McDonald’s Franchise Owners: The Turnaround Isn’t Working

Although McDonald’s is trying to shake off years of underwhelming results and win back customers with new menu items, franchise owners still aren’t happy.

A recent survey of 29 respondents who run 208 McDonald’s restaurants found that the owners are not impressed with the company’s turnaround efforts, The Wall Street Journal reported.

In fact, it’s the worst six-month outlook for the U.S. business in the 12 years that analyst Mark Kalinowski has conducted the poll of franchisees, the Journal said. The latest round of responses are even worse than the previous low seen in April, the report said.

The franchisees predict a 2.3% decline in June U.S. same-store sales, the report said, noting that it’s far below analysts’ expectations of a 0.3% decline. They also said the changes recently implemented by McDonald’s management have not yet born fruit.

Some McDonald’s franchisees said years of investments for store remodeling and new equipment have left them with debt and unable to expand or make further investments to boost their businesses, the paper reported. And one person surveyed said some store operators are nearing the end of their 20-year franchise agreement and may not be able to enter into a new one if they fall below the required financial thresholds.

“Everyone is worried that there are no longer any operators that can buy their stores,” the franchisee stated in the survey. “I suspect there will be a large number of fire sales with the end result that everyone’s equity will go down.”

McDonald’s recently hired a new CEO Steve Easterbrook to help turn things around at the fast-food giant, which recently celebrated its 75th birthday.

Easterbrook acknowledged in a video and press release that the company has been bogged down by a cumbersome structure and too much bureaucracy, making it slow to adapt to big changes like customers gravitating to what they perceive as healthier fare. It also has been grappling with a poor perception of its food quality and customer service.

“Approximately 3,100 franchisees own and operate McDonald’s restaurants across the U.S. Less than 1% of them were surveyed for this report,” a McDonald’s spokeswoman told the newspaper. “We value the feedback from our franchisees and have a solid working relationship with them.”