Two recent surveys of McDonald’s Corp. revealed unrest among brand operators.
An exclusive survey of McDonald’s franchisees by Kalinowski Equity Research analyst Mark Kalinowski, released on Tuesday, revealed “strained relations” between franchisees and management at the Chicago-based burger brand.
On Monday, CNBC reported that a majority of McDonald’s franchisees in a survey by the National Owners Association, seen by the outlet, were unhappy with changes to ownership terms and expressed a lack of trust in the company’s CEO and the president of the brand’s US division.
The surveys come ahead of McDonald’s expected release of second-quarter results before market open on Tuesday, June 26.
Kalinowski said respondents to his survey, who were asked to quantify the relationship between franchisees and McDonald’s Corp. on a scale of one to five (1 being “poor” and 5 being “excellent”), had an average of 1.09, which the analyst said was “the second lowest such response in the near 20-year history of our investigation.”
Kalinowski added: “It was below the April 2022 average of 1.19 and below the January 2022 average of 1.87. The 1.09 figure is ahead of just 1.04 in our survey released in October 2018.” Kalinowski said he will release the second half of his franchisee survey later this week.
The analyst noted that the National Owners Association, an independent franchisee advocacy group for McDonald’s owners, recently surveyed its members about changes to franchisee lease terms, and those results were seen by CNBC.
“The results show that an overwhelming majority – 87% – of those polled support calling for a ‘vote of no confidence’ in CEO Chris Kempczinski and the company’s US chairman, Joe Erlinger,” he said. .
Almost all National Owners Association franchisee respondents said that company executives “should have collaborated and consulted with owner executives before announcing changes to the franchise system, and 95% said that senior management of the company did not have the best interests of owners in its approach to franchising,” noted Kalinowski.
The National Owners Association has approximately 1,000 members and nearly 700 responded to the latest survey. Kalinowski said McDonald’s had more than 2,400 owners at the end of 2021.
For the first quarter ended March 31, McDonald’s net income fell 28% to $1.104 billion, or $1.48 per share, from $1.537 billion, or $2.05 per share, at the same period a year ago. Revenue rose 11% to $5.666 billion from $5.125 billion in the prior year quarter.
In the first quarter, comparable store sales increased 11.8% system-wide and 3.5% in the United States.
For the second quarter, Kalinowski said his research firm maintained its U.S. same-store sales forecast for McDonald’s at 3%.
“During the second quarter, we believe April was weak (partly due to the slowdown in stimulus provided by the government in March/April 2021), with May improving a little and June the best month in the quarter,” Kalinowski said in Tuesday’s note.
McDonald’s has over 40,000 locations in over 100 countries. Approximately 93% of the global system is franchised.
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