Coalition of Franchisee Associations

February 21, 2020

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.


Richard Adams said...

As to my hypothetical - as far as I know, there's no discussion about raising service fees. I just picked that component of the business model because it doesn't vary like rents or OPNAD.

As to the secrecy surrounding any corporate board of directors - I don't mean to make it sound nefarious, it's a necessary thing. When rumors get out analysts rush to speculate on how a change might impact the company's results sending share prices into gyrations that aren't good for any of the stakeholders.

Anonymous said...

The NOA was a good move, but any organization has to be whole. To be whole, it has to have teeth. You never want to have to bite. However, without a understanding and willingness to bite, you'll never achieve mutual respect.

Corporate isnt afraid to bite. In fact, they bite, punch and even kick operators on a regular basis. Corporate, even the board, live and die by results.

90%+ of revenue generating restaurants are operator owned. This makes a very powerful lever if properly applied.

The NOA needs a director whos paid and not an operator, guided by a board of operators. For once in a locked room, any operator is easily threatened by corporate. And that negotiator needs to be clear, articulate and fully supported by the membership to deliver in firm terms the ideas to protect the brand. Enforcing our leg of the stool, even if it takes hammering it over the remaining legs. Our voice has to be equally measured and honest. Open discussion has to be valued; even if either side disagrees with the content.

Anonymous said...

A well-versed McDonalds business operator on the board is essential. However, not for the reasons that many promoting the idea think.

The problem with the board today is there is sufficent knowledge of McDonald's culture and operation to allow the board to think they're right. However, a complete lack to the depth of McDonald's knowledge for the board to know when they are wrong.

In the past, This offset with depth of operation knkwledge was enabled by past CEOs - Ray, Fred, etc. Mentors that developed the brand, had vision and operational expertise. That grounded the board in operational soundness and protected overall brand trust.

That depth of brand knowledge doesnt exist today, anywhere in McDonalds Corppration. The Worldwide leader of McDonalds isnt from McDonaldland... and whatever depth he has was limited in scope to the mission he was brought onboard to achieve at that time.

The board, masters of their fields ... still have no idea of the brand trust that made the arches shine. What shines for them, stock valuation.

So what does the brand suffer from today, vulture capitalist who destroy the brand to bump a stock. Taking a short term gain, over brand longevity. Does anyone seriously think there is anyone in corporate with a 20, 30 or 50-year vision?

As operators work a 3-5 year plan, plan Second Generation, corporate is working a 3 month quarterly report cycle. Even technology isnt looking forward of a 6-month cycle. The sole long-term visionist for the brand is the franchise owner. Without that vision directing the board, the brand will be short sighted, if not sold short.

Hence, its franchise investment security to have a seat at the table. And not to be disuaded by comments of what can or cant be communicated once there.

Richard Adams said...

Well stated. However, we've been hearing about this idea for 25 years (or longer) but there's never been a way to make it happen.

Anonymous said...

It is one thing to understand and operate good solid performing restaurants. However, that knowledge does not translate to understanding and operating a solid performing Global company. MCD operators are the very best in the world at operating franchised quick service restaurants.Much better than MCD corporation and everyone agrees that is true. If it were not true their would be no reason to have franchisee's. Operating a Global corporation requires knowledge well beyond what experience operating MCD restaurants provides. IMO.

Richard Adams said...

There's no evidence that this new management team knows how to operate a global corporation. We'll see.

Anonymous said...

The comment about NOA needing to grow some teeth is spot on.
Is it not obvious that management is just placating NOA at this point? Waiting them out and continuing to push operator- wealth destroying strategies, and then blaring out to the market every three months how much stockholder value they created by taking it from operators and financial engineering?

Operates own 90% of the units. That's a muscle to flex. If NOA takes to the public arena (financial, where the average consumer is not listening and won't harm brand value to our guests) , management will sit up and beg.

I see no evidence that this is ever going to happen. What will it take?,

Anonymous said...

Agreed. I certainly don't endorse MCD's current top management. I wonder what measures the BOD's have adopted to evaluate these people with no relevant background. It seems that implementing technology is their only concern. It is unbelievable they would turn over the entire system to managers with such shallow experience in the industry or specifically MCD. It doesn't speak well for them as there are more effective ways to do it. Every time I hear pee wee Herman speak it creates feelings of insecurity and of pending doom. You have to assume that he is being "handled" by staff. So, we really don't know who is making the most important decisions impacting our investment and future.

Anonymous said...

Thinking placing a 1 person on the board jeopardizes the global operation misses the point. It only gives brand specific business insight, which the board severely lacks. Hell, the entire MCD organzation lacks it on the corproate side.

A board is created with many experts.. financial, human resources, international affairs. Each brings their talent to the benefit of the whole.

The reason it never happened, operators were never in a position to force the demand. This is the time and place in history to make it happen.

Just needs a consolodated voice to communcate a process. The 3rd ANNUAL NOA Meeting is weeks away. Think about it. 3rd ANNUAL! Some say the wheels of change move slowly. Some could say, non-existent in the case of the NOA.

Teeth for the NOA?

Id be satified with a Louder VOICE!

Corporate has already thrown the NOA on its death throes. What I fear most, so will many operators.

Not to sound overly disparaging, McDonalds Franchisees all suffer from the worse case of Stockholm Syndrome ever.

Anonymous said...

Heres the choice - hang TOGETHER (Noa) or hang separately.

Anonymous said...

Any sentient owner knows that the anti NOA comments above are probably planted bt a MCD corp troll.

Anonymous said...

Above poster said about the board and management: "It seems that implementing technology is their only concern"

It is a giant one because the Wall St analysts always call that out for restaurant brands. They also call out "Value" and delivery. Every single analyst note on a publicly traded restaurant repeats those 3 things like a mantra, ad nauseam.

Since MCD management and the board know nothing than more than the stock analysts about running a restaurant, they take these 3 things as marching orders. And operators have to march, dropping cash with every step.

BTW-"Value" means endless cycles of discounting on top of discounting. Sell a discounted item that the app gives a deeper discount on etc.

A secondary message from the analysts is FAKE MEAT is great! Expect to be force fed fake burgers that our customers won't buy.

Richard Adams said...

And the problem is compounded by managements boasting that everything they are doing is working. McDonald's can throw out global delivery numbers which sound huge. Burger King can lie about how well fake meat is doing. Chains can claim their drive-thru times have improved due to new tech. While some information a public company gives out can be verified by outsiders certain data can't be verified by anyone. So multiple chains can claim that these initiatives are working brilliantly and that forces other chains to go in the same direction.

If other chains are claiming that fake meat is selling well then analysts will ask, "what's wrong with McDonald's"?

Anonymous said...

I'm not sure where to post this, but here we go. I'm upset with our upcoming partnership with Disney. They seem to have allowed Disney to dictate our values. In the upcoming Disney release "Onward" apparently there is an LGBTQ character. While it does fit within our "modern and Progressive" value system..... it does not fit within my moral compass. I really would not like to be associated with this. Perhaps I'm the only one....

Anonymous said...

I agree. All of our problems seem to stem from McDonald's guidance. We take away fast service and ask operators to do better, we switch OPNAD companies like our crew turnover and create new rules to kick ad agencies out. Our "best" "worst" competitor is McDonald's Corp itself.... it's really, almost unbelievable. They should create a 2nd addition of McMillions. Sub titled, "how we screw owners out of equity and money".....then go on to buy a European soccer team.

McDonald's Corp needs to do some soul searching and an honest evaluation of themselves. this poor decision making can't go on forever.... and if it does, I will be out a fair amount of money and, perhaps, will be happier in the end. So I guess, all roads lead to my happiness.... with McDonald's and actually making money OR being away from McDonald's and not being extorted. either sounds like a win at this point.

Richard Adams said...

When Disney and McDonald's work together Disney calls 100% of the shots. McDonald's is the junior partner. McDonald's corporate people and the agencies act like they are just lucky to be in this relationship.

Anonymous said...

To three posts up- You are NOT the only one. Ray and Fred are spinning in their graves! MCD (all companies actually) should NEVER take a position on political or social issues. Unfortunately MCD top execs are totally PC and flamingly Liberal, especially Chris K. The smart thing would be to stay neutral, and concentrate on selling hamburgers, not supporting PC propaganda.

Anonymous said...

I agree that we need to build and keep NOA funded, independent and strong. I also agree that NOA needs to change up some tactics. The campfire bonding isn't helping my bottom line so far...

Don't get me wrong, I renewed and know that we need an independent franchise owner organization that can stand apart from the company's rigged systems and clealry not true voting mechanisms. I just want them to to start driving the bus.

I speak to friends in other systems that are in their independent franchisee organizations. They host stock analysts at their event sand at CFA (the ones that are emembers of that group). Their franchisor a want them happy because they know that the franchisees know the truth and so so the analysts.they are routinely told not to talk to them and they routinely ignore this self serving advice.