• Thu. Nov 24th, 2022

McDonald’s rejects franchise owners’ request to delay big changes, letter says

ByStephanie M. Akbar

Sep 28, 2022

A customer places an order on September 24, 2022 at a McDonald’s restaurant along the New York State Thruway in Hannacroix, New York.

Robert Nickelberg | Getty Images News | Getty Images

A group representing McDonald’s owners says the company has denied its request to delay changes to franchising policies, including updated standards and adjustments to how the company assesses potential new restaurateurs, a letter says. seen by CNBC.

The National Franchisee Leadership Alliance said in a letter to owners on Wednesday that McDonald’s had rejected its request to make the changes in June 2023 instead of Jan. 1.

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The leadership group represents McDonald’s owners across the country. At the end of last year, according to the company, there were more than 2,400 franchise owners. Franchisees operate approximately 95% of McDonald’s locations.

The company declined to comment on the changes or the letter from the NFLA and its request to delay the adjustments.

McDonald’s unveiled new policy changes over the summer, causing tension between some operators and the company. Several owners unhappy with the changes expressed a lack of confidence in the company’s CEO, Chris Kempczinski and its US chairman, Joe Erlinger, in a poll conducted by a separate group, the National Owners Association.

The NFLA is seeking more clarity and education from the company on what it calls “McDonald’s values” as it pushes to hold franchise owners accountable for how they represent the brand in online and in person. McDonald’s says its values ​​are: “Serve, Inclusion, Integrity, Community and Family,” and the update aims to reflect how these should be incorporated into owner and operator standards, according to a previous document obtained by CNBC.

The new policies also call for evaluating potential new operators equally, instead of giving preferential treatment to spouses and children of current franchisees.

McDonald’s also separates how it renews leases, which are granted over 20 years, from assessments to determine whether landlords can operate additional restaurants – meaning a lease renewal would not automatically make a landlord eligible to operate. additional locations. In an earlier message to owners about the changes that were seen by CNBC, the company said, “This change is consistent with the principle that receiving a new franchise mandate is earned, not given.”

The company has been actively working to recruit more diverse new owners, highlighted in a message to Erlinger franchisees that was seen by CNBC earlier this summer.

“We’ve put a lot of thought into how we continue to attract and retain the best owner/operators in the industry – people who represent the diverse communities we serve, bring a growth mindset and are focused on excellence in execution, while cultivating a positive work environment for catering teams,” he said.

In December, McDonald’s pledged to recruit more franchisees from diverse backgrounds, committing $250 million over the next five years to help those applicants fund a franchise. The company has yet to reveal how its recruiting efforts are going.

“Several of these internal changes, in my view, may further constrain the market, reduce demand and strain the financial capability of owner-to-owner sales beyond the external factors that currently exist,” the NFLA president wrote. , Mark Salebra, in the letter.

He then points to other challenges facing operators today, including legislative changes at the state level, likely alluding to a recently signed law, AB 257 in California, that would regulate operator wages and conditions. fast food industry. The law was defended by the AFL-CIOthe largest union federation in the United States, and denounced as “radical” by the american chamber of commercethe largest business advocacy group in the country.

McDonald’s is also rolling out a new ranking system for restaurants in 2023.

Owners said they fear alienating workers as employers struggle to attract and retain employees. The letter stated that in light of all of these factors, “consideration to delay (not modify or renegotiate) implementation seemed appropriate and warranted.” He added that the company has provided more than 20 documents on the changes and that training sessions are coming for clarity.

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