April 20, 2017

More Survey Comments By McDonald's Operators



Some McDonald's Franchisees Think They Can be 'Fired on the Whim of a Corporate Suit'
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11 comments:

Anonymous said...

An operator cannot be fired by a company employee even an officer. The licence agreement is a binding document that can only be withdrawn by following prescribed proceedures and reviewed by a court. The lease is also binding and difficult to break. Both the licence agreement and the lease are written in favor of the company to the point that any practicing Attorney and CPA would strongly advise not signing it. However, we sign it because of the past ROI and understanding that it remains a good investment. If company drones from Oak Brook down through the regions could fire operators there would be none remaining. They really resent us. There is no question about that as a fact. Once again, a very real problem that has greatly contributed to McDonald's decline has been the rise of the McDonald's bureaucracy. They have been in a position of power and have been running the company for their own benefit for many years. Many many are not competent. They think they know more than they do and believe that they can ignore the licence agreement. This problem is compounded by the fact that the operators allow it. These are not business people. Even the regional managers. Many are good McDonald's adminastrators but they don't understand the business or store operations. This is further compounded by the fact that McDonald's executives allow it. Over the years people have been promoted into positions of authority well before they were ready, so, the company would comply with goals that had nothing to do with selling product or profit. As a public company McDonald's allegence must first be to the shareholders. However, that is not the case. It is too the bureaucrat's who have continued to increase over the years. An article a few years ago talked about Warren Buffets holdings in McDonald's which he pulled out and never put money back. When asked why his answer was simple, Leadership. Leadership of McDonald's had been usurped by the bureaucracy. It continues today. Easterbrook seem's to be trying to dismantle it with little success. I urge operators who feel threatened by regional bureaucrat's to ask for their comments in writing and discuss it with your Attorney. Discuss it with your Attorney anyway. It is amazing how quickly things can change. There are many excellent Attorney's with extensive experience dealing with McDonald's.

Richard Adams said...

"An operator cannot be fired by a company employee even an officer."

I'm thinking that survey comment was more a state of mind than an actuality.

Anonymous said...

That can't be fired but they can all of sudden start failing BSV's & CEV's, then have to sell restaurants.

Anonymous said...

And eligibility is no guarantee of growth and rewrite. So at rewrite time, that's when the "firing" can happen. Although, the FDD says you cannot arbitrarily withhold consent. Which is a pretty broad term.

Richard Adams said...

Feel free to correct me but I don't think that language applies to rewrite. Check your franchise agreement. I'm pretty sure it will be silent on rewrites. I don't pay much attention to the FDD and assume it mentions the "rewrite policy" but the FDD is not your franchise agreement, it's simply a disclosure.

Richard Adams said...

But you're right about rewrites being arbitrary. McDonald's rewrite program is a little over 40 years old. For the first 20 years each store stood on its own for a rewrite. An Operator could be unexpandable but as long as the store under consideration was running well, current financially, and the Operator was "involved" it was usually rewritten.

But in the late 1990s Franchise 2000 (F2K) came along and made expandability and rewritability the same criteria. That changed everything and made it possible for McDonald's to refuse a rewrite for things such as an Operator's "attitude".

Anonymous said...

Refusing to rewrite a store at the end of its franchisee term is a very dicey thing for the company. So many protections for the individual have been put into law over the years that unless there has been outright crimminal behavior on the part of the operator the company can't just surprise the operator by refusing to rewrite. The rewrite process begins in the 17th year. The company then gives the operator the requirements to be rewritten and the operator has three years to comply. During that process it is up to the operator to actively communicate with his region on progress being made and to document those communications. This doesn't mean they can't or won't refuse to rewrite an operator. If they want you out there are many ways they have to make life so miserable you want out. No reason to wait until rewrite. The company has always wanted methods to control and scare the operators and unspoken and unwritten threats about rewrite is but one of many. I have seen where a regional bureaucrat will say something to sound important and not really knowing what he is saying legally. That is the perfect opportunity to politely ask if he and the regional manager would meet with you and your Attorney to simply understand what was said, just to be clear and be very non-threating. So many times employee's make statements they are not authorized to make and have no idea of the meaning. They just want to sound important. Asking for a meeting to include your Attorney and a company Attorney has a very chilling effect on regional people.

Richard Adams said...

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I almost didn't approve the above post for publication because it starts out with a huge inaccuracy. However, it makes some other interesting points so here's a correction:
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Refusing to rewrite a store is not a "dicey' thing for the company.
Yes, the company can "surprise" an Operator by refusing to rewrite.
Yes, the rewrite process typically begins three years prior to the expiration of the franchise term but the rewrite policy says nothing about the Operator having a chance to correct any problems. The policy says the opposite: * The decision of the rewrite committee is final and * The Operator has an opportunity to sell the store.

There have been many cases where an Operator was given a chance to correct problems before the rewrite consideration but isn't that an ongoing part of the Operator Review process?

There are more and more cases where the Operator is told two or three years out that they won't be rewritten, there will be NO reconsideration, and they need to sell the store in question. Or, consider selling all their stores.

Of course, if there's no rewrite in an Operator's future this doesn't have much impact but even with an Operator who has five or six stores it seems there's always a rewrite coming down the line, especially if the discussion starts three or four years out.

And I'm not just using my voluminous knowledge of McDonald's history here. As I write this I'm referring to a copy of the McDonald's Rewrite Policy that I know to be a 2017 version of the policy.

It's one page, but don't look for it in your franchise agreement, your agreement doesn't use the word "rewrite". The policy is in your franchise disclosure (FDD). That thick package that's been gathering dust in your office since you opened or acquired your last store.
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Anonymous said...

I'm sorry if I gave bad information about the rewrite process. I have gone through several and we did start in the 17th year and rewrite was never an issue. My next stores to be considered for rewrite are 15 years away so I don't think about it much. I have purchased stores from operators that were not going to be rewritten but they knew it well in advance and had no real desire to stay in the system. And, no I have not read the 2017 policy.

Sorry!

Anonymous said...

I believe also that the license agreement is written and enforced under the laws of State of Illinois, so even California operators are not protected by their new Franchise Relations law. Does anyone know the answer to this?

Anonymous said...

There are VERY few legal protections for franchisees that are terminated or no re-written. That statement was plain erroneous.

CA has one of the few robust laws protecting an Operator in these situations (thank you Keoth Miller and Rob Branca of the Coalition of Franchisee Associations), and whether anOperatorin CA is bound by IL or CA law has not yet been tested under the new CA law. Also, the CA law only applies to franchise agreements signed ( and MAYBE to rewrites/ renewals) after it was enacted in 2016.

If you are in FL, you need to support the CFA's new bill currently help over to the next session that provides similar protections to CA's new law.