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February 25, 2020

Franchisees Dodging Bullets

In January the Department of Labor defined "Joint Employer" and now the NLRB has set 
out a rule that franchisees are not joint employers. This should protect franchisors from excessive litigation and make it difficult, if not impossible, to unionize franchised businesses.

NLRB Issues New Joint Employer Rule Requiring Direct Control
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February 21, 2020

Mayor Pete Attacks McDonald's

Buttigieg said in a statement on Friday, "It’s critical that we support workers who are
coming together to fight for a union, fair wages and benefits, and an end to harassment 
and discrimination.”

How much will the McDonald's PAC send to Mayor Pete?

Buttigieg to join striking McDonald's workers next week
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An Owner/Operator as MCD Director?

Occasionally an anonymous website visitor submits a comment about having a McDonald's Owner/Operator on the McDonald's Corporation Board of Directors.

At least one commentor recently stated that would be a waste of time. I agree completely, 
it would be a waste of time, effort, and resources.

First, there's no mechanism to make it happen. Just because someone signs a McDonald's franchise agreement doesn't give them the right to help run McDonald's Corporation.

But most importantly, directors of a corporation are "insiders" who cannot discuss the board's business at anytime. When have we ever seen a board member of a public company discuss the company's plans under consideration? I'm sure the answer is never. We might see a carefully prepared public statement by the chairperson or CEO but not from a run-of-the-mill director.

You might have seen public statements by activist investors but those people are not directors, just big shareholders such as Bill Ackman was at one time.

Here's a hypothetical: It's year 202X and there's a McDonald's Owner/Operator on the McDonald's board of directors. Corporate earnings are in a slump and the board is discussing ways to increase revenues. One of the proposals is to raise the "service fee" charged to franchisees by a full one percent. 

Can said Owner/Operator leave the meeting and launch a campaign among their fellow Owner/Operators to discourage the board from making such a move? Nope, they can't discuss it with anyone. And if the change moves forward their one vote wouldn't stop it.

And there are many other governance issues that would cause this one director seat to be ineffectual. After signing a stack of NDAs and other agreements this Owner/Operator would be completely neutered.

There are many ways Owner/Operators can influence the direction of McDonald's Corp.  Spending years fighting a losing battle to force a franchisee onto the McDonald's board of directors is not one of them.
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February 19, 2020

Subway's Struggles

"Subway is planning to offer a buy one, get one offer for its footlong subs starting next 
month. Customers who order a sub online or through the chain’s mobile app can get 
another one for free.
Yet franchisees, who operate all of Subway’s nearly 24,000 U.S. restaurants, have 
pushed back against the offer."
Subway works to rebuild its business - Restaurant Business
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February 15, 2020

This is What We've Been Saying About Fake Meat

This analyst is looking at nothing but Beyond Meat and is not considering any impact
on McDonald's sales or profits. They estimate McDonald's could sell 45-55 fake meat 
patties a day. I'm sure that's possible after OPNAD spends millions of Owner/Operator
$$$ advertising the product but then it will drop back to 10-20 a day.

But Beyond Meat shareholders will benift greatly. Just how many of those shareholders
work for McDonald's Corp. is the question.

Beyond Meat Rises as Bernstein Gets Bullish on McDonald’s Potential
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February 10, 2020

Words Mean Things

Looking back on the January McDonald's conference call with analysts it seems we didn't adequately discuss the CEO's comment that McDonald's Owner/Operators are "Wealthy".

That was an extremely poor choice of words.

In a publicly held franchise company there is always a tug of war between shareholders and franchisees. Shareholders know that franchisees have to be solvent. But, if shareholders perceive the franchisees are making too much money they'll want to move and in and get 
their share. 

There are many ways to describe the financial status of franchisees - "in good shape", 
"solid", "successful", "prosperous", "comfortable", "aligned" etc.

But the word "wealthy" is in an entirely different category. The word denotes a level of opulence that needs to be taken down a notch.

And I'm not just spitting verbal hairs. For example, McDonald's management has to justify their capex expenditures to shareholders. A certain amount of that capex goes to partner 
with Owner/Operators on remodeling. If investors get the impression that franchisees are 
too "wealthy" there will be questions about why part of the capex budget has to go franchisees and not to shareholders. That's just one example.

A management team that understands franchising would not make this mistake. But that's 
not the case at this point in McDonald's history. It might be the fault of the McSpin department that writes the CEO's script but a knowledgeable CEO would have changed it 
in editing.

McDonald's Owner/Operators should resist being labeled "wealthy" or any other over-statement, it could cost you a chuck of your net worth.
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