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January 6, 2020

McDonald's Hatchet Man is Holier Than Thou

McDonald's CEO promises new culture

Here's the WSJ aticle (subscription required)

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38 comments:

Anonymous said...

I find it very interesting that our new PLACEHOLDER CEO, has the audacity to speak in regards to human values! He caused harm to 100’s if not 1000’s of peoples lives in the wake of his downsizing both on the corporate and operator side. An arrogant individual that needs personal reform. He will have one hell of a time trying to sell anymore of his sub par technology to the operators in the future. He should probably resign now.

Anonymous said...

Chris K ... The impact he had on organizations (people’s) lives (removing operators from the system) is larger than will probably ever be knowN to everyone in McDonald’s USA. He is a hatchet man that unfortunately has been given the “golden personal financial ticket” being elected CEO for the brief moment. Please don’t let him fool you with the “emotional” videos he has shared. Those are “crocodile tears”. He is not a people person and I hope karma will personally mirror the negative results he has inflicted on this once highly regarded company.

Richard Adams said...

“I firmly believe that McDonald’s can change the world in a way that no other company can, and we’re just getting started.” CK

Howard Penney said...

clearly an article that was planted in the WSJ by the new CEO's PR team... If it was not for Steve E. Chris K would not be CEO. Now he is throwing him under the bus.. WOW

Do people actually believe this stuff?

Richard Adams said...

Yes, all perfectly timed with the launch of the CEO's Instagram page. Where is the adult supervision?
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Anonymous said...

now, he wants to "Change the World". How about just selling more quality products. Typical snowflake.

Anonymous said...

It is interesting, I feel like we’re along for Chris K’s personal leadership journey. My crew person that gets promoted to shift manager expresses similar thoughts. His ascension into “global leadership” is a journey of one person’s lucky promotional aptitude’s.

Anonymous said...

This is a slap in the face of the operators that
built this business for us

Thousands of MCD lives have been changed
by this HATCHET MAN -

WORLD WIDE is just months away and there
is so much frustration & disappointment in
the operators I talk with - I have no idea
what will really happen in Orlando

I know there is a summit a day or two ahead
of WW - but there is nothing that can be
said that will ever make me change my
thinking of this little person

CRIS - what have you done to OUR
MCDONALDS?

How much longer will you stay in a place
that you do not belong?

Do the right thing & resign before WW

MAKE MCD GREAT AGAIN

JOIN THE NOA






Anonymous said...

Agree with above comments completely

Cris - resign before World Wide and give
us something we all can celebrate - we
have just over 100 days - let the count
down begin 100-99-98 -

Time to move on - you have done enough
damage to the BRAND.


Anonymous said...

Simply put, Chris K is a charlatan, and no operator should believe or trust him or his "yes man" henchmen!

Anonymous said...

Not to sound disparaging, but simply follow his career. It is impressive his ability to maneuver thru the corporate structures - yet has there been any successes to place in that portfolio? Utterly amazing that the Board of Directors would of engaged such a profile for the brand to begin with; it has to be a sign of pure desperation in the corporate ranks.

Funny, how they tell operators to QUALITY hire....

At P&G, he achieved nothing - last 4 years

Was then a private business consultant in Boston, aka essentially unemployed.

PEPSICO - in the early 2000's, when that brand QSR struggled - and finally imploded. Was VP in charge of non-carbonated beverages, achieved nothing in the realm of QSR. Most that progress in that chain of command would of went to YUM BRANDS. Seems they didn't want him?

Kraft - another world of NO QSR experience. Sold Mac&Cheese Internationally for a very short term before coming to McDonald's. Critical is understanding why a person just promoted to PRESIDENT INTERNATIONAL SALES, vacates such a position in a very short time.

In under 5-years, now leads MCD Worldwide. Most operators cant get their 2nd gen thru the program in 5 years - yet a no QSR experience executive, can escalate thru the ranks in the Worlds largest QSR to lead worldwide operations in that time.

Oh, McDonald's is about to change further and JOINING THE NOA isn't gonna help if they don't have a set agenda for the membership to support and enact. If operators cant change operator organizations like OPNAD today. There's no chance to get a voice with future destructive advances.

You drive by the new McDonald's at night and debate its appearance - a family restaurant, or mortuary. An experience of the future in Nebraska and Kansas that aided nothing in the sales, and nothing but complete dissatisfaction on the appearance.

Consolidation of restaurants, that has removed entirely the McDonald's brand philosophy, "We're not just on your corner, we're in your corner". Sitting in planning meetings trying to generate excitement and promotions, realizing there isn't anything left - we have discounted everything.

Worldwide is an important event, and I hope the NOA is prepared to present its agenda too. For operators have to be more than glorified McDonald's Supervisors in control of local hiring. If operators lose the P&L control for their restaurants, they are nothing but McOpCo managers.

There's no ability for a operator to reasonably say NO individually - and the NOA needs to step up fast to protect the franchise agreement. The mere lack of communications is a sign of its weakness, decay and apathy.




Anonymous said...

How exciting it would be for every NOA member (preferably every operator) to show to WWC wearing the NOA - STRONGER TOGETHER shirt. Gathered together prior to the OPENING SESSION, pouring into the seating, into every section

https://nationalownersassociation.com/collections/frontpage/products/noa-t-shirt-stronger-together

One thing to see a number on paper - another to see that number manifested into bodies before you. It's time to come out of the woodwork. Belonging to an fraternal organization shouldn't be observed as maleficence, but as solidarity.

Operators may not of started this fire, but they sure can control whom it burns.

Howard Penney said...

Richard,

As you know I have been following MCD for a very long time (since 1994). My tenure as a MCD analyst dates back to the Mike Quinlan years and have met every CEO since Mr Quinlan. Given what I have published on Chris K., I'm certain I will not be invited to any MCD events in the near future. I was also the first sell-side analyst to take investors on the fist "McTrip" in the early 2000 to look at how MCD operates overseas. I have been supportive of the company when company was operating with integrity and critical when the company was out of integrity with mission of the company and its franchisees.

In my 26 years writing about MCD, I have never seen the company and the franchise community in such disagreement over the direction of the company. As an outsider, the company has never been the same since since the changes to the $1 menu in 2012 (removed the small fries I think) and stopped advertising the $1 menu nationally in 2015. I'm not telling you anything you don't know but, MCD USA has experienced declining TC's every year since 2012, except for 2017. All this suggest is that MCD no longer stands for "value" in the QSR space. I understand "value" is a difficult subject to address, but MCD must stop loosing share to its more nimble value competitors.

I look forward to hearing what comes out of Orlando in a few months!

My Best,

Howard Penney

P.S. I love a good QP with cheese!



Anonymous said...

Somebody needs to get CK to read "Forever Ray".

CK doesn't have a clue.



MMGA
#OperatorRepOnTheBOD!

Anonymous said...

Dear Howard Penny, you obviously havent been in a McDonald's restaurant recently. There are over 147 menu items on the average McDonalds restaurant menu.

Currently, every item except the Arch Card is on sale (directly discounted, BOGO or under the Promotion Engine). Several times a year, even the Arch Card is added.

As for not advertising $1 menu, we advertise 123DM. It stands for $1, $2, $3 Dollar Menu. We also have $1 Any Size drink, $2 Small McCafe, and 2 for $5

Then you have Global Mobile App that advertises 18-19 other WEEKLY discounts and promotions. Not including the special, free fry fridays, national ice cream, hamburger, you name it day.

The COOPS are coerced to add VALUE on top on that VALUE (directly, 123DM add-ons, and GMA). There can be no Local Store Marketing, and there hasnt been any LSM.. guess since when... yep 2012. When operators lost complete control of their menus and pricing. National platforms never worked in McDonalds, which is why Kroc made the COOP and LSM the cornerstone of the brand. OPNAD was the greatest farce perpetrated on operators then, and is a needless waste 30 years later.

Now, there are people who love Dollar General. And theres a bunch of people who never stepped inside one. One thing for sure, you dont need to spend millions to update a Dollar General. McDonalds isnt Dollar General, it needs to have a reasonable and appeasing Value strategy.. and cashflow to cover these growing operational expenses.

Analyst that dont see the cashflow AFTER debt, and only view pre-debt numbers.. fail to see the ticking timebomb fruitless reinvestment causes.

At the same time, failing to realize the alienation occuring in the neighborhoods. Where store consolidation, market consolidation has turned a winning model of success into the Burger King model of dispair.

Anonymous said...

Howard, I've lost count of the many thousands of dollars that I've spent building the McCafe brand in my restaurants only for corporate to steal that equity and take it to general retail stores to compete against my investment! I am beyond furious, and then I can't charge full price for a latte?, I'm limited to $2.,.,

Why am I even in the espresso business? Our customers don't drink espresso.

Howard Penney said...

Dear Anonymous:

Thanks you for your thoughts. Yes, I stand corrected MCD does have a value proposition, its just not having the intended consequences of driving incremental TC's. I believe, 123DM emerged under the Steve E. era, which never really worked (or was never going to work), as "the "operators lost complete control of their menus and pricing."

This theory suggests that the MCD owner/operators will never get control (of pricing) again unless Chris K. brings back LSM? This also explains why average check has been up so much for the last two years. The growth in average check can also help to explain why traffic continues to decline in the MCD system.

As far as the leverage in the system goes, MCD is not alone in keeping analysts in the dark about leverage at the franchisee level. Why do you think the JACK franchisee are so unhappy! There is so much leverage in the JACK system and traffic and margins are declining. Making things worse for JACK is they need to spend more money on remodels!

Can the MCD system be far behind if traffic does not improve?

Thanks again for your thoughts.

My Best,

Howard

Anonymous said...

Hi Howard,

I’m an operator. I’ll go by anonymous for fear of retaliation.

Buy McDonald’s stock and if there’s a way to short McDonald’s Franchisees — you should.

Good Luck.

Anonymous said...

Which is the bigger threat to McDonalds: competition (no, they've always been there), SEIU or Chirs K?

I vote for Chris K. He is destroying us from within.

Anonymous said...

Shoot, at this point, I almost support the SEIU.... To review McDonald’s Rent practices over the last decade. It seems they are out of line for the avg industry rent per sq foot.

Richard Adams said...

Huh? ... McDonald's rents have never had anything to do with industry averages or local market sq/ft charges. Rents are set for maximum profit for MCD Corp and that's it, take it or leave it. It's their business model.
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Anonymous said...

Richard, do you pick and choose which comments to post? It seems any disagreement with you results in a no post.... what the hell?

Richard Adams said...

Yes I do, it's not about a disagreement with me but unintelligent posts don't make it through. Especially those sent in by the crooks representing organized labor.
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Anonymous said...

FYI. I’m not a crook. I’m an operator. And there are lawsuits about what rent to charge tenants. McDonald’s with the “blanket shareholder value” concerns are bullshit. Take a look at share buybacks and what % ultimately makes it to shareholders. Just because I’m suggesting there’s an issue with rent structure doesn’t make it unintelligent.. perhaps you’re working for MCD Corp? Or simply too old school to acknowledge that times have changed. I’d be happy to call/email you personally to discuss. But there is a thing called rent caps or price controls. Google it. I always thought you were pro operator. Now, I’m not sure. Tell me how to get in touch and I’ll call you personally. Assuming that you don’t actually work for MCD....and this blog is a rues to get operators to vent..:

Richard Adams said...

My E-mail is to the right above my profile picture.
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Anonymous said...

SEIU TROLL ALERT

Anonymous said...

I heard that the NOA has the goal of putting an OPERATOR on the McD Board of Directors!
Just another reason why EVERY operator should join the NOA!

Anonymous said...

McDonald's rent is a percentage rent of of top line sales. The more sales increase the more dollars go to Chicago. Retail business in most cities the rent is a Square foot rent to the owner. Few local retailer's do the sales volume of an average McDonald's restaurant. Thus, comparing MCD percentage rent to rent based on square feet of the store is not a valid comparison. Harry Sonnoborn a MCD VP invented the percentage rent for MCD and it was a stroke of genius. As sales increased and new stores increased there became a steady stream of growing cash go to McDonald's. The percentage rent is just one side of the formula the other side is the concept of "BASE SALES". Thus, if store sales fell below base sales you still paid the percentage rent on the base sales effectively increasing the percentage rate the operator was paying. For example: If a store base sales on an 8.5% contract is two million dollars and the store did two million dollars the rent would be $170,000.00 plus 8.5% of any sales above the base sales figure. If the store sales fell below base sales to $1,800,000.00 the rent remains at 8.5% of base sales or $170,000.00 or 9.4% rent. If the store sales exceed's base sales to $2,200,000.00 the rent is 8.5% of actual sales or $187,000.00. Thus, it makes no difference to the company if the store is profitable or not. They know the minimum amount of dollars coming from that store. It is why promotions that drive sales but not profit makes money for the company. When sales go up the amount of dollars going to the company goes up even though the percentage rent remains the same. As I said it was a stroke of genius that financed McDonald's growth. Now that McDonald's USA is no longer a growth company it is the "Base Sales" provision that guarantee's a stable revenue stream. Thinking that McDonald's will reduce rent to local market rates is a pipe dream. If they did it it is a sure bet that they would increase the base sales provision.

Anonymous said...

Base sales were set as a way to guarantee insurance money. Think hurricane Katrina. Otherwise it would be hard to prove what your sales actually were/would have been — due to being closed. Having lower sales than base, is called an effective rent problem and needs to be remediated.... it’s the % rent that matters at the end of the day. MCD wants base to be as high as possible, but not so much that it puts the operator in a bad spot. Ie effective rent problem. McDonald’s, in all cases, should honor the % rent and fix any issues where base sales were set too high.

Anonymous said...

Right, those of us who have rebuilt stores and had those stores closed for four months with zero sales continued to pay percentage rent on base sales. A rude awakening, for sure. Having your store reduced to a pile of rubble and being required to continue paying rent seemed unfair. However, it contributed to keeping the system healthy and was a smart move by McDonald's. I have never thought about the "insurance money" guarantee. Can you explain that further?

Paying percentage rent on base sales can be a very difficult issue. I know an operator that had his store closed for two years due to a hurricane and thus having the highway in front of his store closed to rebuild the on/off ramps. The insurance company was on the hook to replace his store but road construction prevented the store from opening. He told me he would meet with the regional office about this serious problem he was presented with. He reported that they were very nice and expressed sincere empathy and sympathy but at the end of the day they were sorry for his problem but he needed to find away to pay the rent before going into legal default. Paying percentage rent and service fee's on base sales with zero sales should be given special consideration, in my opinion.

Anonymous said...

MCD just appointed WNBA commissioner Cathy Englebert to the BOD. WHY ? What does a basketball commissioner know about QSRs? And yet there are NO OPERATORS on the BOD. DISGRACEFUL!

Blake Casper for the MCD BOD !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Anonymous said...

If in piling up its billions in debt to do share buybacks MCD securitized its rental and fee income stream, they CANT give you rent relief.

Those securitized income streams are subject to financial covenants and the real masters of MCD-the Wall Street people who hold the debt- will never let the income go. They don't care about your restaurant, your remodel, the flood, the road construction etc.

Anonymous said...

Of course, MCD negotiated the secuirtized debt the same way it negotiated the first deliver deal with Uner Ears- with no thought whatsoever what pain it would rain down on operators. Same for the McCafe in every retail outlet surrounding your Restuarant.

Anonymous said...

The real problem with piling up debt for share buybacks, is that not all of that buy back makes it to shareholder value. Along the way MCD executives take a cut. In the form of stock options. The board approves them congruent with buy backs and executives get Rich.... shareholders should demand a closer look at the flow through of those buybacks. Although, due to a great stock market and economy no one probably cares. And McDonald’s, once all of these reinvestments are done. The money they paid for its portion of BBV2020 will go to pay down debt and raise dividends. And then someone will come along and figure a way to take more money from operators and the cycle will continue. Being a private company would be our best option. That is, for operators.

Anonymous said...

Oh. And yes, Blake Casper should be on the BOD. But also McDonald’s CEO.

Anonymous said...

Quickly

Chris the hatchet man should go - the sooner
the better

BLAKE for the board of directors

We should sell hats with the saying

GO CRIS GO - we could sell thousands

GO CRIS GO

GO CRIS GO

whatever MCD person monitoring this
site PLZ pass on my comments to
the hatchet man - he took advantage
(Better word than screwed) 1,000’s
of operators At least his boss had
consensual affairs - this one is just
one way

GO CRIS GO

Anonymous said...

Casper for BOD? Fantastic idea. But would he accept?

Anonymous said...

As an Operator I am shocked that a fellow operator does not know what is in their Franchise documents or the 2020 documents, about Base Sales, Base Rent, Service Fees or OpNad. As Operators we need to know these documents well, even far better that our McDonald’s counterparts.

To the Person that was closed for rebuild or remodel. You did not pay on base Rent if you were closed for remodel or rebuild. I know this because I have done 5 in the last 4 years. Also, There is no such thing as base service fee, it is a flat fee on each dollar.

Please Learn and Arm yourselves with the Knowledge of your contracts.