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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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14 comments:

Anonymous said...

Everyone see, read and viewed the new CAMPUS Anti Trust Training sent to operators by the NFLA? Wondering how these OPERATOR LED price Fixing responsibilities have been quietly and completely downloaded onto the operators backs. Where those forcing these prices can point to your (operator) registered training; signed with your EID and password and later hold their hands up and say "but we trained them and they violated the law anyways". All accomplished with the NFLA endorsement. Not a peek by any operator organization or COOP?!

Thoughts?

Anonymous said...

Does the placeholding CEO have enough shares to meet SEC regulations to even be CEO? I understand he has until October (if he lasts that long) to meet the financial requirements to stay eligible for his position. All of us franchisees have had to put-down or inject personal non borrowed cash to become Operators. Will he be made to stay under the same standards he holds us too?

Anonymous said...

That is a good question for CFO Debt Devil Kevin Ozan!

Anonymous said...

The dearth of EXPERIENCED executives leading MCD is appalling. (and embarrassing) They need to shut up and go work in the stores for 6 months. And I would bet real money that Chris K makes more money than 90% plus of the Owners.

Anonymous said...

Because of multiple MRPs and EOTF debts, I have had to cut my draw three times in the past 19 months. Did not take a draw at all when bad weather strikes. Wealthy? Hardly.

Also, don't believe the garbage the Corp and its sniveling operator and agency minions are shoveling about cash flow being up substantially. When you figure in all the new debts to improve their assets, CF is actually DOWN.

MMGA

#Casper for MCD BoD

Anonymous said...

Wonder how much $$$ Clueless Chris K is donating to antibusiness politicians like Bernie Sanders?
The democrat/progressive party has jumped the shark and is now antibusiness and radically to the left. Any operator who supports a Demo needs to seek psychiatric help or has a death wish!

Anonymous said...

To poster #2- Chris K Didn't own ANY before promotion !

https://markets.businessinsider.com/news/stocks/mcdonalds-ceo-chris-kempczinski-buys-half-a-million-dollars-in-stock-2019-11-1028670242

Anonymous said...

Don't worry about our competitors, it is our franchisor that will do us in.

Anonymous said...

Thanks, Chris K! It's not like the SEIU and their goon squads needed any more fuel for their envy based war on us.
Please resign before you do any more "wealth" building.

Anonymous said...

To the poster above re cashflow;

The Corp and its operator leadership lackeys (yes men) only cite PREDEBT Cash Flow. Most accountants (I was one) would tell you that the true barometer is POSTDEBT CF.

MMGA

Anonymous said...

I am a four-store operator and probably make a little more take home than a seasoned FBP but have a lot more skin in the game and far more daily responsibilities; I have very little equity due to the amount debt I have taken on and lease tenure issue make for a future of declining cash flow and a very bleak equity future.

Anonymous said...

"I am a four-store operator and probably make a little more take home than a seasoned FBP but have a lot more skin in the game and far more daily responsibilities; I have very little equity due to the amount debt I have taken on and lease tenure issue make for a future of declining cash flow and a very bleak equity future. "

MCAD has us right where it wants us, added to the fact that we are mere tenants dumping our savings into MCD owned real estate.

It's a pretty solid way to clamp down on NOA and neuter it.

And to get operators to work against their own interest on votes and on legislation proposed to protect franchisee equity when in such a position.

Hopefully NOA has a long ball strategy to save our families' net worth I joined NOA. Without us joining in large numbers and STAYING in NOA it can't get this done for us.
MMGA

Anonymous said...

I agree with the above 100%. The NOA is our last ,best hope for protecting our equity. If you are not a NOA member-JOIN. If you are a NOA member, be sure to RENEW.

55 cents a day ($200/year) is cheap insurance to protect your equity!

Anonymous said...

Everyone knows our biggest problem is staffing and retention. Here's an idea that could increase top line sales significantly. MCD should cut the (N0)Service Fees from 4% to 2% conditional on the Owner investing the savings in higher wages and/or labor coverage. It would enhance our position and image as employers publicly, help staff our stores adequately, and actually INCREASE top line sales. Field first is saving the corp a ton . SERVICE from them is way down. But of course Clueless Chris will never buy in.