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

March 4, 2017

Random Thoughts on McDonald's Analyst Day

Transactions - It was surprising to hear Oak Brook discuss the fact they've lost 500 
million customers since 2012. Why would a company so focused on big brother McSpin
and non-transparency toss around such numbers?

1) This move blames everything on their predecessors, "look at the mess we inherited". 
When they wear out that transference they'll start blaming everything on the Operators.

2) While these executives don't know anything about restaurants or McDonald's they are probably aware that a chain can only go down so far (except for Sears) so there's a good 
chance McDonald's USA will turn positive in 2017 or 2018. Then, if they are still around, 
this management team can take all the credit.

Can't tell the players without a scorecard - Because I have no connection to these people
I ignore them when they come and go. It's been a blur over the past ten years.

This week I kept coming across the name "Lucy Brady", who's that? She's McDonald's new
chief strategy officer. She's been with corporate a total of six months. That's right, 180

Capex - Management is telling investors their capital expenditures will be reduced after 
2017. There are many components to Capex but one reason it will be reduced is in a 
few years there will be less small Operators who can't keep up with reinvestment and McDonald's will be unwilling to help the larger Operators.

Burger King Brags About Restaurant Fires

This first appeared to be a joke or fake news but it's on a website run by AdAge magazine.

Burger King Takes Its 'Flame-Grilled' Credentials to Extremes With Ads Featuring Real-Life Restaurant Fires