May 9, 2015

Related to the "Comment of the Week"

Analysts and reporters are asking, "How much leverage does McDonald's Corp. have 
to force franchisees to go along with their reinvention plans".

My response is usually, "Very little".

Ten or fifteen years ago they had many levers to pull - but today - not so much.
Really, 
all Oak Brook  has is bullying and threats. They don't have the money to pay for the
initiatives. They can't make every Operator unexpandable. Rewrites are an issue (more
on that later) but that's a long term problem and won't have much impact in the next 
few years.

Terminate some franchises? Oh, they can send out nasty letters and make threats in 

Operator reviews but that's private communication. Actually terminating a franchise 
is a messy, public ordeal.

On one hand Wall Street wants franchisors to be able to boss franchisees around but 

no investor wants to hear about a bunch of embarrassing litigation. It would illustrate management's incompetence and says bad things about the future of the brand.
.

3 comments:

Richard Adams said...

There are two primary political problems if McDonald's were to take legal action against more than a few Operators.

1) The argument against being a joint employer becomes weaker if they are publicly crushing Operators who don't do exactly as they are told.

2) Such public abuse of franchisees gives energy to proposed franchise legislation currently being proposed in various states.

Anonymous said...

Mr. Adams. I'm having trouble leaving a comment for some reason. Do you have an email?

Richard Adams said...

adams@fegroup.com