Tags: mcdonalds | franchisees | furious | rent

McDonald's Franchisees Furious About Rising Rents, Other Costs

Image: McDonald's Franchisees Furious About Rising Rents, Other Costs

By Clyde Hughes   |   Wednesday, 07 Aug 2013 08:44 AM

McDonald's, which has received negative publicity from employee strikes over wages, are now facing a franchisee revolt over rising costs in rent, training and operation expenses.

McDonald's is trying to improve its bottom line on the backs of franchise owners, who own 90 percent of the restaurants, according to Bloomberg News on Tuesday  The franchisees told Bloomberg that the relationship is "deteriorating" because of the squeeze between corporate and employees.

"(McDonald's is) doing everything they can to shift costs to operators," said Kathryn Slater-Carter, who owns two McDonald's in the California area. "Putting too much focus on Wall Street is not a good thing in the long run. It is not as profitable a business as it used to be."

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Heather Oldani, a McDonald's spokeswoman, said McDonald's corporate is engaged with franchise owners to balance costs and restaurant upgrades.

"We are continuing to work together with McDonald’s owner/operators and our supplier partners to ensure that our restaurants are providing a great experience to our customers, which involves investments in training and technology," Oldani said in an email to Bloomberg.

McDonald's has been one of the restaurants targeted by the advocacy group Fast Forward for wage protests as employees walked off their jobs to complain about work the federal minimum wage of $7.25 an hour, reported UPI.com.

Fast Forward and other groups have organized walkouts in New York, Chicago, St. Louis, Detroit, Milwaukee, Kansas City, Mo. and Flint, Mich. for the past two weeks, according to UPI.com.

In the 1990s, McDonald's angered franchise owners when it expanded too quickly and new stores began cannibalizing other locations, Dick Adams, a former McDonald’s store owner and restaurant consultant in San Diego, told Bloomberg.

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Revenue from franchised stores, which includes rent and royalties, have increased eight percent on average during the past five years, while total revenue rose only four percent, shrinking franchisee profits at a time of growth, Bloomberg reported.

Some franchisees are paying as much as 12 percent of store sales in rent, according to notes of an April 23 meeting attended by store operators obtained by Bloomberg. Franchise owners want McDonald's corporate to return to its historic rate of about 8.5 percent.

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