McDonald's to Pay Some Restaurant Remodeling Costs; Investors Skeptical

2 min read
Opinions expressed by Entrepreneur contributors are their own.

Oak Brook, Illinois--McDonald's Corp. will offer U.S. franchisees financial incentives to win their support for a nationwide $1 menu and a major restaurant remodeling effort. To encourage enthusiastic franchisee participation in the $1 menu rollout, the company will provide what it calls "downside support" for those who find that the cheaper, low-margin menu hurts their bottom line. If a restaurant sells more Big N' Tasty burgers than the average McDonald's in its market but sees gross profits fall compared with the period last year, the company will pay an amount equal to 30 percent of the gross profit reduction.

McDonald's has also planned a set of economic incentives for franchisees to remodel or rebuild their restaurants. Under certain circumstances, the company would pay up to $150,000 in remodeling costs.

Franchisee leaders have thrown their support behind McDonald's plan to improve domestic sales via the $1 menu and increased restaurant investment in everything from d�cor to drive-thru lanes.

Meanwhile, shares of McDonald's Corp. fell to almost a seven-year low Thursday after two big investment banks cut their stock price targets and voiced pessimism about its turnaround plan in the United States. Shares of McDonald's, the fifth most-active issue on the New York Stock Exchange in early afternoon trade, fell below $20 for the first time since October 1995.

Many Wall Street analysts doubt the company's strategy of a low-priced menu and facelift of older restaurants will be sufficient to increase U.S. sales. They said the strategy could even backfire, eating into future earnings McDonald's said it will provide more details of its plans in a quarterly update Tuesday. The company has been plagued by several quarters of sluggish U.S. sales. -Dow Jones, Knight-Ridder, Reuters

More from Entrepreneur

Kathleen, Founder and CEO of Grayce & Co, a media and marketing consultancy, can help you develop a brand strategy, build marketing campaigns and learn how to balance work and life.
Book Your Session

In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Apply Now

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.