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