October 9, 2018

This Is The McDonald's Fred Turner Warned Us About

If you've taken my advice to read John Love's book "McDonald's: Behind The Arches" 
you'll remember the last several pages of the original book focuses on Fred's dream of 
having McDonald's Operators and suppliers own a large chunk of McDonald's stock.

At the 1986 Worldwide Fred told the convention, "I own some of your store, now I want 
you to own some of mine".

The book says this effort was about making the company more entrepreneurial. Maybe 
it was but there's a back story. 

McDonald's was a darling of Wall Street and management was concerned that outside 
investor groups or hostile entities would someday control enough shares to have a major influence on how the company operated. Putting 20/30/40% of the shares in the control
of McDonald's Operators, suppliers, and company employees could prevent that from happening. 

The three-legged stool would be able to protect the company.

Protect it from what? Investors who didn't understand the culture of the system. Greedy investors who wanted to take excessive cash out of the company. Shareholders who didn't understand the need for solid, productive franchisees.

But now, five years after his passing, Fred's fears have been realized. It happened from 
the inside, not by outside robber barons.

The company and the Operators have been stripped mined to return cash to MCD shareholders. The culture has been changed or erased by individuals who don't know 
what made the system successful. Franchisees are considered liabilities not an asset.

The McDonald's board of directors was once peppered with executives from some of the 
major system suppliers. Those folks are gone and the board is made up people with no 
history with, or connection to McDonald's.

Only McDonald's Operators can fix McDonald's because they are the only people left who remember how McDonald's is supposed to work.
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13 comments:

Anonymous said...

It is up to us to fix the "partnership". A great way to start is to attend Wednesdays Operator ONLY meeting in Tampa. We need to air our grievances and come together with a new, EFFECTIVE Operator advocacy organization. The NOAB/NLC/Opnad are a toothless,pathetic joke whose operators were bought off by Corp (via Mcopco sales, etc) Only through UNITY and determination can we,the people who run over 90% of the stores, change our current circumstances. We must challenge todays leadership (Corp) like never before. Its time to stand up to the Corporate bullies!
Some say we have no power over corp. How about these (for example); Coops refuse the extensive discounting en mass, we refuse the unfair corporate mandates, we pay fees late, etc etc etc.
If we fail to stand up and defend our own interests and investments, we will suffer even more in the future. The system is BROKEN, It favors stockholders over operators. HELP FIX IT !!!!

Anonymous said...

What we need is an INDEPENDENT Operator Advocacy Group to represent our interests.
All of our competitors have them. Why dont we?

Richard Adams said...

"The NOAB/NLC/Opnad are a toothless, pathetic joke whose operators were bought off by Corp (via Mcopco sales, etc)."

Operators should take a hard look at why OPNAD even exists. If it's not working for the Operator's benefit - shut it down.
.

Anonymous said...

Be careful about buying a block of shares on the open market. Our system got ours directly from management on a friends and family IPO issues, after fighting managements suggestion that we were free to buy on the open market. We learned from our Burger King franchisee colleagues at CFA what can be done to you when you buy on the open market, and that lesson allowed our association and its members to insulate ourselves from what happened to them. MCD Operators would do well to attend a Coalition of Franchisee Association meeting, and also, stop calling your Eve's Operators and start calling yourselves Fanchise Owners. Language matters if it permeates the culture long enough.

Richard Adams said...
This comment has been removed by the author.
Richard Adams said...

From my experience, I've formed the opinion that franchisees in a publicly held company should not invest heavily in the corporate stock. It's too confusing. Do I go along with corporate initiatives that help the share price or do I do what best's for my franchise locations?

I learned this from many McDonald's franchisees who bought into the idea and then the company hit a wall in the late 1990s. Some McDonald's franchisees had to sell their McDonald's shares to pay their rent and royalties to McDonald's Corp.

When Fred made that speech everyone in McDonald's (me included) thought the growth would go on forever and we could build new stores and get year over year same-store sales growth into infinity. Ten years later there was a rude awakening.

Having said that, I'm uncomfortable discussing personal investments on here. That's never been the purpose of this site.
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Anonymous said...

I find it ironic that directly after this Tampa meeting the “Leadership Alliance Team” is having two consecutive days of meetings in Chicago. Chris K and Travis H Most certainly have their spies down in Tampa without a doubt.

Anonymous said...

I recall that years ago, we could count of Fred"s Secretary calling us every Spring and saying "Fred would like to know how many shares of MCD you own". His motive was to avoid a hostile takeover by having the O/O's being able to vote a large bloc of stock.

Richard Adams said...

Exactly, I doubt that's a concern these days. John Love writes that in 1986
there were 88 million shares outstanding for a market value of $9 Billion.
Today there around $775 million shares outstanding with a market cap of
$127 Billion.

Of course with this Chicago management team who knows if those numbers
will hold?
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Anonymous said...

If we dont stand together to fix our broken system, WHO WILL????

Anonymous said...

It might be helpful to know just how many MCD shares operators do own....Hmmmmmm.
Leverage?

Richard Adams said...

There are 775 million MCD shares outstanding and 68% of that is controlled by institutions. I'd guess the amount owned by McDonald's Operators is measured in small decimal points.

Anonymous said...

QUESTION: I see the term "Partners", "Partnership" being used a lot. Are we no longer concerned about the "joint employer" issue??