Retailing: From A to Z

The backbone of McDonald’s long-term growth around the world is its franchising system, whereby the vast majority of McDonald’s outlets are owned and operated by franchisees. However, McDonald’s has not performed strongly for a while. And many of its franchisees are not happy. Click here, for example.

As reported by Bryan Gruley and Leslie Patton in the story ‘McRevolt: The Frustrating Life of the McDonald’s Franchisee — Not lovin’ it’ for Bloomberg Business:

“There are 5,000 McDonald’s franchisees around the world. They run 82 percent of the chain’s 36,000-plus restaurants and generate a third of its $27.4 billion in annual revenue. The average franchisee has six outlets.” Yet, “many operators wonder whether executives at headquarters will figure out how to innovate while staying true to the chain’s promise of serving good-tasting food fast. Their experience suggests the answer is no.”

“For the first time in at least three decades, McDonald’s this year will close more restaurants in the U.S. than it opens, for a net loss of 59 locations. Same-store sales in the U.S., where McDonald’s gets 30 percent of its revenue, have declined in eight of the past 10 quarters. It’s a number that Wall Street watches closely. The company’s shares have underperformed the Standard & Poor’s 500-stock index for the last three calendar years.”

“McDonald’s has gussied up its restaurants, stuffed tortillas with baby kale, and promised to rid its chicken of antibiotics, all to little avail. This year it promoted a sirloin burger in ads bringing back the Hamburglar character as a hipster with chin stubble and a Zorro mask; the company recently said the sandwich didn’t meet sales expectations. The sirloin burger was only the latest would-be hit that flopped.”

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Photographer: Jamie Chung for Bloomberg Businessweek