McDonald’s is in an unresolved feud with its US franchisees

McDonald's-Corp-is-in-an-unresolved-feud-with-its-U.S.-Franchisees-amid-plummeting-sales

A request to delay rent and royalty payments has been rebuffed by the world’s largest fast-food chain, Mcdonald’s Corp. Rejected franchisees have expressed their disappointment through several letters, while some see this as a telltale sign that the world’s largest food company is aloof and unfeeling despite the crisis.

At odds with its franchisees, McDonald’s is at a critical point in maintaining its goodwill as affected stakeholders are dismayed from an ungranted request.

The turmoil caused by The Great Lockdown has not limited itself to plummeting shares and loan losses. It has also come to disturb sound relationships within large and small businesses as the economic recession progresses at an unbelievably rapid rate.

The incident

Reportedly, the said franchisees have been enduring weeks of negotiations to receive financial help from McDonald’s amidst the coronavirus crisis when it consequently asked for a 14-day grace period in their March rent.

On April 3, they received a response declining the request. Overwhelmed by dismay, the National Owners Association of franchisees expresses that they have been anticipating to see how the Company would handle such a crisis brought by the pandemic and that they were expecting a “positive, tangible company decision,” as reported on a response letter sent to McDonald’s CEO Chris Kempczinski and McDonald’s USA Head Joe Erlinger.

McDonald’s reason for nixing the request

On April 9, Erlinger responds and expresses his disappointment as he feels that NOA’s faith in the relationship was based on the assumption that unlimited financial support would be outrightly given.

Some critics have also expressed their dismay and state that the Corporation should be more accommodating to the NOA, especially since they are representative of a huge 75% in McDonald’s franchisees. A few cited some brands that have given a 14- to 30-day reprieve for its franchisees in response to the ongoing global health crisis.

In response to statements that the Corporation is unsupportive of its franchisees, David Tovar, who is the VP of Communications for McDonald’s U.S. told Reuters that “the company has provided unprecedented levels of financial support to U.S. operators to inject liquidity into the system during this crisis.”

Going out of business?

The same franchisees fear worse business outcomes in response to analysts sharing their glum outlook of the economy. This has been ignited as McDonald’s reports a 13.4% plunge in its U.S. Sales in March. These franchisees have suffered greatly as they have had to switch operations to drive-through, delivery and carry-out only due to hampered operations and impeding government restrictions.

Subway restaurants and Darden Restaurants Inc belong to the long list of brands that have been hurt by the coronavirus recession. Overall, fast food sales in the U.S. have depressed at 30-40% recently. Business analysts have not been optimistic about this and predict how this might be a prolonged predicament.

 

Feature image used courtesy of Mashed/Youtube Screenshot.

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