April 30, 2019

McDonald's Cracks $200

McDonald's cracks $200 after comparable sales shine - Seeking Alpha

McDonald's turns to bacon and wins
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17 comments:

Anonymous said...

Meanwhile, according to Franchise Attorney Carmen Caruso, nearly 1000 MCD operator stores are at or near bankruptcy. Oh well, at least Stock price Steve and Clueless Chris K are making millions off this.

Ray would be turning over in the grave.
If you want to change this relationship, join the NOA as a dues paying member!


MMGA

Anonymous said...

I am concerned that McDonald’s leadership does not have an understanding of what we as Owners contend with each day. The shortage of people, the new d├ęcor packages that are much more expensive and of poorer quality and the fact that if we do not run 5% to 6% sales increases we cannot stay ahead or even in this Cash Flow crunch. This is in a QSR environment of sales and guest decreases. If you raise prices due to the wage environment, the franchisor and the creditcard company each gets their cut of the price increase. However, we have far less than ever fall to the bottom line. That puts us into a vicious cycle of no return of increasing prices again to keep up. I made a mistake of staying in this long. Should have sold a few years ago. I will not miss my chance again.

Anonymous said...

The NOA will be a major factor in helping franchisees improve their cash flow and protect them from wasteful spending on MRPs and other things that the Corporation demands without justifiable reason. Example: replacing floor tile every ten years.

Anonymous said...

So few people working for McDonald’s Corporation know anything about the McDonald’s business.

Anonymous said...

We have zero support today. I am being graded by people that don’t understand our business.

Anonymous said...

Totally disgusting! Stock price steve shorts owners!

Anonymous said...

And at a recent meeting, they throw up a slide of a refrigerator, and tell us this is our biggest competition! Come on, are you kidding me? Are you comparing these expensive MRPs, to local swag grocery stores? Insulting.This is legacy thinking. I thought we had “experience”, and that we are restaurants, not “stores”; Feels like Discount Warehouse with DM, GMA, Deal (wink, wink); it’s all a discount no matter how you slice/sell it. Stop the madness! Marketing is on the loose! Embarrassing how much we spend to advertise a discount. We continue to line the pockets of these CoOp ad agencies, and media buyers. Market our Brand, not a discount!

Anonymous said...

This all time high stock price (which has stayed high in a sustained basis and will continue to as same store sales are positive-even if due solely to price increases to keep pace with accelerating labor costs) PROVES TO EASTERBROOK AND CHRIS K THAT WHAT THEY HAVE BEEN DOING IS EXACTLT WHAT THEY WILL CONTINUE TO DO!

I hey are over delivering on their legal duty to shareholders and to their own compensation. Don't be fooled. They may throw us a few bones and even that is only because NOA was formed. We cannot expect ANY significant help from MCD as long as they are proven right by stockholders opinions.

These are facts. We have to deal with them. We may have to change strategies from playing nice and trying to sweet talk them into stopping the pain from flowing into the restaurants.

Anonymous said...

It is true that so many people in MCD with influence over important decisions impacting operator business have very shallow understanding of the business at the store level. Some of them admit it but no one seems to care. The operators need to watch out for themselves and be forceful about it. The best way to start is to draw a line in the sand and refuse to take on anymore debt regardless of regional intimidation. Just don't do it. Banks won't lend you the money unless you sign a loan agreement pledging to pay it back. They have to deal with you because they have no recourse to MCD. Be professional and straight forward and tell them that it was your mistake to sign the loan agreement and that you are going to reschedule your repayment schedule and only make one payment every two months until you can catch up. Ask them to work with you on your plan and you will likely be surprised. If you are close to filing chaprter 11 they will need to get in line to get their money anyway and working with you is a far better deal for them. I'm not so naive as to think they won't use their leverage with MCD to make your life miserable or that they won't threaten you with foreclosing on everything you have but you have more leverage than you may think. If they dig their heels into the ground then only communicate through your Attorney. MCD has created these issues for you and the bank and the courts are sympathetic to that fact. Let NOA know what you are doing. It is not that we don't want to repay this debt that we took under pressure from MCD, we do. A reasonable solution is simply to reschedule the debt payments. Otherwise, nothing will change. Ask for a 15 year amortization with a balloon payment at the end of ten years with no prepayment penalty. You will not be the only operator trying to do something like this.

Richard Adams said...

I hesitated to post the above comment because, while it contains some good advice, it contains some kamikaze tactics that McDonald's Operators should avoid.

The comment says Operators should work with their bankers, that's good advice. But then the comment implies that Operators should reschedule their loan payments. If that's in concert with the bank it might be a good thing. If the Operator is doing it on their own it's called a default.

The comment also mentions Chapter eleven bankruptcy.

If either of the above tactics are bouncing around in an Operator's mind they should run, not walk to wherever their franchise documents are gathering dust and re-read the section on "Material Breach". Then they should discuss this topic with their legal advisors.

Bank loans and McDonald's franchise agreements are not handshake deals.
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Anonymous said...

As a factual matter, the board of Directors and their top management in any public corporation has as their first priority the shareholders and that won't change anytime soon. Previous MCD management allowed costs to climb out of sight with little regard to company valuation. It was a golden opportunity for Easterbrook and he did a great job of eliminating costs in payroll and other low hanging fruit. Costs were down, cash flow was up, dividends were paid and the stock price spiked. However, we continue to shake our heads about what happened in MCD USA. As an operator it quickly became clear that the traditional operator/company relationship no longer existed as we once knew it. Then came the MRP's, EOTF that generated lots of new debt. Dutifully, the operators signed the loan agreements in hopes that the reinvestments accomplished by this new financing would generate enough sales to cover the cost of the financing. For many that just was not the case and then the loan payments began to eat into cash flow.
The operators did very little to take care of themselves until the NOA became a reality. Chris K. created a lot of hard feelings and simply did not know what he was doing. Still doesn't. Going forward, the operators cannot continue to operate as a herd. They must stand up for themselves. Debt is like drinking poison after a certain point. Today, Easterbrook and CK are worried that the NOA which they caused will become a movement across the world. So, I expect they will put on a kinder/gentler face until they can regroup. The operators cry: NO MORE DEBT, NO MORE INTIMIDATION,
Their next recommendation may be All drinks, any size, all day FOR FREE. Not really.

Anonymous said...

"Their next recommendation may be All drinks, any size, all day FOR FREE. Not really."

Yes, really. They will point to BK essentially giving away free coffee with their $5/month coffee subscription and double down to $2.50/ month for any McCafe beverage every day. If not $1.

Wake up folks. They aren't concerned with owners. They own all of the real estate. If we default they get our restaurants for free. Even if they can't operate them, they will refranchise them and keep the cash from the sale.m they will be able to afford to resell the restaurants that they capture (except in CA, thank you, CFA) for very low prices that allow the next operator to make a profit. Why not? MCD got the restaurant for free so anything they sell it for is 100% gravy

Everybody wins:MCD management. Stockholders, Bomd holders- except for owners and probably our store level lenders. All at no cost to MCD- only wins.

Anonymous said...

McD' P&E ratio over 25 is not sustainable for an established restaurant chain. The only place to get more earnings from in the future is the restaurants/franchisees.

Anonymous said...

refinancing a loan is not a "material breach of contract"

Richard Adams said...

No, but rearranging your payment schedule without the consent of your lending institution would be.
.

Anonymous said...

Might I suggest that NOA holds a summit with the top lenders to MCD franchisees to explain the shrinking cash flow problems. Let's get ahead of this BEFORE there are defaults and we go down one by one.

It won't be long before we are not meeting debt service coverage rations because profitability is disappearing. Even if you are paying your loan, it is in default and is nonperforming if you don't meet all of the covenant ratios in the loan documents. That causes bank regulators to forbid banks from lending to MCD okwners.

A banker would much rather hear about the problems and negotiate a lion rewrite than find out that there are problems after you are in default. It's a much better bargaining position.

Anonymous said...

The thing many miss is that McD. has suspended the Ratios back to our/your last Operator review, Pre - EOTF. This is until 2020.

Mine have fallen to a All time low. Because of the purchase of 3 operators under performing (6) restaurants and EOTF construction. Two of the acquisitions where simply McD begging me.

Last O/O review I was at: Equity above 70%, CF coverage Ratio 1.82 and -3.4 days turnover days. The Construction will be finished in June 2019 and the 13th month of the last acquisition with be at the end of June. Ratios will start going up then.

Having been in this a long time and helped countless Operators develop a better understanding of finance. We must dissect our actions from the BBV, to truly see what has happened. If I had not bought the restaurants I would be fine. But I made the decision and I have several friends that bought Restaurants that were way over priced at the beginning of 2017 without considering the other costs.

However, I agree the BBV was not performed as Presented.
1). The Value Platform did not deliver.
2). The Remodel Packages are over price and will be a M&R Nightmare.
3). The Delivery Model has not been profitable for Us as it has been for McD.
4). The Kiosks have not been received well in the rural areas. Can’t speak for elsewhere.
5). Mobile Order Pay has been almost nonexistent in our areas.

We can not do what McD. does and paint with a broad brush. We must be Factual about what has happened. That means digging into our actions as well as theirs. Once we do that we can start making long term decisions that will put us on Sound footing again.
For me that me that means Maximizing Sales, PAC and minimizing M&R at the time of sell, which is July of 2022 (Retirement).