30% of McDonald’s Franchises Are in Trouble

An April report by Franchise Consulting Group in partnership with VF Franchise Consulting titled “McDonald’s Model in Dying Days – 30% of Franchisees Insolvent” suggests some franchisees are insolvent and the McDonald’s business model of Ray Kroc may be in its end days.

Franchisees generate over 2/3rd of their revenues in the U.S. Franchise owners say the corporation is on a destructive path, and one 8-store franchisee just declared bankruptcy. Some 1,700 stores have changed hands in the last year, and some 2,000 stores are expected to close by the end of this calendar year. Franchisees operate 95% of McDonald’s locations in the U.S.

https://www.youtube.com/watch?v=qQkAXzil_9Y

In a financial survey by the Nomura Group, one McDonald’s franchisee stated the company is in the “throes of a deep depression, and nothing is changing” and that “probably 30 percent of operators are insolvent”.

Problems cited include pressure from government regulations, labor tensions, and financial losses are said to be to blame. The typical two most often mentioned are the cost of goods due to inflation of the last two years and the cost of labor due to higher minimum wages.

But these are not the only issues causing problems between McDonald’s corporate of Oak Brook, Illinois, and local franchise owners. Another April article in Restaurant Business Online offered:

The Investing Future report, “McDonald’s goes to battle over ‘joint employer’ rules—with its franchisees,” offered:

“McDonald’s once again was accused of being a heavy-handed “joint employer” of its franchisees’ employees. But this time, the accusations are coming not from labor groups but a group of the company’s own operators.

The Chicago-based burger giant’s ongoing dispute with its franchisees intensified this week over the level of control the company exerts on its operators’ businesses, this time with franchisees suggesting that some of its actions could qualify the company as a joint employer under potentially tightened regulations of the franchisee-franchisor relationship.

The result led to an intense week featuring warring statements between multiple groups of operators along with accusations of intimidation and threats and fears that the franchisee base has become divided.”

Another complaint franchisees have about McDonald’s corporate is that customer survey standards and new ownership requirements can hinder the operation of their stores.

Despite this apparent internal squabbling in the company between store owners and corporate, McDonald’s stock performance remains remarkably strong but this news story makes one wonder if this is not just the calm before the stock market storm so many are predicting these days.

OPINION:

Some people might consider me a lucky freak, but I consider myself blessed by God. As it turns out, I once ate at the first McDonald’s and was served personally by Ray Kroc. The McDonald’s #1 restaurant was built in Des Plaines, Illinois, and opened by Ray Kroc in April 1955. I met him some years later as a toddler as McDonald’s was getting all kinds of positive reviews in Chicagoland newspapers around 1958.

My meal was a burger, shake, and French fries, and it totaled out to less than 50 cents. We ate in our family car as there was no inside dining at that time.

McDonald’s has had a ton of “Bud Light moments” throughout its history, and it has overcome all of them. I remember when I was a teenager, and somebody leaked an internal document that McDonald’s was thinking of experimenting with using the meat of earthworms to supplement their beef patties. Boy, was that ever a premature Klaus Schwab moment for them!

McDonald’s is part of America’s heritage now, and I hope and pray they figure out a way through their current issues. Having a McDonald’s close-up shop is about as devastating to a community as losing a local Walmart… another piece of Americana.

Copyright © 2023 by Mark S. Schwendau

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Mark S. Schwendau is a retired technology professor who has always had a sideline in news-editorial writing where his byline has been, “Bringing little known news to people who simply want to know the truth.”  He is a Christian conservative who God cast to be a realist.  His website is www.IDrawIWrite.Tech.