Nearly 95% of the 14,000 U.S. locations are owned by franchisees, up from 75% just three years ago.  Overseas, the number is 85%, up from 70%, with a 90% target by end of 2019.

The goal was for McDonald’s as a corporation is to become “asset” light while still retaining tight controls over operations — such as how and what is served, and benefiting from fees, higher margins, and increased cash flow.  All things that shareholders of public companies love.

And while no-one can dispute Easterbrook’s changes, from all day breakfast, simplified yet better menu offerings, investing in technology and remodeling the stores, have all been smart leading to improved sales. There are signs that franchisees are beginning to buckle under the pace and cost of all the changes.

It’s estimated to cost from $200,000-$500,000 per location to bring the stores up to corporate code. This includes remodeling, refurbishing, new kitchen equipment. Also, new technologies such as kiosks and integrating mobile apps.

While corporate can contribute as much as 50% of these costs, the capital outlay for franchisees who often own five or more locations can run into the millions of dollars.  This money often needs to be borrowed, which is coming at a higher cost in this rising interest rate environment.


About the Author:


More...