Dive Brief:

• CNBC reported Wednesday that a program of inspections developed by McDonald's has sparked franchisee backlash. Operations PACE, which stands for Performance and Customer Excellence, includes a data portal designed to help franchisees and employees identify key trends and evaluate progress toward improvement benchmarks, McDonald's confirmed. It will be rolled out in January 2023.
• Franchisees told CNBC the program, which would mandate a further six to 10 visits by assessors and company representatives to every location, would put strain on labor by subjecting managers and employees to the stress of frequent inspections.
• A survey by The National Owners Association, a large group of McDonald's franchisees, found only 3% of franchisees felt Operations PACE's standards accurately reflected operations, CNBC reports. The NOA didn't respond to requests for comment before press time.

Dive Insight:

Operations PACE also provides personalized resources that can assist operators in improving sales growth, profitability and guest counts, McDonald's confirmed.

“We must remain laser focused on maintaining our world-famous standards of excellence in our restaurants. This comprehensive performance management system, designed with ongoing input from franchisees, will offer tailored support and coaching to restaurants to help them provide a seamless McDonald’s experience that will keep customers coming back," McDonald's wrote in an emailed statement.

McDonald's is offering optional "learning visits" this year ahead of the program's official start date in seven months, but this may not be enough to assuage franchisee concerns that the program's inspections could drive away employees. More than 80% of McDonald's operators said in a survey that Operations PACE wouldn't help the company's "people-first" objectives, CNBC reports, and 64% said staffing has gotten worse or somewhat worse.

Employment data from the Bureau of Labor Statistics shows restaurants have struggled to draw workers back into the industry, with employment levels rising over the last year but failing to reach pre-pandemic numbers. Simultaneously, wages have increased throughout the foodservice sector, with BLS data indicating wage levels for non-supervisory employees have surpassed $16 an hour. 

Foodservice and hospitality are the only major industries in which wage growth has outpaced inflation in the last year. But worker advocacy group One Fair Wage has pointed to poor working conditions, wage theft and harassment as factors that prevent workers, particularly single mothers and women of color, from entering foodservice. It's possible that frequent inspections, which could add pressure to individual store operations, could also be a stumbling block for recruitment and retention. 

McDonald's raised hourly wages at company-owned restaurants by an average of 10% last spring, and average hourly wages are expected to reach $15 by 2024, the company confirmed. But these changes impacted only a sliver of employees, as the majority of the Golden Arches empire is franchised. And while many franchisees have raised wages in tandem and rolled out new benefits, operators that can't afford competitive pay hikes may fear putting more responsibility on workers without additional incentive could hurt their labor strategies.