"Easterbrook will need to gain the trust of franchisees — who operate 90% of McDonald's restaurants in the US — to get anything done"
Spot on. The company needs to surprise and delight it's OOs, if they want to surprise and delight Wall Street. Cut rents, reduce menus. Stop the endless Advertising spending, and get competent people to work in corp, instead of the endless march of McCopCo staff up the ladder. We need a fresh new perspective in all the regions, and memos and webcasts are not going to get it done. We want kiosks, give us kiosks. How does the business model hold up under the weight of minimum wage and the foul play $1 mccopco raise? $10 Big Mac meals, that's how. Give this Brand to some smart 20 year olds.
I personally don't know how one turns around such a large system that has been allowed to get into such a mess. It will take time and patience. MCD must realize that the O/O are key to any long term success. However, the O/O are strapped with debt, declining sales, falling liquidity, increasing costs and distrust of management. I was recently told by a major lender that only twelve per cent (12%) of the O/O are eligible for growth. The company has reduced their capital budget by two billion dollars worldwide and I don't know how much of that is in the USA. I believe that once they get a handle on earnings, fix the food, they will come to the O/O's for assistance. But, they will need some kind of financial assistance package to get buy-in. What they should do, in my opinion, is to reimburse the O/O's for the service fee's over the past several years. Clearly, the failure of leadership demonstrates our money was wasted. It will never happen but that is what they should do. Like any other product that was defective. They are going to have to do something in the area of finance. Otherwise, the O/O's can be of little help. This situation was created by the company insistence that debt be assumed to improve company assets. They could help us refinance existing debt with a longer pay back schedule like ten years as opposed to seven years. If we are going to be a player in this turnaround we need more cash flow right away. I don't have any idea what they are thinking. It will be interesting to find out. Maybe they are thinking about doing nothing. It wouldn't surprise me.
The turnaround plan is simple: If a owner/operator is not happy with their franchise metrics, you can just "turnaround" walk out of the store and don't let the door hit you on the way out!
Your BC, FSM and director along with folks such as Charlie Robeson US Operations Officer do not understand debt and could careless about your debt they just come into your restaurant tell you do a lobby remodel, MRP etc. then the following year at your business review now say you are not meeting cash flow ratio coverage.
Before spending any money I would do the numbers first with your accountant and then present it to McDonald's on the accountants letter head, "by doing this reinvestment you will not make financial ratios next year" this way it is not you telling them it is a financial advisor (because for some reason McD's thinks they are smarter than O/O's if they are an approved CPA firm all the better). Charlie Robeson could not even operate McCopCo's at an acceptable level or reinvestment schedule now he US Operations Officer?
Blah, Blah, Blah. I have used this analogy before. The Franchisee and McDonald's relationship is like an abusive relationship. Where the one being abused (Franchisee) keeps going back to the Abuser (Mcdonald's) with the hope that after reconciliation the Abuser has changed. I was part of the Charade. I swallowed my pride many a day, however in the end I knew McDonald's was doing things outside of the "norm" fiscally to their operators that would strap them with debt. You have to be cautious with amassing debt with a declining "top of mind" brand. Just my 2 cents worth of advise. As some may read this and say disgruntled or bad operator. Anyone who knows this system knows I am 100% correct!!
A bit of a late comment about the turn-around plan and the CEO.
Easterbrook was on The Today Show on Friday talking about this new image. One of the things that he said they were testing was the "breakfast all day" idea about which he seemed very excited, as did all the Today cast members. This would seem to cement the idea that he just doesn't understand the business. He needs to spend time in the restaurants to understand what is involved in breakfasts transitions, including grill temps.
10 comments:
"Easterbrook will need to gain the trust of franchisees — who operate 90% of McDonald's restaurants in the US — to get anything done"
Spot on. The company needs to surprise and delight it's OOs, if they want to surprise and delight Wall Street. Cut rents, reduce menus. Stop the endless Advertising spending, and get competent people to work in corp, instead of the endless march of McCopCo staff up the ladder. We need a fresh new perspective in all the regions, and memos and webcasts are not going to get it done. We want kiosks, give us kiosks. How does the business model hold up under the weight of minimum wage and the foul play $1 mccopco raise? $10 Big Mac meals, that's how. Give this Brand to some smart 20 year olds.
I personally don't know how one turns around such a large system that has been allowed to get into such a mess. It will take time and patience. MCD must realize that the O/O are key to any long term success. However, the O/O are strapped with debt, declining sales, falling liquidity, increasing costs and distrust of management. I was recently told by a major lender that only twelve per cent (12%) of the O/O are eligible for growth. The company has reduced their capital budget by two billion dollars worldwide and I don't know how much of that is in the USA. I believe that once they get a handle on earnings, fix the food, they will come to the O/O's for assistance. But, they will need some kind of financial assistance package to get buy-in. What they should do, in my opinion, is to reimburse the O/O's for the service fee's over the past several years. Clearly, the failure of leadership demonstrates our money was wasted. It will never happen but that is what they should do. Like any other product that was defective. They are going to have to do something in the area of finance. Otherwise, the O/O's can be of little help. This situation was created by the company insistence that debt be assumed to improve company assets. They could help us refinance existing debt with a longer pay back schedule like ten years as opposed to seven years. If we are going to be a player in this turnaround we need more cash flow right away. I don't have any idea what they are thinking. It will be interesting to find out. Maybe they are thinking about doing nothing. It wouldn't surprise me.
The turnaround plan is simple: If a owner/operator is not happy with their franchise metrics, you can just "turnaround" walk out of the store and don't let the door hit you on the way out!
Exactly, with no money in your pocket, because first you pay off your debt, and McD resells the franchise. Win/Lose!
Your BC, FSM and director along with folks such as Charlie Robeson US Operations Officer do not understand debt and could careless about your debt they just come into your restaurant tell you do a lobby remodel, MRP etc. then the following year at your business review now say you are not meeting cash flow ratio coverage.
Before spending any money I would do the numbers first with your accountant and then present it to McDonald's on the accountants letter head, "by doing this reinvestment you will not make financial ratios next year" this way it is not you telling them it is a financial advisor (because for some reason McD's thinks they are smarter than O/O's if they are an approved CPA firm all the better). Charlie Robeson could not even operate McCopCo's at an acceptable level or reinvestment schedule now he US Operations Officer?
Blah, Blah, Blah. I have used this analogy before. The Franchisee and McDonald's relationship is like an abusive relationship. Where the one being abused (Franchisee) keeps going back to the Abuser (Mcdonald's) with the hope that after reconciliation the Abuser has changed. I was part of the Charade. I swallowed my pride many a day, however in the end I knew McDonald's was doing things outside of the "norm" fiscally to their operators that would strap them with debt. You have to be cautious with amassing debt with a declining "top of mind" brand. Just my 2 cents worth of advise. As some may read this and say disgruntled or bad operator. Anyone who knows this system knows I am 100% correct!!
Remember their fallback position: If your cash flow is affected by the debt load, it's because you are taking too much income out of your store.
I presume you mean the corporate fallback position for Operators?
THERE IS NO PLAN !!!!!!!!!!!!!!!!!!!!!!!!!!!!
A bit of a late comment about the turn-around plan and the CEO.
Easterbrook was on The Today Show on Friday talking about this new image. One of the things that he said they were testing was the "breakfast all day" idea about which he seemed very excited, as did all the Today cast members. This would seem to cement the idea that he just doesn't understand the business. He needs to spend time in the restaurants to understand what is involved in breakfasts transitions, including grill temps.
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