The Fast-Food Giant Plans Stricter Reviews and New Criteria for Franchise Owners
McDonald’s Corp. is poised to implement significant changes to its U.S. franchise operations, according to an exclusive report in The Wall Street Journal. McDonald’s plans to implement the modifications next January, the report said. Franchisees operate 95% of McDonald’s restaurants in the United States.
Executives this week notified U.S. franchisees that they will undergo stricter reviews every 20 years in order to retain their restaurants, The Journal reported after being shown an email sent to franchisees. McDonald’s will review new factors, such as performance history when owners apply to keep their stores, The Journal article stated. And McDonald’s corporate leaders will also examine new factors — customer complaints among them — when assessing which franchisees may add more units to their portfolios.
McDonald’s Expects More Cash from Heirs
Some longtime franchisees are likely to be upset by a change that will mandate that next-generation heirs pony up more money to maintain operations at their sites, The Journal said. In addition, heirs will be required to name a single family member as the operator; under current rules, McDonald’s franchisees can designate multiple heirs, such as the children of an owner, to take over their McDonald’s restaurants.
For the past several months McDonald’s has sought to recruit franchisees from more diverse backgrounds. In conjunction with that search, the corporation also set expectations for franchisees to create a favorable work environment for employees and align with company values. The policy changes revealed by The Journal aim to promote those goals, U.S. President Joe Erlinger wrote in a message to U.S. owners and employees.
Pushback by McDonald’s Franchisees
Some McDonald’s owners told the newspaper that the rule changes surprised them. Some franchisees say they plan to push back when they meet with company leadership in late June. The National Black McDonald’s Operators Association sent a message to franchisees on June 23 asking whether they should issue a no-confidence vote regarding company CEO Chris Kempczinski, The Journal reported.
McDonald’s owners generate some of the largest annual sales per restaurant among any U.S. fast-food chain, but franchises are costly. Start-up costs for a traditional McDonald’s franchise are $1,366,000 to $2,450,000, including a starting franchise fee of $45,000, according to the franchise disclosure document. Franchisees pay rent and service fees based on a percentage of total sales.
McDonald’s had 13,679 restaurants as of Dec. 31, 2021. It has more than 2,400 U.S. franchisees.