June 22, 2017

Making The Big Bucks By Being Anti-Business

Someone here mentioned the contemptible Robert Gibbs and I realized I haven't heard 
much about him lately. It looks like he's still working in Oak Brook but I came across a 
new name, someone who was hired by McDonald's Corp. in February, one Genevieve 
"Genna" Gent.

For the past seven years, she's been working in government affairs for the American 
Beverage Association. That would seem to make her a good fit for a McDonald's job.

But wait, prior to the ABA she spent ten years working directly for Jennifer Granholm, 
then Democrat Governor of Michigan (2003-2010).

If you're not familiar with Jennifer Granholm you need to understand she was the 
Elizabeth Warren of that decade. If you don't follow politics just do a search for 
Senator Elizabeth Warren. 

Granholm was a Hilary Clinton supporter but with her movie star looks and being 12 
years younger, Granholm could have easily stolen the 2016 Democrat nomination from 
Clinton. Trouble is, Granholm was born in Canada.

The contemptible Robert Gibbs would have run into Genna Gent while he was working 
his way up the liberal ladder. It appears a large part of the Obama administration has 
occupied the government relations offices in Oak Brook.

Which brings me back to a question I often ask  - why are Operators contributing to the McDonald's national PAC?

McDonald's operators can't do anything about Oak Brook liberals hiring liberals but 
they can sure close their checkbooks when those liberals ask for political contributions.

Going back ten years the PAC gave 90% to Republicans and 10% to Democrats. Today 
that split is 60/40. Forty percent of Operator contributions are going to people largely supported by organized labor.

McDonald's Operators are contributing to these Democrats to enhance the career paths 
of liberals working in Oak Brook. That "seat at the table" is an electric chair.

You are the best judge as to how to spend your political money at a state and local level, 
but for the national PAC? Shut it down. You're sleeping with the enemy and paying for it.

June 16, 2017

Good Decision on the Olympics

Trouble is - should have been done in 1985

McDonald's nixes Olympics sponsorship after 41 years

When McDonald's lost big at 1984 Olympic Games? - LA Times

Anheuser-Busch InBev, Citigroup, Hilton, TD Ameritrade, and AT&T have all pulled 
out of the Olympic games in the last year.


June 15, 2017

Restaurant Oversupply Worsens

Financial editor Jonathan Maze reports

There's No Need For "Hospitality" in the Drive-Thru

There seems to be an epidemic of time wasting dialogue in QSR drive-thrus. Many crew are greeting customers with their name and other useless information while taking orders.

We should all be pleasant with each other but what does a crew person's name have to do with customer satisfaction in the drive-thru? If everything's running properly the customer will only see the crew person for a few seconds. Especially in a double window drive-thru where the customer may never see the person who took the order. 

I wonder if this started in a few chains and crew people brought the practice with them from other jobs? But, it adds nothing to the experience and wastes precious seconds.

If you're operating a drive-thru and your crew are giving out names - Stop it - it's silly.

And I'm not just picking on McDonald's. I usually have high praise for the levels of QSC at Chick-fil-A but I went through one of their drive-thrus last week and the conversation went something like this:

"Hi, welcome to Main Street Chick-fil-A, my name is Christine, thank you for dining with 
us. Would you like to try our new Smokehouse BBQ Bacon Sandwich? May I take your 
order please?"

I quickly place my order (without sharing my name).

Christine repeats my order back to me, "Can I get you anything else?" I say NO. She says, "Thank you, please pull forward to the pickup window".

It was exhausting!

I'm told a free standing drive-thru Chick-fil-A can easily hit $4 million a year. If we assume
a 60% drive-thru factor they're exceeding the total sales of the average McDonald's, just in their drive-thru.

Imagine what they could do if they cut out the useless, time wasting, "hospitality".

June 8, 2017

Go Ahead, Change the OPNAD and Co-Op Contribution ... Just Don't Change the Franchise!

The four percent for advertising and promotion continues to be our featured post
because of the great Operator comments we've received.

Over here >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The most recent breaks down the 2.0% for OPNAD and 1.3% for Co-Op, yada, yada.

McDonald's veterans have seen these contributions move around over the years.

OPNAD started out at 1.0% in 1966, went to 2.0% for a few decades, then back to 1.5/1.6%
for a while. Co-Op contributions have changed constantly, sometimes on an annual basis.

This has been happening since the first days of McDonald's TV advertising. And it was all
acccomplished without messing with the franchise agreement.

Why now, does McDonald's want to open up the franchise agreement for renegotiation?

It's simple - while McDonald's Operators aren't watching there will be other changes to the franchise agreement that won't show up until the last minute. 

Beware of control-freaks bearing "gifts".

SEIU Stealing Content

If McDonald's Operators find some similarities or duplication between this website and the McDonald's website run by the SEIU, please know:

1) Most of their information appeared here first.

2) The unions are using this website as a resource to make it appear they have some connection with McDonald's Operators.

3) Some of the information on the union website comes from our McDonald's Operator surveys.

This website, Franchise Equity Group, or myself have nothing to do with the SEIU, their website, or any union activity. As this is a public website there's not much I can do about them lifting our information. 

But, isn't that what union thugs do? - profit from the work of others without doing any 
work themselves? 

June 6, 2017

Panera Finally Makes Speed of Service a Priority

As a consumer, two chains I gave up on long ago are Five Guy's and Panera. I refuse to 
stand in line to order and then stand around for five - ten minutes waiting for my food. 
With recent changes, maybe Panera  deserves another visit. Panera is adding drive-thrus where possible but given the size of their menu - that's going to be a dog slow drive-thru! 

Not a threat to QSRs with well run drive-thrus.

Panera 2.0 Cuts Wait Times In Half As Digital-Ordering Gains Traction - Benzinga

Consumerist.com reports on recent WSJ article on Panera

June 5, 2017

Fact Checking The Founder

One reason The Founder got a lot of press - there was a book about Joan Kroc published
about the same time the movie was released. I've not read the book but did speak with the author many times. She did five years of research, talked to a lot of people, and learned
far more about McDonald's than was her original goal.

For those who have seen the movie the "fact check" section of her blog will be interesting,
maybe even for those who've not seen the movie.

Fact-checking The Founder | RAY & JOAN

May 27, 2017

McDonald's Operator Comment of the Week

"Comeback? Talked to my accountant today about Vision 2020 and EOTF. They are
a medium sized Northeastern firm , with about 600 McD stores as clients. He told 
me that based on the McD plan (requirements) they are advising 15% of their 
clients owning 86 stores to refuse McD demands or face BANKRUPTCY. Modern 
and progressive, partners INDEED !"

May 23, 2017

Where Are They Now? ... Don Thompson and Irwin Kruger

Ex-McDonald's CEO Thompson buys majority stake of PizzaRev chain

Irwin selling Park Avenue penthouse - list price - $18.5 million

On Vision 2020

One of the big McDonald's Operator CPA firms is sending around an E-mail concerning
V2020 suggesting that Operators coordinate with their CPA and their bankers on 
developing a plan.

That's great advice. But what about an Operator's legal advisers?

If McDonald's is trying to get Operators to make changes to their existing franchise 
agreements shouldn't Operators have someone look at the impact on the contractual relationship?

As we've discussed before - this is a great opportunity for the more powerful party to 
sneak in substantial changes to the franchise.

McDonald's Operators could be walking into a legal buzz saw.

But if changes are coming to the franchise it's likely that 90% of McDonald's Operators
will not have sought legal advice when McDonald's executives demand they "sign here".

May 22, 2017

It's Usually the College Kids

56 year old businessman charged with stealing Ronald McDonald statue

RBC Capital Studies Big vs. Small Restaurants

Analyst David Palmer discusses some of the advantages privately held In-N- Out, 
Chick-fil-A, and Culver's have over larger chains.

Understandably, David doesn't' mention the biggest advantage these three chains 
have - they don't have Wall Street leading them around like a dog on a leash.

And he should have mentioned Chick-fil-A's "operator on premise" policy.

RBC Capital's report on restaurant consumer attitudes

May 17, 2017

More On EOTF and the Four Percent Myth

When I first heard that McDonald's management was proposing a change to the 4% advertising requirement I assumed it was because of the Oak Brook management team's 
lack of knowledge of McDonald's.

But now that the idea is moving forward I'm beginning to wonder if this isn't a huge 
scam  on McDonald's Operators. Lower the franchise agreement advertising percentage 
but raise OPNAD?

As we've discussed before, the 4% is meaningless since most McDonald's Operators spend 
far above that percentage in advertising and promotion.

As a comparison - Let's say you have a store that's been paying percentage rent for years. 
Base rent and base sales are merely numbers in your lease, the important line item is the 
rent percentage you pay every month.

McDonald's comes to you and offers to lower your base rent if you do such and such. Your percentage stays the same. How did adjusting your base rent benefit your business? Or 
make any difference at all?

This proposal is/would be the same, a meaningless change to the terms of your franchise.

Since I'm not an attorney I can't give contract advice but I understand negotiations. If 
there's a deal in place, whether a handshake or a rock solid franchise agreement, once 
you open it up for changes, anything goes. Both sides can ask for changes to unrelated
terms. And the more powerful party usually prevails.

Renegotiating the contract carries a big risk for McDonald's Operators. The language 
about advertising is short and pretty simple and wide open on how an Operator should 
spend the 4%. There's no mention of Co-Ops or any kind of advertising funds. These 
things developed organically over the decades. But they could be cast in concrete by 
messing with your current agreements.

I'm not so worried about reducing the number of Co-Ops and agencies. That can all 
be normalized after this management team is gone. But negotiating  changes to your 
existing franchise agreements in any way? Don't do it.


Of course there are huge gaps in my knowledge about EOTF because I don't attend your meetings but, I keep hearing about "votes". If those votes are related to changing the advertising percentage in the franchise agreement, I don't see how that's possible. Co-Op 
votes are valid because membership is voluntary and members use a democratic process 
to decide on contribution rates, expenditures, etc. You're operating as a homogeneous  
body in a cooperative manner, hence the term "Co-Op".

But your franchise agreements are between you as an individual and McDonald's. The 
other Operators in your Co-Op or OPNAD are not a party to your franchise agreements.
They can't vote to change them.

That's why I now think this is a scam to get more control over the individual Operators 
(what's new) and getting rid of Co-Ops and agencies is the biggest power grab in the 
history of McDonald's.

As MCD Follows BK Down the Path to Larger Operators

Mom-and-Pop Joints Are Trouncing America's Big Restaurant Chains - Bloomberg

May 16, 2017

Chick-fil-A Launches its First Seasonal Entrée

Restaurant News - QSR magazine

The Founder - The Movie

I've watched "The Founder" a couple of times and have to 
say I enjoyed it, at least the first half.

I've heard or read the stories about Ray Kroc and the McDonald brothers a few thousand times so it was fun to see the story dramatized on film. Ray doesn't come across as a saint but as a normal, hard working salesman.

The second part of the movie is a desperate attempt to 
make the movie interesting and is a mess. I don't know if I was around McDonald's when Ray met Joan. But, because I started in Minneapolis, I eventually knew all the folks portrayed in "The Founder". The writers pretty well messed up individual roles and much of the historical timing of those years.

So it's not historically accurate and it's certainly not a documentary. For those interested in McDonald's history, pick up a copy and watch it until the scenes with the screaming matches between Ray and the brothers. That's where the fantasy kicks in.

But is it an anti-McDonald's film like "Supersize Me"? Not at all. I think McDonald's veterans will enjoy the first part and will get a good chuckle out of the way they try to re-enact the kitchen operation. 

May 15, 2017

WSJ Article Update

Well, nuts: I used to be able to tell if an article was available to non-WSJ
subscribers by signing out of my WSJ account and then trying to access
the article. They must have changed the way their cookies work because 
on all three of my systems I can see the entire article while I'm signed out.

Sometimes when an article is behind the paywall on the WSJ site they
publish the entire thing free at marketwatch.com, a WSJ subsidiary. 
But not this time.

Anyway, here's a couple of other publications' take on the WSJ article.

From Hayley Peterson at Business Insider

QSR mag - McDonald's opening the checkbook for franchisees

Investopedia - McDonald's desperate to modernize franchisees

Again, a big high-five to the Operators who participated in the writing of 
this article.

McDonald’s Boosts Its Payout for Franchise Upgrades - WSJ

Higher Beef and Poultry Prices?

U.S. beef market opening to China - poultry next

May 11, 2017

Trump to Nominate For Labor Board

Trump to Nominate Big Law and Government Lawyer for Labor Board Spots

When Did the McDonald's Franchise Become a Suicide Pact?

Operator comment:
Anonymous said...

As to the delivery economics, Uber will pay the driver the $4.99 delivery fee per order. UBER will charge the McD store a 15% service fee. McD will collect full rent and service fees on everything but the delivery(driver) fee. Uber WINS. McD WINS. Operator LOSES. Thanks to the NLC for endorsing this profit losing program. This was CONFIRMED at the Gallery Walk by our NLC rep.

May 10, 2017

Unions Support Board Seat For McDonald's Operators?

Another example of how the SEIU has no understanding of the McDonald's system.

Interestingly, the letter currently being sent to McDonald's Operators bears the address of 
the "Owner Operator Information Center". Turns out this address is in lower Manhattan. 

Do they have several floors in a Wall Street high rise? Nope, it's a UPS Store mailbox.

$19.95 a month

Wendy’s CEO Sees ‘No Impacts’ from McDonald’s Fresh-Beef

Investors Gobble Up Shares - Fox Business

May 6, 2017

Stolen Ronald Statue Returned

Locals use hashtag #FindRonald to locate

Just Trying to Figure Out a Few Things

* Heard it on the Internet - It is rumored that 
Martin-Brower is going to begin doing distribution
for Chick-fil-A. Talk about sleeping with the enemy!

* Is it true that the third party food delivery companies
will charge the customer a delivery fee and also retain
a % of the food total, paying less than 100% to the Operator?

1) Where's the Operator's profit in that transaction?

2) Do Operators pay rent and service fees on 100% of the order?

Comments? ... Clarifications?

May 4, 2017

Caution! Union Thugs in the Area

I've delayed mentioning this for two days because the idea that organized labor could
do anything for franchisees is ridiculous. And there's no need to lecture franchisees 
about the dangers of working with unions. If there are franchisees who would do 
so - they're beyond help. 

Everyone's heard the parable about the camel getting his nose inside your tent.

But here it is anyway

McDonald's accused by SEIU of gouging franchisees on rent - Chicago Business Journal

Dunkin Donuts Plans to Streamline Menus

Or will they just pretend to simplify?

Chipotle May Never Make Its Big Comeback

Howard Penny is one of the more outspoken Wall Street analysts covering restaurants.

Hedgeye on Chipotle - Fortune.com

May 2, 2017

McCashing In Or McCashing Out?

On April 25 and 26 McDonald's VP James Sappington exercised his option on 13,912
shares of McDonald's and immediately sold those shares netting a profit of over $740,000.

Source - Yahoo Finance

April 15, 2017

Who's The McBoss?

"Beyond asking franchisees to pitch in for upgrading restaurants—work that could 
set them back millions of dollars—McDonald's is pressuring owner-operators to cede 
even more control to Oak Brook over a particularly sensitive issue to franchisees: 
menu discounts and deals."

McDonald's reasserting its authority over franchisees - Crain's Chicago Business

Kudos to those Operators who worked with Peter on this Crain's article.

April 13, 2017

Corp Argues Against Franchisee Director in 2016 Proxy

Top left corner of the page - click on "Table of Contents". On table of contents - scroll to 
the bottom of the first page and look for page 66 or "Proposal No. 8". Click either one:

Link to McDonald's 2016 Proxy filing

There are "robust lines of communication" between the Board of Directors and franchisees
because the CEO tells the Board what the franchisees are thinking.

Burger Options

The average American has 17 different burger options on a 10-minute drive

Well, the "Turnaround" is Working For Someone!

McDonald's CEO received compensation worth $15.4 million

Up from $7.9 million in 2015

April 11, 2017

Tuesday Morning McGossip

* If McDonald's USA is in a "Turnaround" why is OPNAD already discussing value and         discounting programs for 2018? It's only April.

* Is the difficulty in changing POS menu prices a way for Oak Brook to control menu 
prices in general?

March 30, 2017

This is Not Just About Olive Garden - About the Industry

America Doesn't Need More Olive Gardens - Bloomberg

The Four Percent is More Than OPNAD Plus Co-Ops

There are some strange conversations going on between McDonald's and their franchisees.

What's this talk about making changes to the 4% spend for advertising and promotion required by the McDonald's franchise agreement? In reality that 4% is a meaningless 

Here's what the McDonald's website says on the topic:

"each restaurant is required to spend a minimum of 4% of gross sales annually for 
advertising and promoting the business."

Source: McDonald's franchising US 

Please compare that to the language in your franchise agreement(s). Assuming it's similar
or identical consider that in practical application that has always meant that McDonald's franchisees add two lines on their P+Ls, "advertising" and "promotion".  

The 4% has never been the sum total of local Co-Op and OPNAD expenditures. It has 
always been just what the language says, advertising and promotion.

And most, if not all, McDonald's Operators have exceeded 4% when combining the two.

I don't know if there's ever been any litigation concerning this requirement but there's 
tons of anecdotal evidence to support what the McDonald's website states. For instance:

* When Operators decline to belong to a local Co-Op or OPNAD they are sometimes 
audited by McDonald's Corp. Promotional activities are always considered to be part of 
the 4% requirement. Billboards, Little Leagues, donations, etc. etc. were considered to 
be a component of the 4%.

* In the 1970s we were developing small towns in the Southwest and often went into markets where television and radio was very inexpensive. The Operator often got to the 4% spend by buying freeway billboards along with other promotional activities.

I'm sure veteran McDonald's Operators can think of many more examples.

While the 4% is set in stone OPNAD and Co-Op contributions have changed constantly over the years, they've never been determined solely by the "advertising" line on Operator P+Ls. 

Because the newbies in management have apparently never studied the agreements they 
seem to be making up the McDonald's franchise as they go.

March 29, 2017

Chick-fil-A Will Own the Restaurant Industry

As other big chains move to larger and larger franchisees Chick is sticking with their
one-store-per-owner rule. Big multiple operators can't compete with that.

Chick-fil-A is Still the King of Customer Service - QSR mag

March 28, 2017

Franchisees Flex a Newfound Might

"McDonald’s has been ceding more authority to franchisees as part of CEO
Steve Easterbrook’s pledge to accept more ideas from the field and encourage
the customization of menus to local areas. But it resisted Segal Marco’s request
to let shareholders decide if a franchisee should be on the board."

Restaurant Business reports

March 27, 2017

Can Oak Brook Levy Fines On McDonald's Operators?

Ninety-five percent of the time McDonald's Corp. gets its way with McDonald's operators  
through "bluffing". 

As we've discussed many times OPNAD is the biggest bluff concerning McDonald's USA. 
Another bluff concerns constant reinvestments. Most of corporate's methods concerning 
food safety are a bluff (more on that later).

But the worst kind of bluff is forcing operators to do something that has no foundation in 
the contractual relationship, but I already mentioned OPNAD.

The latest example has to do with the "Hardware Modernization Program".

As with most of McDonald's Corp. vendor relationship there is endless opportunity for graft 
and corruption between McDonald's, their executives, the vendor, the vendor's people, and 
the finance company.

But what really caught my attention is the statement that says, "If an owner/operator 
declines to participate a $1,000.00/month ongoing penalty will be assessed". 

Maybe every McDonald's operator in the country recently signed new, revised, franchise 
agreements with McDonald's and I missed it. How does anyone have the contractual power
to levy fines on McDonald's Operators for not going along with an Oak brook program?

Where is that in your franchise agreement?

Does the NLC suddenly have to power to levy fines? 

Like all arrangements between McDonald's and the vendors everyone benefits but the Operator. 

And there's another concern, the McDonald's employees who came up with this assessment 
may know nothing about the McDonald's franchise or contracts. Since McDonald's is now 
run by people who know nothing about restaurant operations they apparently also know nothing about franchising.

McDonald's Operators should not be "bluffed" into spending money just because a McDonald's corporate employee says, "Write us a check".

Maybe I just need to be educated on these changes but until I am I'll remain shocked at the 
audacity of McDonald's Corporation.

Jan Fields Finds a Job

Buffalo Wild Wings nominates former McDonald’s executive to board

March 23, 2017

Talk To The Analysts - Part Deux

The Crain's article below mentions Maureen O'Brien of Marco Consulting, the firm
sponsoring the Operator on the McDonald's board idea. If Operators have feedback
for Maureen here's her E-mail connection.

Maureen O'Brien contact form

March 22, 2017

Crain's On McDonald's Franchisee Welfare

This article is worth reading a couple of times. Joe Cahill is one of best, and 
most experienced, writers on McDonald's. While he doesn't take sides he seems
to understand the small business person's point of view.

Note that he makes several mentions of Mark Kalinowski's McDonald's Operator 
surveys. One of many reasons Operators should participate.

McDonald's at a pivotal moment with franchisees - Joe Cahill

March 15, 2017

Where Does All of Oak Brook's Money Go?

We don't usually post articles from Seeking Alpha because they are mostly opinion but
this fellow does a good job of discussing McDonald's shareholder's expectations for
ever-increasing dividends from the company.

This is why management is pulling the plug on contributions to remodels, rebuilds, etc. Operators are on their own, the shareholders must be satisfied.

Buying McDonald's For Dividend Growth? Not So Fast

This Is So Not Going To Happen

McDonald's Franchisee Board Seat Eyed After Years of Discord - Bloomberg

March 14, 2017

Reuters on McDonald's Mobile Ordering

So a guy with zero McDonald's operational background thinks McDonald's can move 
20% of the drive-thru customers over to curbside pickup?

As a prolific user of McDonald's drive-thrus and I don't see the attraction of curbside
pickup over just using the drive-thru. Two occasions I can imagine, 1) If the drive-thru 
line is insanely long and not moving, or 2) the order is huge and even the customer 
knows it would mess up the drive-thru operation. 

It seems the energy should to go improving the drive-thru service, not making the 
restaurant more difficult to operate. 

            McDonald's, late to mobile ordering, seeks to avoid pitfalls - Reuters

Jack in the Box Franchisees Get Organized

Jack in the Box franchisees lawyer up - Restaurant Business

March 11, 2017

Do Your Customers Want Wi-Fi? Not So Much

This article caught my eye because I tried to remember the last time I looked for a
Wi-Fi connection - I think it's been more than a year. If all your mobile devices have
unlimited data plans why take the risk of connecting with a public Wi-Fi?

And, I recently bought a new car. The dealer and the manufacturer have been giving 
me the hard sell on buying data packages for the built-in Wi-Fi. As long as I have a 
cell connection, why do I need Wi-Fi in my vehicle?

Now that many, if not most, retailers have Wi-Fi and auto manufacturers are trying
to make Wi-Fi and data into profit centers - Wi-Fi's almost obsolete.

A World Without Wi-Fi Looks Possible as Unlimited Plans Rise - Bloomberg

March 8, 2017

Cicis Appoints Former McDonald's Exec as COO

Don't know the lady or what she did for McDonald's but it appears she was
with McDonald's from '92 to '02 and has since been with YUM.

It's good to see that even a small chain like Cicis understands it's important
their upper management has some experience in the restaurant business.

Cicis Appoints Jini Foust Chief Operating Officer