McDonald’s won’t postpone franchising changes, operator group claims

Dive Brief:

McDonald’s denied the National Franchisee Leadership Alliance’s request to delay franchising policy changes to June 2023 rather than Jan. 1, 2023, CNBC reports. McDonald’s declined to comment.
These changes, which were announced in June, include a shift away from franchisees designating spouses or children to take over operations in their agreement terms. Lease renewal evaluations will also change.
Franchisees have also criticized McDonald’s new grading system, Operations PACE, which mandates additional unit inspections by assessors and company representatives and will take effect in January.

Dive Insight:

Operator frustration over upcoming franchise policy adjustments could potentially discourage would-be McDonald’s franchisees from joining the system. This would undermine McDonald’s investments in growing its franchisee count, including a pledge of $250 million over the next five years to recruit diverse operators.

Policy changes could also make it more difficult for operators to open additional McDonald’s restaurants. Starting next year, current franchisees will need to go through additional application processes to secure additional franchise agreements. The company will also use a separate “New Term” evaluation process when operators are buying more McDonald’s restaurants.

“These moves will better position the System for the long term: how we remain ‘green and growing,’ guided by our values and with the right mix of owner/operator skills and experience,” McDonald’s U.S. President Joe Erlinger wrote in a letter to franchisees in June.

Erlinger added that McDonald’s would work for the rest of 2022 to ensure that franchisees understand how each change will look in practice, and that the company would field franchisee questions during this period. The company has shared a 10-page document outlining its franchising vision for operators.

Existing franchisees are also concerned that additional inspections under Operations PACE will hurt employee retention because preparing for six to 10 such visits will strain managers.

The NFLA includes over 2,400 McDonald’s franchise owners, according to CNBC.