Small operators can not afford EOTF and BB2020. THAT is why they are selling. This may be a boon for Large operators in the short run, but in the not so distant future the continued reinvestment demands (ie: every 10 year total remodels)by McD coupled with the excess current debt (to remodel,reinvest, and acquire more stores) will cripple even the largest operators.
RBC is missing the big picture. Corp sold its stores because it saw what is coming and knew it could not profit in its McOpCo stores. McD is sowing the seeds for our distress by holding to its politically correct, liberal leaning stance on UNIONS. And a larger operator will find it far more difficult to fight the SEIU in 10-30 stores than a smaller,on site operator. Once UNIONIZED, all bets are off. ITS COMING.
The MCOPCOs they are selling in our co-op are running better than the company could have
These operators like mentioned in previous quotes will have financial concerns 10 years out. Don't plan on any company help
As mentioned by RBS 1.000 stores sold probably means 200 operators (5 per owner). GOOD NEWS 200 fewer chairs to set up at WORLDWIDE. MODERN and PROGRESSIVE. The line at lunch will be shorter as well. WIN/WIN. Usually, too many operators are walking around anyway. So 2 benefits as we move forward. .
One of the most fun things I did during my corporate franchising years was to put a new, young BFL Operator in a low volume McOpCo and watch sales skyrocket. .
We are experiencing upward momentum and getting ton's of positive press. This coming because of long needed change. The change is being implimented by the best operators in the industry. For many years MCD kept adding new operators into the system giving them an equal vote in the co-ops as the large operators. MCD became the biggest "control freaks" on the planet. Now, with at least 50% more operators than needed implimenting change undue financial burden is being shouldered by small operators with average to low volume stores. Many of these operators are minorities, not all, and will receive financial assistance from the corporation that will not be avaliable to the larger operator organizations. The economic's of this policy is not good for the business but it helps with their political correctness goals at a huge costs. When these smaller operators sell the regions are engineering things to see that minority operators are awarded the stores and in some cases they are financing them. MCD in recent years have not made good business decisions which created the situation we are digging out of. Can you imagine where we would be had Thompson remained as CEO!! I continue to Monitor Easterbrooks promise to Wall Street in 2015 that he would take a half a billions dollars in cost off of the USA balance sheet. I didn't think it was possible but he may do it but not without more deep and needed cuts to the entrenched buearcracy . He will need to outsource more responsibilities to the operators for these changes. I was once a small operator and I feel for them but the economics of the industry has changed and making a living, servicing debt and continuing to reinvest makes it near impossible. Most small operators have simply brought themselves a job and not a very good one. The company needs to downsize a great deal and competent operator organizations be encouraged to grow to keep the system strong. In my opinion.
While I don't agree with all of the above, thanks for taking the time to put it together.
"implementing change undue financial burden is being shouldered by small operators with average to low volume stores."
Many of these undue financial burdens are the result of McDonald's Corp. sticking with the antiquated policy of making McDonald's Operators pay to remodel/rebuild their landlord's facility - something that should have been left behind twenty years ago. .
I agree 100%. My point is that "Undue financial burden" is the sole result of MCD policy. Another point is that in all of the communication from the company about these required reinvestments is that they remain silent about "Impact". The EOTF and other reinvestment seem to increase sales but the smallest sales impact would wipe out all of the profit from these reinvestments. The company impact policy is an antique and they should address it if they continue to insist upon adding this financial burden.
10 comments:
Small operators can not afford EOTF and BB2020. THAT is why they are selling. This may be a boon for Large operators in the short run, but in the not so distant future the continued reinvestment demands (ie: every 10 year total remodels)by McD coupled with the excess current debt (to remodel,reinvest, and acquire more stores) will cripple even the largest operators.
RBC is missing the big picture. Corp sold its stores because it saw what is coming and knew it could not profit in its McOpCo stores. McD is sowing the seeds for our distress by holding to its politically correct, liberal leaning stance on UNIONS. And a larger operator will find it far more difficult to fight the SEIU in 10-30 stores than a smaller,on site operator. Once UNIONIZED, all bets are off. ITS COMING.
There you go again - thinking long term. Even if they say they do, analysts don't think long term. Few shareholders think long term.
But the real short term thinkers in McDonald's are the neophyte decision makers in Oak Brook.
.
The MCOPCOs they are selling in our co-op are running better than the company could have
These operators like mentioned in previous quotes will have financial concerns 10 years out. Don't plan on any company help
As mentioned by RBS 1.000 stores sold probably means 200 operators (5 per owner). GOOD NEWS 200 fewer chairs to set up at WORLDWIDE. MODERN and PROGRESSIVE. The line at lunch will be shorter as well. WIN/WIN. Usually, too many operators are walking around anyway. So 2 benefits as we move forward.
.
You think it'll take ten years?
One of the most fun things I did during my corporate franchising years was to put a new, young BFL Operator in a low volume McOpCo and watch sales skyrocket.
.
The system was built on a hands on operator who could be successful. Large multiples cant do that
We are experiencing upward momentum and getting ton's of positive press. This coming because of long needed change. The change is being implimented by the best operators in the industry. For many years MCD kept adding new operators into the system giving them an equal vote in the co-ops as the large operators. MCD became the biggest "control freaks" on the planet. Now, with at least 50% more operators than needed implimenting change undue financial burden is being shouldered by small operators with average to low volume stores. Many of these operators are minorities, not all, and will receive financial assistance from the corporation that will not be avaliable to the larger operator organizations. The economic's of this policy is not good for the business but it helps with their political correctness goals at a huge costs. When these smaller operators sell the regions are engineering things to see that minority operators are awarded the stores and in some cases they are financing them. MCD in recent years have not made good business decisions which created the situation we are digging out of. Can you imagine where we would be had Thompson remained as CEO!! I continue to Monitor Easterbrooks promise to Wall Street in 2015 that he would take a half a billions dollars in cost off of the USA balance sheet. I didn't think it was possible but he may do it but not without more deep and needed cuts to the entrenched buearcracy . He will need to outsource more responsibilities to the operators for these changes. I was once a small operator and I feel for them but the economics of the industry has changed and making a living, servicing debt and continuing to reinvest makes it near impossible. Most small operators have simply brought themselves a job and not a very good one. The company needs to downsize a great deal and competent operator organizations be encouraged to grow to keep the system strong. In my opinion.
While I don't agree with all of the above, thanks for taking the time to put it together.
"implementing change undue financial burden is being shouldered by small operators with average to low volume stores."
Many of these undue financial burdens are the result of McDonald's Corp. sticking with the antiquated policy of making McDonald's Operators pay to remodel/rebuild their landlord's facility - something that should have been left behind twenty years ago.
.
I agree 100%. My point is that "Undue financial burden" is the sole result of MCD policy. Another point is that in all of the communication from the company about these required reinvestments is that they remain silent about "Impact". The EOTF and other reinvestment seem to increase sales but the smallest sales impact would wipe out all of the profit from these reinvestments. The company impact policy is an antique and they should address it if they continue to insist upon adding this financial burden.
Good post. I am dealing with a few of these issues as
well..
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