In a surprise move, Joe Erlinger, U.S. president of McDonald’s Corp. addressed a letter to U.S. franchisees advising them of new corporate policy.  Franchisees will undergo more intensive reviews at 20-year intervals to determine their suitability to continue operation.  Store performance as compared to peers and customer complaints will be included as criteria to determine continuity and expansion.  The company will also require additional payments from franchisees to pass on operations to heirs. It is estimated that a McDonald’s franchise costs from $1.25 to $2.25 million.

Following the advent of COVID in 2020 franchisees experienced a sharp drop in traffic with most revenue derived from drive-through sales. It is noted that for the first quarter of 2022 ending March 31st U.S. comparable store sales increased by 3.5 percent.

Relations between the corporation and its franchisees have been strained in recent years resulting in the formation of owner's organizations.  Complaints include lack of innovation on the part of the corporation, obligatory store upgrades, required promotional discounts and imposition of excessive fees. A side issue concerns the lack of diversity among franchisees.  To address inequities, McDonald’s is offering low-interest loans to minority owners over the coming five-year period.

It is self-evident that other QSR companies are observing the interaction between McDonald’s and its franchisees since Wendy’s, Burger King and other fast-food franchises are experiencing similar problems partly as a result of supply chain disruption but also declining margins resulting from inflation in both food and labor costs and changes in consumer purchasing patterns.