It's difficult to make investors concerned about restaurant profitability. They may be brilliant when it comes to the corporate balance sheet, but still do not understand how sales increases do not always make it to the restaurant bottom line. Or they may be very judgmental about how much a franchisee is allowed to take home. And they sure don't understand it when the CEO talks about " franchisee cash flow" without factoring in franchisee debt service.
So the following article is a pleasant surprise in that it explains:
"The real question is whether the company's value strategy can generate enough traffic to outrun the margin pressure it creates for its operators".
25 comments:
About Trefis: https://www.trefis.com/info/about-trefis/
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Imported from previous post:
The 2026 price mandate by corp could cost you your franchise license if you do not cooperate with it and do all the discounting and price fixing that corporate dictates.
Isnt this ILLEGAL?.
Where is the FTC?? NFLA??? NOA??, Lawsuits ????
We are not independent business people anymore. We are merely employees and tenants!
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100% true. But McD has intimidated the owner groups so very much that they are afraid to speak up.
Is McDonald's price fixing illegal? Who knows? That's what litigation is for.
We can bet that pajama boy and his lawyers (internal and external) spent a chunk of last year discussing the benefits and pitfalls of their new strategy.
And in the meetings, someone would eventually ask, "What if we get resistance from the franchisees?"
Once everyone is back in their chairs after rolling on the floor laughing, they'll agree to move ahead, but to make Mason Smoot sign any letters.
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So I have been consistently been out performing my business unit for quite a while now. My average check continues to be below the BU, yet i'm outpacing them in sales and GC. When Deliotte came out with their recommendations for coming off of Buy One Get One For a Dollar, I didn't accept it. Im still under 3$ as the program dictates for all products. However I was told corp last week to expect a call from one of the ops officers. I am on a list because I did not accept the price decrease. If or when that call comes I will let the ops officer know that my average check is still below the BU, and I am consistently outperforming in both sales and GC. It is not fair that I get a talking to when i'm outperforming others. Maybe Revenue Growth Management(Their new buzzword) DOESN'T WORK!
AMEN
Revenue Growth Management (RGM) is a hairbrained idea dreamt up by McKinsey and eagerly adopted by our MBA CEO with zero restaurant experience or restaurant economics knowledge. Operators be d@mned!
Great question !
WHERE is the NFLA/NOA in opposing this blatant Price Fixing?
Calling Robert Zarco, Line One !
Richard, you hit it right ! They (the McDonalds execs) Laugh at the thought of Operator Resistance. Not since the Joe Casper days at the NOA have McDonalds owners dared challenge or even question corporate. Todays operator leadership is feckless.
From the article - 1000% True-
" When operators who run the vast majority of the restaurants see their profitability squeezed by higher costs and value-menu pricing, it threatens the whole model. It can lead to underinvestment, weaker service, and friction with corporate, all of which can erode the brand’s strength over time."
Thanks but let's give proper credit. The founder of NOA was Bake Casper, son of the late Joe Casper. Of course, what really made it work were the brave Owner/Operators who showed up at the orginal Tampa meeting.
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Correct. Blake not Joe. But both were great Leaders.
A dozen of my Operator friends have either gotten a call or a nasty letter from the field office over their prices
I received an anonymous post that was a cut-and-paste from a letter the Owner/Operator received from corporate. Trouble is, I fear it contains enough unique information to be traced back to the source. Job One here is to protect participants' anonymity. Am I overly conservative on this issue? Yes, I am.
If you have the time, please reduce this anonymous post to something generic so you get fewer phone calls from corporate.
... For others, please don't let this make you afraid to comment anonymously. Just don't include personal information that would put you on PJB's target list...
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A dozen of my Operator friends have either gotten a call or a nasty letter from the field office over their prices
Is it possible that management waited until after the WWC to jump ugly on this issue?
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NOA should poll its members to see how many have received these threatening communications. Our partner has turned into a predator
Thank you Richard for having our backs!
Absolutely. WWW was a Love fest, lead unfortunately by the company and the lemmings at NFLA.
Our CE/Chairman is anti operator.
The most recent NOA sunday email contains a link to make your thoughts know to the Kalinowski survey. USE IT. It also has a link to a NOA survey. Use it.
your in good hands with mr adams
Mcd stock price near 52 week low
* McDonald's stock price has crashed by over 20% in less than 5 months.
* For me, that's a very attractive buy-the-dip opportunity.
* MCD's scalable franchise model, robust free cash flow, and Dividend * Aristocrat status underpin shareholder rewards and ongoing expansion.
* Valuation has reset to below 21x forward P/E, well beneath its historical * 24–26x range, creating a compelling risk-reward profile.
* I expect double-digit total returns in the long-term. I've just bought my first stake in MCD.
* And I intend to buy even more along the way.
>>> https://seekingalpha.com/article/4923577-mcdonalds-sell-off-is-your-opportunity?position=rta_analysis_sublogic_pretestlaunch_main_0_title&utm_source=seeking_alpha&mailingid=46653604&serial=46653604.6948&utm_term=46653604.6948&messageid=2800&source=email_2800&utm_campaign=rta-stock-article&utm_medium=email
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Is that you Chris?
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