McDonald’s Franchisees Are Fed Up

by Christopher Freeburn | August 6, 2013 9:14 am

mcdonalds store 630[1]Faced with escalating fees from their franchisor, an growing number of McDonald’s (MCD[2]) restaurant operators are banding together to take their complaints to company executives[3].

Franchisees say that McDonald’s has been shifting more costs to store operators in order to boost corporate profits. Higher fees are cutting into franchisee earnings, making it less profitable to run a McDonald’s. Many franchisees are banding together in hopes of pressuring the company to listen to their concerns, Bloomberg notes.

Over the past five years, McDonald’s has seen revenue from franchisees rise 8%. By contrast overall revenue climbed by 4% during the same period.

Nearly 90% of McDonald’s U.S. restaurants are run by franchisees. A number of franchisees held a June meeting in California to discuss strategies to get the company to lower costs passed on to them. Other franchisee groups are meeting with company executives.

In the 1990’s, McDonald’s faced similar resistance from franchisees who were unhappy at the company’s rapid pace of expansion, which often left new restaurants competing with older restaurants nearby. After hearing their concerns, McDonald’s sharply reduced the rate of new restaurant openings.

Shares of McDonald’s were flat in Tuesday pre-market trading.

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