this is why the o/os are so weak financially. we've spent so much to buy the sales increases that the increased sales are not as profitable as they should be and now the increases have stopped and we are still left with the debt.
Great Comments Richard! The last comments from the Analyst are what is the problem with how Wall Street see's the Brand. Sure everyone feels bad when Sales and T/C counts are down. There is a much deeper reason the Operators feel that way. The Percent Rent is just one area that really hurts the Operator in the Long Run, and Operators do nothing to change it. McDonalds is going to make money regardless if the store makes any profit for the Store. And if that store makes marginal profit, who really wins, not the Operator, Again McDonalds. Then add on top that a NEW initiative. "Sorry son maybe you can go to Harvard after I get thru the next wave of initiatives" "But dad didn't you just do one last year dad? Do you realize manyh Operators cant leave the system because they are so far in debt they would leave with nothing! Scary Times.
The gap between Corp. MCD and the operators has continued to grow every year. The three legged stool is now a myth. Field service has a good handle on operations but little if any understanding of what it costs to achieve solid operations on a consistant basis. Top management in the regions and in Oak Brook just don't care. They think they know what is best for the system better than the operators do even though most haven't worked in the stores for years and know nothing about debt service. I'm expecting that lenders will soon start rejecting loan requests. If and when that happens there will be a ripple effect. When Wall Street looks at the MCD brand and when MCD top management looks at the brand both of those view points are completely different than an operators. MCD see's an operators credit line and net worth as their credit and net worth to spend how they see fit. They know exactly how much each operator can borrow and they push us to do it as long as it improves their real estate because they don't have the liability. One of the most important elements of MCD success over the years was their relationships with the operators. Today, those relationships mean nothing. Nothing!
I have to assume that McDonald's understands they must make a massive shift in the Model. This "system" is still very strong, but the economics at the Owner level is what really needs to be understood by Wall Street. The last comment said it perfectly, they know are debt structure better than anyone, but what is a brunt of the negativity is how they "prey" on our cashflow to insure their new programs go in to effect, not giving us a change to breath. Sounds dramatic, yet it is true
Don't assume MCD understands anything or if they do that they care enough to change anything. Because the model is not working for the operator, in my opinion, means nothing to them. It is the risk we assume when we buy a franchisee. The dynamics of the MCD system has changed and any operator who assumes that the relationship has the same advantages as in the past is sadly mistaken. Take a look at all the requirements imposed on the operators over recent years that were never agreed to in our license agreements. Why do you think they now require monthly balance sheets when the license only requires an annual balance sheet. It is so they know how much money you can borrow to improve their real estate. The list goes on and on.
Kind of like when Operators belong to OPNAD even though it's not in their franchise agreement.
RUMOR: I was in a meeting this morning where a "Business Consultant" confirmed, to me, that 135 people we fired in Oak Brook and that when given the number to be fired in this region the GM broke down and cried and the QSCVP had to take over the call. 1/23 is the reported date regional people will be given best wishes in their future life. Taming the beast is no fun but they allowed it.
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