To Franchisees, McDonald's Arches Aren't Looking So Gold
After a year-long sales slump, McDonald's franchisees aren't loving it.
Franchisees report that their same-store sales fell by 3.6 percent in September, according to a survey of McDonald's franchisees by Janney Capital Markets analyst Mark Kalinowski. The franchisees, who operate a total of 256 U.S. restaurants, aren't feeling great about the next month either. Looking ahead to October, they estimated on average that same-store sales would decline 0.7 percent.
Other franchisee concerns include having to increase menu prices due to minimum wage boosts, an "idiotic” corporate marketing plan and a lack of leadership. Additionally, all the franchisees who responded except one said that McDonald's has failed at its promise to streamline and simplify the menu.
A sour relationship between franchisees and franchisor also isn't helping the fast-food chain. On average, franchisees ranked their relationship with the corporation as a 1.72 on a five-point scale: somewhere between poor (1) and fair (2), and lower than the average result of 2.1-2.2 over the history of the survey.
One bright point for franchisees is McDonald's Monopoly promotion, which a number of franchisees said they believed would help sales this fall. Others hoped that the return of the McRib would help prevent declines, despite the fact that the popular pork sandwich is only a local option this year, instead of a national rollout.
Janney Capital lowered its September domestic same-stores sales projection to a decline of 3.6 percent following the report, significantly lower than the consensus forecast of a decline of 2.7 percent. McDonald's is set to report its third quarter sales tomorrow. The company is expected to report earnings of $1.34 a share, down from $1.52 per share a year ago, according to Thomas-Reuters.
August marked the fourth straight month of declines in McDonald's U.S. same store sales. Internationally, the company is still dealing with the aftermath of the Chinese expired meat scandal, as well as investigations in half of its nearly 450 Russian restaurants, likely due to anti-U.S. political pushback.