Subway has made several new requirements for its franchisees
"All of which has resulted in frequent pushback from franchisees over strategies such as new discounts, extended hours, and even the company’s new slicers. And franchisees often refuse to go along with the company on some of its initiatives, such as digital offers."
6 comments:
Coming soon to Mcd. They are already pressuring us for extended/24 hr operations. I did 24 for two years and didnt even break even. Didnt make a dime BUT MCD DID.
No investment, no effort, no creativity on corporate's part. Just send out a memo and make it so.
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How many franchisees will actually read thier franchise agreement concerning operating hours.?
Great point. They cant legally force you to do 24, but they can, and have, intimidated many into it.
24 hours is a money loser. And it wreaks havoc on your equipment, wearing it out twice as fast.
I operate some restaurants 24 hours, some 24 hours only on weekends, and others that close at 11 p.m., midnight, 1 a.m., or 2 a.m. It depends entirely on the location. I am not opposed to 24-hour operation when the sales justify it and the restaurant is profitable, but it does not make sense for every restaurant.
In my market, I need to be doing roughly $300 during the closing hour or I will not stay open, with closer to $500 in the hour leading up to it. The same applies if staying open for just one or two additional hours would bridge the gap to 24-hour operation. The frustrating part is that I may lose money during one or two slow hours while McDonald’s continues collecting its percentage of sales. That is why I will sometimes close for even three hours. I am not going to remain open merely to break even or lose money, so McDonald’s can continue earning revenue.
When McDonald’s licenses a new site, it will often require 24-hour operation in the franchise agreement if local zoning permits it. McDonald’s can also impose new terms when it exercises its right of first refusal on an existing restaurant and resells it, or when it sells one of its corporate locations and relicenses it under a new 20-year franchise agreement. Those terms can include higher rent and a 24-hour requirement.
McDonald’s may have to accept a lower purchase price because of those added requirements, but it will likely make that money back and considerably more over the long term. I cannot blame them; it is a smart business move.
The existing franchisee in the area also have a choice whether to purchase it. It is not a new restaurant entering the market and affecting your business; the restaurant and its operating history were already there. If the economics or 24-hour requirement do not make sense, don’t buy it. McDonald’s can bring in an RA or, even worse, an RA on BFL.
If that happens near one of your existing restaurants, you decline to purchase it, and you want to have some fun, market the heck out of your location and make McDonald’s and the RA compete for every customer. It can become an interesting game and really bury an RA who is operating on a BFL.
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