Coalition of Franchisee Associations

July 28, 2018

McDonald's Q2-2018 Earnings Call

Best analyst question:
Jeffrey Bernstein - Barclays Capital, Inc.
Great, thank you very much. Just touching on the company-operated and, I guess, maybe more importantly, the franchise profitability, I think you said all constituents are behind you in terms of being more nimble. But with the continued pressure on labor and, I guess, to a lesser degree, food costs, it seems like you want to keep pricing below food away from home. But do you think the franchisees are okay with the near-term margin pressure or do you think maybe that this inflationary environment is unusual and, therefore, justifying a further bump in the pricing, whether or not that's on premium or still keeping the value? I'm just trying to gauge the franchisee sensitivity to this aggressive value push and their profitability.
Stephen J. Easterbrook - McDonald's Corp.
(This is part of his answer)
Are they still entirely unified behind the plan we have and believe in its long-term strength? Absolutely, right. And there's nothing we want to do more than grow operator cash flow, because that's such a great motivator for future investment and future confidence. So in the immediate term, they are pragmatic, but we certainly have a desire to be growing, not just our own income and margins, but also their cash flows as well.

July 26, 2018

McDonald's to Push Hard on Value - NRN

From Nation's Restaurant News

"""But some franchisees have expressed concern about the deep discounting, according to a recent operator survey conducted by analyst Mark Kalinowski of Kalinowski Equity Research.

In the survey, which included input from 26 domestic franchisees with about 281 stores, franchisees seemed caught in a conundrum when it comes to the chain’s pricing strategy. Many said they are frustrated by the deep discounting but also complained about higher menu prices hurting guest counts.

“We’re worn out on the discounting. It no longer works,” one franchise stated in the Kalinowski survey. 

Yet, raising prices isn’t helping, either. “Can’t raise prices any more without destroying transaction counts,” one person said. 

Kalinowski said McDonald’s is challenged by “an industry that has trained the fast food customer to look for discounts.”

“Discounts, in a way, aren’t as special as they used to be,” he said.""" 

Entire article: McDonald's to push hard on value to step up sluggish guest counts

Less McDonald's Stores Should Help SSS


July 23, 2018

MillerPulse: Q2 Sales Gains Boost Outlook For Year

Sales may be in up slightly but traffic is still down.

Analyst sees light at the end of the tunnel

Just Give It Away

Millions in Operator ad dollars 
were spent to build up the 
McCafe brand and McDonald's
Corp. is now using the McCafe 
grocery pipeline to give away Operator's product.

July 14, 2018

Dumb and Dumber

The year was 2000 and a McDonald's corporate PR person uttered the dumbest words
ever to come out of the Oak Brook headquarters.

By the end of 1999 most McDonald's USA stores had implemented the "Made For You"
cooking system. Reporters and analysts observed that suddenly the service was slower 
and lines were longer.

When asked about service times the corporate PR person said, "People don't mind 
waiting longer if they know the sandwich was made just for them".

Pre-MFY 1999 same store sales were a healthy +4.0%, 2000 +1.5%, 2001 +0.5%, and 
2002 (- 1.5 )%.

Customers on were voting on MFY with their feet.

This week Restaurant Business Magazine published an interview of one of McDonald's 
chefs. Editor Jonathan Maze asked about menu innovation and its impact on service 
times. The chef talked about "indulgent moments". Another editor asked, "So it's the 
opposite of fast-food?'

Answer: "When the food is right, people slow down"

Yikes! Now, it's his job to think that way. But, if that thinking permeates the minds of 
more than a few people at the new headquarters McDonald's USA is about to take a trip
back to the years 2000, 2001, and 2002.

By the way, desperate to get sales turned around, management strong-armed Operators
into launching the original Dollar Menu in the fall of 2002. Same store sales in 2003 were 
a robust +6.4%.

So "Made For You" was the father of the Dollar Menu.

This is a recorded interview and is only seventeen minutes long. The discussion on speed 
begins at the eleven minute mark.

How McDonald’s is working to change its menu by Restaurant Business Magazine

July 10, 2018

But Will Customers Care?

"As for how long the paper straws last after being inserted into liquid, Merran said it depends on the beverage and temperature.
"It should hold for about the time for you to [finish the] drink," he said. "It’s going to become a little soggy, but you can still drink from it. It’s like any alternative. It’s not perfect but it does the trick."
Paper straws are better for the environment, but they will cost you

July 7, 2018

Crazy Bernie

McDonald's is Officially Out of People

Apparently the effort to downsize McDonald's has no plan or logic. For a mature company 
to have a lack of middle management is a sign of incompetence. Of course, the downsizing
is being managed by people who know little or nothing about McDonald's so some of this 
blundering is to be expected.

This Linkedin job posting is interesting. It appears that the new position of "Operations Assistant" has a primary function - reporting Operator food safety problems to HQ.

Will that attract quality people or just nasty, control-freak types?

"The Operations Associates main focus is on evaluating the Franchisee business

and ensuring it is in accordance to operating standards held by McDonald’s. 
The Operations Associate is responsible for immediately reporting restaurants 
below food safety standards to Operations Associate Lead and Operations Officer. 
This position works collaboratively with Franchisee Business Partners, Franchisee, 
and the deployment team.
This role is based in Denver, CO."

Linkedin job posting is HERE

July 3, 2018

Cheesy Lawsuit Frivolous?

Yes, this is a cheesy lawsuit and people who use our legal system in such a way should be stripped of their citizenship. But, there is a point here.

In sampling the never-frozen quarter patties I decided to try a couple of quarters without cheese so I could better examine the patties. When the kiosk charged me full with/cheese 
price I thought to myself "Hey?".

The problem is, the typical McDonald's store charges more for a regular cheeseburger than 
a regular hamburger. And, for customers who remember when the quarter pounder without cheese was on the menu, it cost less than a QPC.

So McDonald's has done a good job of implanting the idea that cheeseburgers are more valuable than hamburgers without cheese.

My humble opinion? Quarter Pounders without cheese should not be on the menu but if a 
kiosk customer deletes the cheese the price of the sandwich should be reduced by a modest amount.

The profit loss to the Operator should be minimal because - face it - very few customers 
are going to delete the cheese. Based on my recent experience the Quarter Pounder without cheese is OK but these days few people will opt for a sandwich as plain as a Quarter Pounder without cheese.

Is this cheesy McDonald's lawsuit frivolous, or have we all been paying too much for our burgers? - Sun Sentinel

Sonic's Digital Strategy

The words "competitive advantage" and "Sonic" rarely go together but in terms of mobile
ordering this might give them a leg up. Customers order on their phone, pull into one of 
Sonic's many car-hop bays, and their phone interfaces with the intercom and POS system. 

Sonic's Digital Strategy Could be a Game-Changer - QSR magazine