Dear Fellow Owners,
US McDonald’s restaurants are 95% franchised. Owned and Operated by the best in the business, the Apex Franchisees. Our commitment to our people, our communities, and our brand is unparalleled. Together, with individual McFamilies, Managers, Restaurant Staff, Mid-Managers, and Support Staff, we were in our restaurants every day of the pandemic. We did not hide in our bunkers. We did not isolate. We turned on our lights. Opened our drive-thrus, and served our guests, our first responders, and our neighborhood. We were, and are, the beacons of hope and inspiration. We shine our Arches bright.
We are Mr. and Mrs. McDonald’s. We are fixtures in our communities. We are members of the Chambers of Commerce. We are engaged with our social service agencies committed to making our communities stronger and better for all. We support our local, youth sports organizations and are members of our school’s PTA’s. We are on boards of education; school districts and libraries and we are on city councils. Yes, our business is to sell great-tasting food, America’s favorites, providing those memorable feel-good moments, in a spotless dining room or drive-thru, with fast and friendly service. We don’t just sell hamburgers and fries. In short, in every community, WE ARE THE BRAND.
Inflation has now achieved a 40-year high and every American is feeling it. Our businesses are not immune to these detrimental impacts. Our collective efforts to remain relevant and accessible to our consumers have resulted in tremendous sales for the System, but it’s not translating into positive cash flow for our businesses. 2021 was touted as a record cash flow year for the franchisees and a record operating revenue year for McDonald’s. 2022, however, was a very different tale with franchisee cash flow dropping by approximately $100,000 per restaurant. Contrast that with another operating revenue record for McDonald’s US.
As planned, 2023 will be another record sales year, resulting in unprecedented operating revenue for the Company. As franchisees and stockholders, we celebrate these achievements and successes. We want and need, our Franchisor to be strong and resilient. We trust and hope that our Franchisor wants the same success for its Franchisees as it does for itself. Unimaginably, with the tremendous sales momentum, franchisee cash flow will retract again in 2023 for the second consecutive year; likely by $25,000 to $50,000. The gap in operating revenue performance is not sustainable. We should not, and can no longer, be accepting the burden of the entire impact of inflation.
Promotions and discounts have become significant enough to earn individual line items on our P&L’s. OPNAD and BU’s must establish promotional and discount percentage thresholds. They are a vital component of our current advertising strategy. As stewards of our advertising budget, these line items must be included in all budgets.
McDonald’s is restructuring, in part, to reduce their G&A costs, while the restaurants are adding additional layers of G&A support to manage the Ops/PACE assessments, People Brand Standards, EVP, and project management. While McDonald’s is being advised on strategies to reduce operating costs, becoming leaner and more efficient, the Owner/Franchisees are doubling down on our investments in people, technology, and equipment to become more effective. We recognize the importance of assessing and improving our operations and we are making these substantial financial investments in our people and restaurants. WE ARE THE BRAND in every restaurant and every community we serve.
Conversations with FBP’s have begun with Owners on their Qualified to Buy (QTB) status. The newly defined Guest Experience Measurements (GEM) are being cited as the rationale for why Owners may no longer be considered “Qualified To Buy”. It seems unimaginable that McDonald’s could turn to Owners that are achieving record sales as well as operating revenue for the Company and tell them they are no longer qualified to buy. The Owner/Franchisees and our teams are largely responsible for the success of the brand through the global pandemic. McDonald’s has clearly demonstrated its strength to Wall Street, which was earned by the immeasurable commitment of the Franchisees and our teams.
Owners/Franchisees that have demonstrated their unwavering commitment to brand McDonald’s for years, decades, and even generations are now being told they are no longer good enough. Amid the success the brand is enjoying, these ratings are impossible to reconcile. It’s clear, McDonald’s needs to work with our elected leadership to re-evaluate and improve the measurements and criteria being used.
Amid 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. The NOA was never just about our founders. It has always been about you. We are reimagined with an aggressive agenda to assist all owners, and WE ARE HERE TO STAY.
Our brightest days are yet to be.