Coalition of Franchisee Associations

October 31, 2023

California, A Growth Market?

"CEO of the burger giant, told analysts that the company’s (California) restaurants will take a cash flow hit when wages are raised in the state, but he calls it an “opportunity.” But for whom?

"so let's use this as an opportunity to actually accelerate our growth in California."

This may be one of those things that get talked about with analysts but never comes up again, and management has to build on the myth that McDonald's is a growth company. But, building stores in California - in a state that's losing its middle-class population - is risky business. Unless it's purely an effort to move sales from lower rent and royalty stores to more profitable (for corporate) stores. Suffering through a huge wage increase and then having your sales cannibalized doesn't sound like a lot of fun.

McDonald's believes it can grow in California - Jonathan Maze

October 28, 2023

McKinsey Comment

From Anonymous:

"McKinsey & Co. provides many services to McD. They even have an office in MHQ. If you have ever wondered what McKinsey was about, the following video will enlighten you:

Also, the book "When McKinsey Comes to Town" provides valuable insights into them."

October 27, 2023

Look For The Union Label

"Unions have been pushing for decades to broaden the definition of joint employer in hopes of easing their efforts to organize whole chains at once, instead of proceeding franchisee by franchisee. That task might be easier if franchisor and franchisee are viewed as the same entity by employees."

New rule increases restaurant franchisors' chances of paying for franchisees' labor mistakes - Restaurant Business

IFA urges Congress to undo revised Joint Employer Rule - Franchise Wire

October 25, 2023

October 23, 2023

Franchise Business Getting More Expensive

Maybe it was my weekend to be tough on press coverage, but this CNBC article continues the tradition of not mentioning the fact that McDonald's charges franchisees rent in addition to "royalties."

In fairness, many reporters cover a broad range of business and economic issues and can't be expected to understand every complexity of every business model. In this case, the blame falls on the many "experts" the reporter quoted. These people should have some vague idea of the differences between McDonald's and the typical franchise arrangement. But here again, none of these "experts" mentioned the huge rent factor in the McDonald's franchise.

The article does mention that an increase in royalties can be justified due to inflation. That just isn't valid. An increase in royalties happens automatically when the franchisee raises prices due to inflation. This increases income for the franchisor with no increase in overhead. 

In some cases, inflation increases the franchisor's operating expenses related to those royalties. But that doesn't apply to McDonald's since the corporation has been reducing services to franchisees, hence the change in terminology to "royalties.

CNBC reports one-half of the story

October 21, 2023

More Click-Bait Headlines

How did McDonald's become a flashpoint in the Mideast war? - WaPo

Because Israel is taking its time sending ground forces into Gaza, bored reporters around the world are looking for "War Stories" to write. This is one of them.

The United States supports Israel and always has. McDonald’s represents the USA. No matter what the Owner/Operator in Israel may or may not have done, some people in Palinstiene-friendly countries will take it out on McDonald's.

October 11, 2023

McDonald's, Cane's Gain Favor Among Teens

According to Piper Sandler’s semi-annual “Taking Stock with Teens” survey,

Topical Anonymous Comment

Anonymous has left a new comment on your post "McDonald's Shareholders Rewarded":

I am hoping that some McDonald's Stockholders read this BLOG.

Dear McDonald's Stockholder

Last year, McDonald's CEO made a statement of support of Ukraine in its war with Russia. Chris Kempczinski, CEO, sent the following message to employees and franchisees-

"The conflict in Ukraine and the humanitarian crisis in Europe has caused unspeakable suffering to innocent people. As a System, we join the world in condemning aggression and violence and praying for peace."


October 6, 2023

Maze - It's in the McRent

Jonathan Maze straightens out some of the misconceptions about rent vs. royalties vs. service fees. I hope other reporters read this.

The McDonald's premium? It's in the rent - Restaurant Business

Getting at the Numbers

A friend also pointed out some interesting numbers in a recent Seeking Alpha analyst's report. Now, these McDonald’s corporate numbers are no secret. They’re in the quarterly and annual reports that we should all be tracking (shame on us). But this analyst breaks them out concisely:

Over the past three years, the firm has seen its profit margins associated with its US franchised operations climb from 10.75% to 11.64%. A small portion of this increase came from actual franchise revenue. But the lion's share was driven by higher rents that the company was able to extract from its partners. Owners of franchised restaurants went from paying $6.84 billion in rents to the company in 2020 to $9.05 billion last year. In the U.S. market, this was responsible for pushing total franchise revenue that the company collected from $5.26 billion to $6.59 billion, with the take relative to total franchised systems revenue growing from 13.80% to 14.35%.

Seeking Alpha report > McDonald's: The fee hike is evidence of something bigger

October 4, 2023

NOA - One Step Ahead

A friend tells me the NFCA (McDonald's accountants) are discussing the idea that:

"franchisors should reinvest the economic windfall from revenue generated from price increases taken in response to the legislation back into the restaurants in the form of technology, AI, and other operational efficiencies".

My friend wants everyone to remember that the NOA originally presented that concept in their September 14th message to their memembership.

QSR Price Wars?

Jack-the Box - Two for $20 Tacos - Babylon Bee