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Innovation

The McDonalds crisis: Franchise owners revolt

Sales problems are not the only challenge McDonalds faces -- now, franchise owners are up in arms.
charlie-osborne
Written by Charlie Osborne, Contributing Writer on

McDonalds has its fair share of troubles as burger sales slide, and now franchisee anger is likely to cause the management team a fresh wave of headaches.

Store operators believe that the chain, looking to squeeze out additional profits, is charging them too much to run their restaurants. Rent, remodelling, training fees and software are all factors that have prompted franchises to complain. Struggling with the balance books, operators say that while they run almost 90 percent of McDonald's U.S. locations, rising fees are making them less likely to open new restaurants or refurbish them -- which in turn impacts sales and livelihoods.

According to a letter sent in April from a franchisee to other store owners, the relationship between operators and the company is "deteriorating." Franchise owners say that McDonalds management either does not understand or is ignoring the economic pressures of running a restaurant.

As a result, the company's tone when dealing with operators "has become much more controlling and less inclusive."

Operators in California and Stockton have recently met to discuss ways to get McDonalds to reduce rent and operational costs, and as anger rises, others are likely to follow suit.

Some franchises pay up to 12 percent of sales in rent, an average $300,000 a year based on sales of roughly $2.5 million. A McDonalds spokesman said that it costs over $1 million to build a new store, and $600,000 to remodel an old premises.

Franschisee Kathryn Slater-Carter says that the fast food chain is "doing everything they can to shift costs to operators." She is paying an additional $10,400 a year in fees that the company has introduced within the last five years. Having owned franchises since 1971 and witnessed the changes in business strategy, Slater-Carter said:

"What I see going wrong is the corporation itself is forgetting that its fiscal strength rides on the fiscal strength and the creativity of the operators, and it’s just going for such centralized control."

McDonalds may be a common sight for us -- whether traveling in the U.K., U.S. or Europe -- but there are still many countries that do not host one of the fast-food restaurants. Vietnam is soon to have its very own provider of the Happy Meal, but North Korea, Jamaica and Ghana are among 105 countries yet to be tapped by the food giant.

Via: Huffington Post

Image credit: Flickr

This post was originally published on Smartplanet.com

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