Coalition of Franchisee Associations

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


Anonymous said...

Reporters often pull partial quotes out of context to paste into a prewritten narrative.

Each of those experts know about McDonalds rents and how inflation boosts the top line, often at the expense of the bottom line. At least the franchisees know and I'm sure they they explained this and also some of the horror stories about crap brands that were born just to take money from people who want to be franchisees. These crap brands want to charge higher royalties, too.

Richard Adams said...

The fact that the article compares McDonald's royalties to other brands makes the entire article bogus; at least one of these "experts" should have pointed this out. Or referred the reporter to the NOA or one of the many McDonald's franchisees who these "experts" must know. People who go on record with reporters should not complain about being misquoted at a later date.

I've found that it works well to have the conversation and then immediately recap your salient points in an E-mail. The reporters like it because it's a form of fact-checking, and you have a better chance of getting things relayed accurately.

Anonymous said...

I have been involved in a number of big stories that have made front page news or is the lead on our local television news outlets.

Never once has the media gotten it right, in fact they are usually completely wrong in not only the way that they tell the story but in conclusions that either they or the viewer might reasonably draw based on the facts as presented.

I have come to the conclusion that reporters are overworked or they are lazy or they lack the mental acuity to understand what they are reporting on to the extent that they can clearly and accurately retell whatever they're reporting about. They're either overwhelmed, they won't go out of their way to get it right or they just aren't that smart. I don't know, maybe it's a mix of all three or I've missed something.

I'm sure that this dynamic is true at varying degrees at the national level too, the only way that these reporters on this topic will get it right is if they talk to us directly, and even then, who knows what their agenda might be?

As long as they are mostly reliant on the company for information, much like the Board of Directors, they only hear whatever CK tells them; maybe they draw logical conclusions based on incorrect or incomplete information and guess what? In the case of McNews what they know leads to how it's framed and memorialized. Each of us only know what we are told, we've got a circle of friends or sources and that's how we determine what is right, what isn't, what is accurate, what isn't and that's how we make up our own minds. Reporters/the media is no different.

My point is as long as they're mostly relying on the company to provide facts, figures and background- the company is in control of the narrative and whoever controls the narrative gets to make the truth whatever they want it to be. Sometimes even smart people tell themselves something that they know isn't true so many times that even they start to believe it.

That's why it's important for us to foster relationships with those who report on McDonald's. Reporters might try to find "experts" but the only experts that they contact are those that they have access to or those who they have been referred to or whatever.

Richard has done this before, how about each of us makes an attempt to make contact with someone who reports on McDonald's and maybe one day someone will get it right.

I did it, there's nothing stopping you.