McDonald's Survey of Franchisees Finds Pessimistic View of Chain

McDonald's Franchisees Lose Faith in Company
  • Fewer restaurant owners confident in fast-food chain's success
  • McDonald's has pointed to all-day breakfast as a sales boost

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

Only about 14 percent of McDonald’s domestic franchisees think the chain’s comeback plan is working, according to results from a survey of owner-operators obtained by Bloomberg News. And just 35 percent of franchisees are confident in McDonald’s long-term future success, a drop from 46 percent in 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 percent for the fourth quarter, the best performance in almost four years. The company cited its shift to all-day breakfast, as well as mild winter weather, for helping fuel the gain. In October, the company also reported positive sales in the U.S., lifted by a popular $2.50 meal deal. The stock jumped 8.1 percent that day, the biggest increase in seven years.

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

Next Phase

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

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

“These results are hardly surprising given the survey was conducted before McDonald’s ended the 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 12 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 percent 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 1.2 percent to $117.17 on Thursday. The stock has declined 0.8 percent this year.

Strained Ties

The survey, which included responses from 1,468 franchisees, also showed that interactions between owner-operators and corporate managers, have gone downhill. Just 29 percent of respondents said that communication between franchisees and corporate leadership is open and honest, compared with 42 percent in 2014. On a positive note, more than half of the franchisees said their restaurant operations are better than a year ago.

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

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