Chris Kempczynski, McDonald’s, speaks during a press conference in New York, November 17, 2016.
Shannon Stapleton | Reuters
McDonald’s franchisees unhappy with ownership changes are expressing a lack of confidence in the company’s CEO and the US president, according to a new survey of owners seen by CNBC.
The National Owners Association, an independent franchisee advocacy group for McDonald’s owners, recently surveyed its members about changes being made to franchisees’ lease terms.
The results show that an overwhelming majority – 87% – of respondents support announcing a vote of “no confidence” in CEO Chris Kempczynski and the company’s US president Joe Erlinger.
In addition, nearly 100% felt the company should have collaborated and consulted with owner leaders before announcing changes to the franchise system, and 95% said the company’s senior corporate leadership did not have the company’s best interests at heart owners in their approach to franchising.
NOA has about 1,000 members, and nearly 700 responded to the survey. As of the end of last year, McDonald’s had more than 2,400 owners. Franchisees operate about 95% of McDonald’s locations and are key to the company’s operations.
NOA did not immediately respond to a request for comment on the survey results.
McDonald’s warned owners in late June that starting in 2023, it would evaluate potential new operators equally, instead of giving preferential treatment to the spouses and children of current franchisees.
It also separates the process by which it renews 20-year leases from assessments of whether owners can operate additional restaurants. In a message to owners about some of the changes reviewed by CNBC, the company said, “This change is consistent with the principle that obtaining a new franchise term is earned, not given.”
The move sent shockwaves through franchisees. It comes amid plans to introduce a new restaurant ranking system next year, which some fear will alienate workers at a time of unprecedented labor challenges. The company is actively working to hire new and different owners, highlighted in a message to franchisees from Erlinger that was reviewed by CNBC.
“We’ve put a lot of thought into how we can continue to attract and retain the best owner/operators in the industry—people who represent the diverse communities we serve, bring a growth mindset and focus on excellence while cultivating a positive work environment for restaurant teams “, he said.
In December, McDonald’s pledged to hire more franchisees from diverse backgrounds, committing $250 million over the next five years to help those applicants finance franchises. McDonald’s declined to comment on the new changes or the study.
McDonald’s controls the lease terms for owners, and there is speculation among some in the franchisee community that the changes are being made to attract new owners with higher interest rates than established owners would face.
The NOA survey found that 83% of respondents said the new rules were a “veiled attempt to raise rents”. And 95% said they didn’t feel valued by the corporation given recent developments. In addition, 71% of respondents said existing or legacy owners should not be treated the same as potential new operators.
Other franchisee organizations are also disappointed by the changes.
A separate poll by the National Franchise Leadership Alliance, also reviewed by CNBC, found that nearly 100 percent of more than 400 respondents believed McDonald’s management should have collaborated and consulted with owners before announcing changes. More than 90% said the changes were not supported and 90% said they thought their business would be negatively affected by the proposed changes.
The National Association of Black McDonald’s Operators also returned a vote of no confidence in CEO Kempczynski, Restaurant Business Online reported in late June.
The tensions come at a time when McDonald’s US business is strong and franchisee profits are at record highs. The company beat estimates for earnings and same-store sales last quarter. Shares are down 5% year to date.
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