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.