McDonald’s franchisees are furious about the amount they are being charged to operate their restaurants. McDonald’s leases roughly 90% of its stores to its franchisees. They collect rent and royalties and many operators of the branches say they are paying way above the odds as fees increase.
Leslie Patton from Bloomberg News reports that in some cases, franchisees are forced to pay up to 12% of store sales in rent. The furious franchisees now want McDonald’s to return to the old system, which saw a more profitable 8.5% maximum.
This means that franchisees who have recently had lease renewals paid around $300,000 per annum, an increase from $212,500 at the original, more favourable rate. The situation has become so dire for many franchisees that they are holding impromptu meetings in order to work out ways to stop McDonald’s from strangling them financially.
Patton writes, regarding the meetings between the franchisees:
“At the April meeting at a community center in Paramount, California, a group of franchisees spent five hours discussing ways to get the company to reduce rents and other costs. Another cadre of McDonald’s store owners met in Stockton in June to discuss similar issues. The group in Paramount suggested reducing rents, royalty rates and creating a regional real-estate team of store owners to help set lease rates.”
It is clear that the unhappy franchisees wish to exert pressure on the decision makers at McDonald’s to reduce their outgoing costs. The current financial climate, coupled with fierce competition in the fast food market means that McDonald’s franchisees have a right to be furious at the ever increasing costs imposed upon them.