Not even all-day breakfast is enough to cheer up McDonald’s franchisees

Posted by: privatefinancetips in BLOG, Finance News Mar 27, 2016

McDonald’s Corp. franchisees remained pessimistic about the company’s turnaround efforts during the much-hyped rollout of all-day breakfast, based on an interior survey.

Only about 14 percent of McDonald’s domestic franchisees think the chain’s comeback plan is working, according to is a result of market research of owner-operators obtained by Bloomberg News. And just 35 per cent of franchisees are positive about McDonald’s long-term future success, a drop from 46 per cent within the prior year. The survey, which the company conducts annually, was completed in October and November.

McDonald’s posted U.S. same-store sales growth of 5.7 per cent for that fourth quarter, the best performance in almost 4 years. The company cited its shift to all-day breakfast, as well as mild winter months, in order to fuel the gain. In October, the organization also reported positive sales in the U.S., lifted with a popular US$2.50 meal deal. The stock jumped 8.1 per cent on that day, the largest increase in seven years.

Chief Executive Officer Steve Easterbrook, who took control of in March of this past year, has said the company is committed to its turnaround plan, including “running great restaurants, driving operating growth, creating brand excitement and enhancing financial value.”

Next Phase

“While we are pleased with the current positive momentum in the U.S., it will take a minimum of six more months of positive comparable sales and guest count growth to progress through the sustained and prolonged growth phases in our turnaround,” he explained in January.

Lisa McComb, a spokeswoman for that Oak Brook, Illinois- based company, said the survey doesn’t reflect the more recent progress the company has made.

“These results are hardly surprising because of the survey was conducted before McDonald’s ended the entire year with momentum,” she said. “By refreshing old favorites, like our Egg McMuffin, introducing all-day breakfast and making other changes, we are beginning 2016 in a better place than where we were Twelve months ago.”

McDonald’s ties with its franchisees are critical, especially in the U.S. Of the company’s 14,000 domestic restaurants, about 90 per cent are independently owned. More than 3,000 domestic franchisees pay royalties and rent to the company. They also contribute to advertising funds.

McDonald’s shares fell 1 per cent to US$117.42 at 1:53 p.m. on Thursday. Through Wednesday’s close, the stock was up 0.4 percent this season.

Strained Ties

The survey, which included responses from 1,468 franchisees, also demonstrated that interactions between owner- operators and company managers, go downhill. Just 29 percent of respondents asserted communication between franchisees and company leadership is open and honest, in contrast to 42 percent in 2014. On a positive note, over fifty percent of the franchisees said their restaurant operations are superior to a year ago.

“We know that sustaining our growth means continuing to hear both our customers and our franchisees and we’re committed to doing exactly that,” McComb said.

Bloomberg News