By Annie Gasparro
Pessimism has grown among some McDonald's Corp. franchisees
about the fast-food giant's efforts to reverse lagging sales and
rebuild its damaged image, according to the latest survey of
franchisees by Janney Capital Markets analyst Mark Kalinowski.
Respondents to the quarterly survey, which covers about 25
franchisees who own a total of about 215 U.S. McDonald's
restaurants, rated the outlook for the business over the next six
months as between poor and fair. Their assessment equated to a
rating of 1.81 out of 5 on Mr. Kalinowski's scale, the worst in the
more-than-11-year history of the Janney survey. Several respondents
complained about elements of Chief Executive Steve Easterbrook's
push to revamp the chain-including a plan to raise wages at
company-operated stores.
"Corporate has betrayed us," the Janney report quoted one
franchisee as saying. "We are on our own."
A spokeswoman for the Oak Brook, Ill., company said about 3,100
franchisees run McDonald's restaurants across the U.S. "We value
the feedback from our franchisees and have a solid working
relationship with them," she said. "Less than 1% of them were
surveyed for this report."
The survey is Janney's first since Mr. Easterbrook took over as
McDonald's CEO on March 1 touting plans to shake up the struggling
restaurant. The report suggests that at least some franchisees
aren't impressed by his efforts so far, which also have included
plans to curtail antibiotic use in chicken in the U.S. and to add a
premium sirloin burger.
McDonald's shares closed down 1.2% on Wednesday, though they
remain up more than 8% since Mr. Easterbrook's appointment was
announced on Jan. 28.
Franchisees overall operate nearly 90% of McDonald's 14,350 U.S.
locations, making them central to the brand's success in its most
important market. The company's turnaround efforts, while winning
praise from some analysts, have raised concerns among some
franchisees about footing the costs.
"In general, we argue that corporations who have franchisees on
board and enthusiastic about senior management's plans and strategy
tend to fare better than those that don't," Mr. Kalinowski said in
his report.
The wage issue has been particularly sensitive. McDonald's plan,
announced April 1, is to raise wages for the 90,000 employees at
McDonald's company-run stores to $1 above local minimum wages by
the end of next year. While it doesn't apply to franchisees, some
have expressed concern that it will pressure them to follow suit,
squeezing their profit margins.
In the survey, several said they feel betrayed by the
wage-increase announcement, and two-thirds expressed concern about
not having the cash to implement the changes in McDonald's
turnaround plan. "Simply can't afford what Oak Brook wants to do,"
one said, according to Janney. "They really do not understand the
financial position that the two-store, three-store and four-store
operators are in," another franchisee was quoted as saying.
Those surveyed reported March same-store sales fell an average
3.7% from a year earlier. McDonald's is expected to report March
same-store sales along with first-quarter earnings next week.
Write to Annie Gasparro at annie.gasparro@wsj.com
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