McDonald’s to proceed with New Year’s franchise policy changes despite requests for extensions from franchisees

Earlier this year, fast-food franchise giant McDonald’s announced that it would make major changes to its franchise policy. In a statement entitled “The next steps on our journey to greatness” Joe Erlinger, president of McDonald’s USA, published on June 23, 2022 on the company’s website and communicated to its US franchise network, said the policy changes were intended to bring “more clarity, transparency and consistency to our franchise process” as he implements the changes. outlined the manner in which potential new franchisees would be evaluated, removing the previous preferred status accorded to spouses and children of existing franchisees and separating the franchise renewal process from the assessment of an operator’s ability to expandable via additional locations. The company stated that these changes are in line with its pledge to hire more franchisees from diverse backgrounds, having previously pledged in December 2021 to spend $250 million over five years helping prospective franchisees in the U.S. who are struggling have to get funding from other sources to build a McDonalds restaurant.

In addition to these hiring and renewal changes, the brand has also stated that they will be rolling out a new restaurant rating system called Operations PACE, which stands for Performance and Customer Excellence, in January 2023. The system includes between six and 10 visits a year by corporate and third-party assessors per restaurant location, along with other inspections for local food safety regulations, among other things.

The planned changes have not gone down well with a large portion of McDonald’s franchisees in the US, who collectively operate about 13,000 locations in the United States. The McDonald’s franchisee leadership group The National Franchisee Leadership Alliance has raised a number of concerns and asked that the proposed launch date of the new systems from January 1, 2023 be pushed back to June 2023. The group stated that franchisees are already under pressure from a number of external factors and that they sought clarification and education on the proposed changes before they were implemented. NFLA chair Mark Salebra was quoted in a letter addressed to business leaders that “Several of these internal changes, in my view, may further restrict the market, reduce demand, and strain the financial opportunity for owner-to-owner sales beyond the external factors that currently exist.”

The fast food industry is of course still recovering from the global pandemic, experiencing supply chain issues, staffing issues in light of the post-covid “Great Resignation” and the group of owners are also highlighting the fact that some operators are also facing legislative changes at the state level. This most likely refers to the newly signed law, AB 257 in California, which will regulate the wages and conditions of workers in the fast food industry through the establishment of a “Fast Food Council”. Franchisees therefore argue that these policy changes and new processes couldn’t be worse timed and that the strict review and monitoring system will put additional pressure on managers, damage staff morale and make hiring significantly more difficult.

However, the NFLA’s request for more time has been rejected by McDonald’s, who say they are moving ahead with the planned implementation date of January 2023. The company had already said they would offer learning and education sessions to franchisees in the second half of 2022. of the changes, saying, “We must remain laser-focused on maintaining our world-renowned standards of excellence in our restaurants. This comprehensive performance management system, designed with ongoing input from franchisees, will provide tailored support and coaching to restaurants to help them deliver a seamless McDonald’s experience that keeps customers coming back.”

In any franchisor-franchisee relationship, introducing and implementing change can be a source of friction. McDonald’s is of course no stranger to conflict with its franchise network over the years, most recently with allegations about the level of support the company has provided during the pandemic and a problem about technology costs in 2020 which saw the company review its position, apparently saying they wanted to “reset” their relationship with franchisees. This latest disagreement is unlikely to calm already strained relations, but the burger franchise hopes they can gain the support of their network and gain full support for McDonald’s values ​​of “Serve, Inclusion, Integrity, Community and Family” which they say support all proposed changes as the brand enters 2023.