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.