McDonald's to raise franchise service fees - CNBC
And now MCD has announced a 30% raise in service fees.Thank you, sir, may I have another?How long before a restaurant becomes worthless to a negative value?Considering selling now while I can and putting the money into state tax-free high-yielding US Treasuries. They can’t be sold out to SEIU. Well, as long as the Biden administration doesn’t think of it.
We are letting this company management team destroy our equity and turn our multi million dollar investments into garbage. And the NFLA, our supposed advocates, say NOTHING !
Corp has this mindset of thinking of us as fools, easily replaceable, like (as Chris K said), "Uber drivers"
They currently plan on building a lot more stores in 2024. What fool is going to buy them? The math just doesnt work with the huge rents and buy down costs. You have to do $4mm JUST TO BREAK EVEN!
Expect to see the right of first refusals skyrocket so corp can further jack up rent and collect more "royalties"
well now the nomenclature has been changed, service fees are now Royalties. A subtle change to camouflage the fact that the company is consistently providing less and less true services.
The claim that international markets already pay 5% is rather bogus because in international markets the company still partners on remodel costs. They are LIARS.
I would love to see the NOA (the ONLY group truly representing owners interests) do a survey of the operators on this atrocity by the company.
Bottom line is this- WHEN will the operators see things clearly and say "enough is enough"?We sure cant count on the NFLA to say a word!The NOA is the only thing standing up for us.
The company is reporting huge increases in profit, record stock prices, and yet they continue to be greedy and take more and more from the operators. Pure greed.
TAX FREE 10 year treasury bonds yield yesterday hit 4.47% GUARANTEED. Why risk losing capital in a McD investment with no guarantee of success?
Any comparison to other franchise brands and their "royalties" is bogus because few other chains are also the franchisee's landlord. Few other chains get rental income..
Let's talk about rewrites..
Any comparison to other global markets is bogus because MCD may or may not have any real estate interest or real estate income in those markets..
If they are now going to be royalties, let us negotiate our real estate deals or own our own real estate and building.
Please don't tilt at windmills. Working together, McDonald's Owner/Operators have a lot of clout, but they will never be involved in the real estate side of the business..
To another attack aboveThis just hit the news this morning. give NOA and NFLA a little time to respond. Its not like they knew about it beforehand, because our dictatorial franchisor shares NOTHING
Corporate leadership could not care less about a "defiant voice". They already ignore the NFLA. The only way to get corps attention is to air our "dirty laundry" to the press. Remember how mad Joe got about leaks?
This announcement will further boost the stock price (more revenue for McDs) while reducing operator equity.
We will hear nothing from the NFLA. They are a bunch of suck ups who pander to the company for personal gain.
Record cash flow? I keep seeing the bottom-line percentage EBITDA get smaller & smaller. I have restaurants that made the same amount of cash flow in 1990 so $400k is not what is was 30 years ago.
NOA released their response at 6 pm
Good advice from their response - The NOA recommendation that McDonald's Owner/Operators obtain legal advice before executing documents is solid advice. Over the years, 90% of the legal advice McDonald's Owner/Operators have received has been from other McDonald's Operators or from McDonald's corporate employees..
Dear NFLA Executive Officers and Representatives,Your (non) response to the royalties announcement was pathetic. Your cowardice to speak up is embarrassing. Would you all please resign so we can elect brave, courageous, committed LEADERS with a voice? You have failed and betrayed your constituents badly. The only ones pleased with your performance are the corporate execs, since you are their lackeys. Lead, Follow, or Get Out of the WAY.Signed,The 2000 domestic US Owners
Ray Kroc said "The quality of a leader is reflected in the standards they set for themselves."Where are our leaders? Nothing but crickets from our elected NFLA representatives
"Achievement must be made against the possibility of failure, against the risk of defeat. It is no achievement to walk a tightrope laid flat on the floor. Where there is no risk, there can be no pride in achievement and, consequently, no happiness. The only way we can advance is by going forward, individually and collectively, in the spirit of the pioneer. We must take the risks involved in our free enterprise system. This is the only way in the world to economic freedom. There is no other way." Ray
NOA is a member of CFA, whose other members have fought and won battles against their franchisors when they had awful management teams that tried to steal their equity.That's a good resource. GO NOA!.
Even with the legal advice McDonald's will not negotiate any change of the documents. Corporation hides and many terms within the document and amends your other contracts with a new agreement. DocuSign is dangerous as people just click approvals without reading the details. The even have a required update in the web access requiring non-trial litigation on any issues with it's use. How do you get information without giving up your rights??
It’s time for every Owner/Franchisee to begin focusing on protecting their business, their employees and their family. Every reinvestment decision should be reconsidered; only investing in programs and items that generate a commercially reasonable return on investment. If you are looking at opening new restaurant, making such investment at this time will not provide a historical return for the franchisee. And now, the 1.00% increase in royalty (which represents a 25% increase in such fees) will make it even more burdensome on you. Each new restaurant should be re-evaluated with your CPA and financial advisor; perhaps a greater return could be generated from investing in McDonald’s stock, a fixed income vehicle or an index fund? Now is the time for Owner/Franchisees to unite across the country and across the globe. We have had calls to action before, but never as important as today. Our collective actions and our cumulative voice can be heard. In the midst of these changes, we must remain vigilantly focused on our culture of care for our McFamily and our communities. Our ability to continue delighting our guests is solely reliant on our effectiveness in caring for our employees and staying true to our values of respect, inclusion, integrity and serving. The NOA will not waiver as your advocacy organization, your voice of truth. We are committed to you, our members, and to the hundreds of thousands of employees that serve millions of guests each day. We will collaborate with our elected Owner leadership to determine ways to positively impact the System for the benefit of our restaurant teams, our customers, the brand and ultimately, our shareholders. Our brightest days are yet to be. With Gratitude,Your NOA Board
Calling the service fee a royalty now means that they are not legally obligated to provide us with ANY service since we didn't pay for any. Plus, royalties show up as an asset on the MCD balance sheet, inflating their net worth. Service fees were a P&L item that showed an expense due.If we get any services in the future, MCD can now start charging us separately for them. Yes, we have been Royalty screwed.
When discussing NFLA, COOPS, ETC one has to question ones character when opportunity controls their loyalty.Royalties make sense in corporate land since there is NO ONE left there with any restaurant operational knowledge to service the field. They already believe their "operators" (field managers) earn too much.Field Service is nothing but Field Evaluators. Delivering stress and turnover on items comparible to joint employer taskings, etc.Automation has only hardened their resolve. Whereas, head office believes they can control sales by massive APP discounts, on boarding and payroll. Why not? They never ran a store... anywhere. Looks good on paper.. and the board is as incompetent as pajama boy.Stock manipulation floats the valuation, temporarily. Current eligibility manipulations have transitioned once profitable store into mediocre stores.They complain about inflationary price increases, but that is the only thing keeping the entire system afloat.Operators have no controls anymore over their business.There's no viable course for correction. Its been a good run for the brand.
MCD will find new franchisees. Crap new franchise brands that anyone with business sense can see will be destined for bankruptcy (soup franchise?!) find buyers every day. The opportunity to get into a brand like MCD will be overwhelmingly appealing to people who want a franchise.MCD will just lower its standards for potential franchisees. They will get people who are willing to make less, a LOT less. People who buy a 7-11 buy themselves a job to wok overtime but not get paid overtime. MCD has to look a ,to better. MCD doesn't care if smart franchisees don't want to take on the huge risk and work required to own a restaurant. They can find people who WANT to be glorified store managers and tenants with high rents.In CA, the management ream just gave itself a huge raise due to price increases to abbsorb $20/hr starting April 1st. Free money from the sky.It's only when the management team's side of the cash flow gets crimped that they will change that view.
Here's a little different perspective. Given recent history, it would be out of character for management to bring in a bunch of marginal franchisees. The trend has been to let the larger Operators grow larger. Does management really want a bunch of new, single-store Operators who need constant care and feeding? Or will they continue to go with larger, more self-sufficient Operators? The recent downsizing doesn't leave corporate with the resources to spend a lot of time with the individual Owner/Operator. Or they could bring in new Operators who have cash and give them three or four stores. That way, they'd go broke more slowly and the turnover wouldn't be so obvious..
Management might want a large multiunit operator but they won't get them from other systems. Those guys won't sign just anything that MCD shoves down heir throats just to be a MCD store manager and take a crimped cash flow. They won't agree to have no say in how the system is applied to their operations. That's not modern multi-unit franchinsing, and they will operate other brands and won't give that up.They will have to come from within because they are used to that culture.
If and when McDonald's allows their franchisees to operate other brands we'll know the traditional (and successful) McDonald's culture is truly dead..
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