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Survey Finds Growing Discord Among McDonald's Franchise Owners

Apr 17, 2013 12:17 PM EDT | By Staff Reporter
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McDonald's franchise owners in the United States are frustrated with mandates from headquarters to push its Dollar Menu, increase competition is leaving operators frustrated and disgruntled, a survey found.

Some McDonald's franchisees surveyed by Janney Montgomery Scott analyst Mark Kalinowski said the chain's recent value push, while attracting customers, is coming at the expense of profit, according to the Wall Street Journal.

"Every item introduced comes with unlimited coupons for FREE and a 'suggested price point' that is ridiculous and does not meet franchisees' needs for profitability. It does meet the corporation's need to keep the appearance of customer transaction counts high, pushing the stock," one franchisee was quoted as saying in the survey.

In recent months, however, McDonald's U.S. President Jeff Stratton has leaned heavily on the chain's Dollar Menu. Management has said in calls with investors that the move has helped stabilize traffic at its restaurants, but franchisees have warned that it could hurt their profitability.

"We have more complicated items, with more elements coming from the (distribution center), more equipment coming from suppliers so everyone else is making more money sending us more 'stuff' and we are expected to deliver a product that takes 55 seconds on the best day in less than that, do it consistently and with a smile on our face," one franchisee wrote in a quarterly survey released today by Janney Capital Markets in New York. "There's little to smile about."

Franchisees have swallowed several corporate demands in the past three years ranging from massive restaurant overhauls costing up to $1 million per store, aggressive discounting and staying open on Thanksgiving and Christmas day.

"You have no choice in certain situations," said Susan Kezios, president of the American Franchisee Association in Chicago. "They signed an agreement that says they'll do whatever management says."

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