden feeds the world


June 25, 2009

Fed Revs Up Franchise Terminations

As a franchisee does it make you nervous that
the federal government can move in and force,
if not encourage, auto manufacturers to terminate
dealer franchise agreements?

This article compares car dealers to McDonald's
and Wendy's


Fenton's Golf Folly

Here's the latest on the whistleblower lawsuit over Oak
Brook's alleged development of a complex scheme to hide VP
Tim Fenton's country club memberships.

This all involves $2,940 in a year when Fenton made more
than $3.5 million in total compensation!

This has to appear absurd to McDonald's Owner/Operators
who have watched while McDonald's Corporation and it's
executives (past and present) have their sticky fingers
in most of the suppliers and privately held entities set
up by McDonald's as "approved vendors" selling goods
and services back into the system.

Just the tip of the iceberg. The real nondisclosure is
in the billions.

CNN Money article is HERE

June 23, 2009

Wage Hike to Squeeze QSRs

Every time the minimum wage goes up the discussion centers around cost cutting at the restaurant level. Since most of the impacted stores are franchised - where is the discussion about the franchisor backing off on some fees and royalties?

As in This Dow Jones ARTICLE investors comfort themselves in the fact that the corporate entity is "Insulated" by being heavily franchised.

It sure was a good time to sell off all those McOpCos!


June 11, 2009

One Way to Force Owner/Operators to Give Away Food

McOpCos - mixed in among dominant Operator
owned stores - offering free sandwiches
with any purchase.

What's new in Kalamazoo


June 8, 2009

McDonald's May SSS Rise 5.1% - USA Lags

USA only up 2.8% - looks like maybe you CAN spend too
much on advertising?

AP Reports


June 2, 2009

Update on Card Check

Both President Barack Obama and Vice President Joe Biden were co-sponors of prior versions of the legislation when they served as senators

QSR Magazine Reports


May 30, 2009

Starbucks Pushing Landlords for 25% Cut in Rents

"hurt by an economy in which cost-conscious consumers cut back on premium coffee."

So says Bloomberg


May 27, 2009

At the MCD Annual Meeting

Management on McCafe:

"Things are going very, very well," Thompson said, without giving any sales details. "It has exceeded our expectations."

A company spokesman later said U.S. espresso-based coffee sales are up by 40 percent on average per restaurant since the launch of the national ad campaign.

Someone seems to be confusing feebees with "sales".

ChiTrib article is HERE


May 26, 2009

McCafe in Europe

What better way to convince Wall Street the McCafe
launch is a success than to announce that it's being
expanded into Europe?

Reuters reports


May 11, 2009

Coffee War Bullets Just Got a Lot More Expensive

More detail on coffee and sugar costs...

"The amount of coffee stored at
warehouses earlier this month
dropped 18% from the highs of
last fall, according to an account
from Bloomberg. Meanwhile, crop yields have been
relatively puny: output in Columbia and Costa Rica
may have dropped as much as 30%. Commodities traders
said prices could climb another 40% before the end
of this year."

Barron's Reports


May 7, 2009

Something Squirrelly With Your McCafe Bills?

Now that the smoke is clearing from the McCafe installations
(at least in 70% of USA stores) it would be wise for the
individual Owner/Operator to take a good, line by line look at
the costs being billed by the corporate approved contractors
and suppliers.

I'm hearing a new horror story everyday about unjustifiable
and unexplainable expenses with no responsibility borne
by McDonald's corporate people.

It must come as a surprise to corporate staffers that Owner/
Operators know what it costs to install a drink system, move
a wall, or cut in a floor sink. These bureaucrats have never
had to write the checks so it's up to the Operators to keep
track of these things.

What can an Owner/Operator do about these over charges?
You probably won't ever get your money back but at least
the corporate types can be made aware you are on to their
game. That might prevent this from happening again, for
instance, when you change out your MFY kitchens in a few

The other question is - what happened to all that money?
This will possibly amount to $100 to $200 million in over
charges just for the United States.

It's hard to believe Oak Brook facilitated these excesses as
a simple favor to their captive contractors and suppliers.
Ah, the wonder of only using privately held vendors with no
transparency requirements!


May 3, 2009

AdAge on McCafe

"The massive media weight from McDonald's could lift the
entire category, since specialty coffee has never had
the benefit of big bucks before."

An interesting way to use McDonald's Owner/Operator's Money!

AdAge article is HERE


April 30, 2009

If I Sell My Stores to Get a Job ..... What Are My Stores Worth ?

It's distressing to hear Owner/Operators talk about cash
flow as a way to value their stores. Certainly that's a
starting pint but there are at least a dozen other major
factors that determine your eventual sale price.

Back in the good old days a wise Owner/Operator would
look at each of their stores as a separate business. Today
it's become acceptable to feed cash into a quarter or a
third of your stores just to keep them open so McDonald's
can collect their rental income.

But when analyzing your equity position one needs to break
out each store as a separate business and balance the stores
carrying negative equity against the value of your better stores.

Woe to the Operator who looks at their annual cash flow,
applies a ratio to that number, and goes forward thinking
this might be the sale price of their stores.


McFriends in High Places

McDonald's franchisees might
take another pass at B of A
for their McCafe financing
since long time McDonald's
director Walter E. Massey is
now chairman of the board at
the bank.


April 29, 2009

Sell Your Stores and Get a Job !

The May 2009 issue of Franchise Times magazine features an
interview with McDonald's Ombudsman Ron Hawkins. He claims
to be the "conscience of the McDonald's system".

The best example of dispute resolution described is an event
where Hawkins used an out-placement service to help an
Operator who was having problems find "another job".

It's obvious that, after 36 years working for McDonald's
Corporation Ron has been conditioned to think of Owner/
Operators as simply corporate employees.

We will post a link to the article when it becomes available.


UBS on McCafe

Prominent Wall Street analyst
David Palmer of UBS has
published a report with a
prediction about McCafe,

"In its entirety, we believe the ongoing US beverage rollout
will add at least 2%-3% to EPS growth in 2009".

Palmer is also looking forward to McDonald’s ad support
ultimately growing the category substantially...Translation?

Operator ad dollars will also benefit your direct competitors.


April 18, 2009

Burger King's Ad Plan Riles Franchisees

BK to spend more selling food while MCD tries to sell specialty coffee

"Several (BK) franchisees say the parent company wants to tap into at least 20% of money that had been distributed to the store operators based on how much syrup they buy from suppliers like the Coca-Cola Co. and Dr Pepper Snapple Group Inc."


April 15, 2009

Espresso Under Pressure

I picked up some McCafe education today. I was first exposed
to the nasty language used to threaten McDonald's Operators
who may not be not fully implemented by the launch of McCafe.

Then I'm told that Franke is having problems processing and
delivering equipment. That's creating quite a vise squeeze
for Owner/Operators.

We can't fix the Franke problem from here but the best advice
is that Owner/Operators do everything they can to document
delays that are not their fault. If a vendor's website is
overwhelmed they can probably still receive E-mail. Or a fax.
Or a FedEx letter. Anything to create a paper trail proving
that the Operator made every effort to comply with the
implementation schedule.


April 8, 2009

Suggesting a Lower Average Check

It's happened to me enough I'm convinced it's a universal
problem at McDonald's. A few days ago I walked into a
McDonald's store and ordered a medium ice tea.
The menu board price was $1.59.

The assistant manager said, "Would you like an extra large
for $1.00?" I answered in the affirmative and walked to the
beverage area with a 32 ounce styrofoam cup and got a huge
drink for 2/3 the price I was willing to spend.

What kind of business strategy is this? I can understand
the part time crew person being eager to give the customer
free food - but a member of management? Someday this
young man will be managing a McDonald's store and the
franchise owner will wonder why the store doesn't make
a decent profit.

And I could understand it if this had been a McOpCo since
Oak Brook looks on the McDonald's system as the food bank
to the world.

But this was in a well run Midwestern store owned by an
experienced Operator.

I guess the theme of the Plan to Win is:

"We lose money on every meal but make it up on
the customer counts"


March 20, 2009

Unionize or Die

From the Wall Street Journal

Andy Stern, who heads the SEIU, has said he expects union membership to grow by at least a million within the first year of the measure's(card check)passage.


March 19, 2009

Of Course, Liberalism Is Also Thriving in McDonaldland

I'm sure few McDonald's Owner/Operators have ever heard
of this guy but Bob Langert is an Oak Brooker in charge
of CSR. His job is to get in bed with all the special interest
groups that want to tell multinational companies how to
conduct their business.

This is the proverbial "camel's nose under the tent" problem
where - after making all of the concessions to their imaginary
issues that McDonald's has made - they now intend to step
up efforts against the beef industry.

But to keep his job Langert has to take these people
seriously and continue to allow concessions that are paid
for by Owner/Operators.

Meanwhile, one of the high points of his life was floating
down the Amazon with members of Greenpeace?

Fast Company magazine profiles Langert HERE

And on the McDonald's CSR website you can read about
the "Life Lessons From a Cow Whisperer" (No joke)


March 7, 2009

Forbes Likes McDonald's

"McDonald's held over $2 billion in cash and cash equivalents on its balance sheet as of Jan. 1 and operating margins are sturdy at over 25%. The company has more than adequate cash flow to proceed with its planned $5.5 billion share buyback program."

Article his HERE

March 5, 2009

Most Admired Companies & Values

This kind of McSpin makes it seem
like the foundation of McDonald's
is "The Plan to Win".

The foundation of McDonald's was built
when Jim Skinner was in Jr. High. He's
just the most recent bureaucrat to get
rich taking the credit.

Fortune article is HERE


McDonald's Bullish On New McCafe Coffee Line

Of course, it's the corporate agenda!


February 26, 2009

Fast-Food Chains Go After Sit-Down Customers

"(MCD) has expanded tests of three varieties of
an Angus burger, a one-third pound burger patty
on a higher-end bun, to 1,100 stores, and it's
pleased with results thus far, spokeswoman
Danya Proud said."

WSJ article is HERE


February 2, 2009

How Much Advertising is Too Much Advertising?

On page nine of the aforementioned investor call transcript Ralph Alvarez
talks about the reduction in the cost of GRPs in the USA.

Isn't this a good time to look at rolling back the percentages
paid to OPNAD and Co-Ops to compensate for other P&L increases?

Why continue to give the Oak Brook bureaucrats (and the agencies)
more and more money to waste?

January 25, 2009

Cutbacks at Starbucks

The Seattle paper reports 1,000 jobs
to be cut at headquarters and in the field.

McDonald's releases 4th quarter results on Monday and
Starbucks on Wednesday.

Of course this week the media will play it like McDonald's
is stomping on Starbucks.

Yup, 4,000 McDonald's stores selling 30 or 40 specialty
coffees a day is hurting Starbucks worldwide. Kind of
like when the Arch Deluxe killed off the Whopper.


January 9, 2009

McDonald's May be Recession Proof - But are Owner/Operators?

Zack's says "In the restaurant sector, we recommend companies that are actually benefiting from the recession as consumers "trade down" to cheaper eats."

Also, Zack's rates Jamba Juice as a "sell" because "Jamba faces a severe cash flow shortage that poses a risk of bankruptcy" - Isn't Jamba one of the brands CBB is meant to imitate?