Many lessons to be learned here.
MCD regions and MCD franchising have lost all perspective and understanding of local markets. Missing sales projections, impacting existing stores, heavy handed pressure to reinvest, dishonesty, too much authority to recent hires in real estate, finance and marketing, they have not for many years made consistantly good business decisions. For unknown reasons operators do not stand up and protect their business and MCD bull's ahead knowing the operator will suffer and maybe go completely broke. They just don't care. I don't know how much top management knows or if they care. MCD has established patterns of business conduct that may expose them to severe criticism and liability. The problem is they are too big to be managed effectively by incompetant and inexperienced executives. My opinion is that most MCD employee's are only interested in their next promotion and being politically correct. It is a real shame. It truly is.
If a fledging franchise company was benefiting financially every time a franchisee failed it would be called "churning". This franchise company would not last very long.If a large, mature franchise company evolves into a real estate empire that uses franchisee money to upgrade its real estate portfolio and lets franchisees and their banks take the fall for problems why would corporate care? The rebuilds and remodels are done and McDonald's (or their secret REIT) still controls the real estate.But eventually the franchisees exhaust their cash or borrowing power and the pyramid scheme falls apart.
Business basics: three profitable stores are usually better than ten unprofitable ones.
Did the operator go bankrupt because of finances or to stop the process of MCD terminating his franchise. It sounds like the decision to file came after the De-Arch process began. The article doesn't provide much financial information or if MCD had provided any support once things started coming apart. It does sound like he was growing too fast without enough equity. However, the other issues of impact, being over leveraged can bring an organization to its knee's very fast. All of which could have been prevented by MCD and the operator. The MCD business is no longer a near sure thing like it was in the past. A few bad business decisions by either the operator or MCD can cause long term problems that make the business no better than owning a popcicle stand. There is so much you don't know in these cases. Was an approved lender being used? I know of more than one case where an ethnic operator could get over 100% investor financing from his community that created serious problems. This type of financing is common in many ethnic communities. My bank told me that its a problem. So many operators want to have a lot of stores and forget that its not what you take in on the top line it is all about what you keep for yourself.
MCD operators need to see this as a likely future if they don't act collectively NOW. Management doesn't care. It has no skin in the game and they can parachute out of MCD at any time without losing a penny. Many will actually leave with bonuses. Franchisees go bankrupt, lose everything and MCD gets the businesses for free ( it already owns the real estate that the franchisee went bankrupt renovating FOR them). MCD then sells the businesses it didn't pay for to another franchisee at a price that allows the new operator to survive while MCD keeps the proceeds for free. Wash rinse repeat. If you doubt that this is your future, start wondering why Dave Hoffman walked away from a potential $6 million in bonuses and stock just to get off the sinking ship. He knows what is coming.Form an independent franchisee association now, while you still can fund it. If you have broad membership, MCD can't do anything about it. If it's just a few, MCD can retaliate. Have the association join CFA and get militant. It's almost too late, don't let it get to be too late. You have much more at stake that any corporate employee. You always will.
How many franchisees go bankrupt is not on your regions score card only how many restaurants are modernized.
I love the Scorecard comment.
Right, proving that Operators are not business partners with MCD. Operators need to make good solid business decisions about their own business. They want us to follow the company line and even if you do they will bend you over and stick it in your rear and smile at you. Plus, they have no shame about it. Its what they do.
McDonalds employees are more interested in getting the NEXT JOB, than in getting the JOB DONE.
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