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"