PHOTO COURTESY OF MCDONALD’S
year who said McDonald’s was pushing him out of the system. Among the company’s com- plaints about the operator, according to the complaint: The operator didn’t use advisors to set prices and raised them too aggressively. The company’s value efforts over the past year and a half also haven’t quite brought in the traffic many hoped for, though McDon - ald’s says that they are working. “Marketing is putting together all sorts of value cam- paigns,” Lewis said. “He’s tried a lot of things the last three or four years from Chicago for the whole country. It just doesn’t work. What works in Iowa doesn’t necessarily work in California and doesn’t work in Texas.” On a more practical level, NOA worries that operators could be forced to lower prices “below sustainable levels, particularly in high- cost markets,” NOA said. If future profitability is uncertain, mean - while, operators may have to discount their restaurants in a sale process. There’s also concerned that parts of the
criteria could be subjective. “If ‘value lead- ership’ becomes a scored metric, franchisees might receive adverse evaluations based on evolving or subjective criteria,” the associa- tion said. A uniform value standard could also dis- proportionately penalize operators in regions with higher-than-average rent, high levels of low-margin transactions or scarcer labor pools that lead them to raise wages to attract workers. McDonald’s, for what it is worth, expects local differences to influence prices but also argues that the chain can be profitable and still offer good value. And there’s no question that the company needs to protect its value reputation. “All they’re trying to accomplish is keep- ing McDonald’s value image,” Lewis said. “They still have to be a value play, that’s a key tenet of the business and they’re not wrong. But they’re trying to control it from Chicago. It’s a sticky wicket.”
a percentage of sales. That percentage can be 18% or even higher in some cases. Despite McDonald’s assurances that oper- ators control pricing, the value standard was nevertheless viewed by some as infringing on that right. “It really changes the relationship owner/ operators have with the corporation,” said Jim Lewis, a former McDonald’s franchisee. “It’s a big change. It’s a really big change.” Yet it’s also a change McDonald’s believes is important. Franchisees raised prices aggres- sively coming out of the pandemic to offset their own soaring costs. But that has earned the ire of consumers, while brands like Chi- li’s have marketed against the chain’s pric- es. Sales and then traffic started falling, and though the company has recovered more recently, there remains deep concern about traffic from low-income diners. There is at least some concern that some franchisees are raising prices too much. The company was sued by one franchisee last
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