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McDonald's Franchisees Join the McFight

Fast food: Disgruntled owner-operators back federal 'good faith' legislation.

May 22, 1997|From Associated Press

A number of McDonald's Corp. franchisees say meals are no longer happy at the fast-food chain following a series of corporate missteps. And they're backing federal legislation to change that.

Consortium Members Inc., representing an unknown number of franchisees, announced Wednesday that it will work with the American Franchisee Assn. for approval of legislation that would mandate standards for franchisee-corporate relationships.

The disgruntled franchisees' move is the first time McDonald's owner-operators have joined the call to legislate "good-faith" relationships between franchises and franchisees.

"They want to do business the McDonald's way, and if that means they act in bad faith, they act in bad faith," said Susan P. Kezios, president of the Chicago-based American Franchisee Assn., which represents about 15,000 franchisees in 60 industries. "The corporation can yank your chain any time they want."

A bill to change that, sponsored by Rep. Gary Ackerman (D-N.Y.) is before a House subcommittee, Kezios said.

McDonald's spokesman Chuck Ebeling said such legislation would be a mistake, because it would place federal regulators and the courts in between the company and its franchisees.

"Similar legislation has been introduced, and struck down, in at least 30 states," said Ebeling, who called franchising "the heart and soul" of McDonald's business. He said the success of the firm depends on the success of its franchisees.

Dick Adams, chairman of the disgruntled franchisees group, said McDonald's forces franchisees to go along with badly formed marketing and expansion plans by subtly threatening retribution against dissenters.

The announcement came just a day before the company's annual meeting and is an outgrowth of the Oak Brook, Ill.-based chain's recent moves to boost domestic sales, which have lagged behind international sales for years.

In 1994, corporate management approved plans to accelerate its domestic expansion by having a McDonald's "wherever people go."

The plan was to have so many restaurants within reach for consumers that they would ignore alternatives such as Wendy's and Burger King. But some franchisees were dismayed to find the new restaurants would open within a mile of an existing store.

"Everyday more and more operators are not making money, and it's going to come to a head sooner or later," said Bob Srygley, a McDonald's owner in Monticello, Ark. "We're our worst competitors. I can put up with a Burger King down the street, but I can't put up with another McDonald's even if I own a McDonald's. The company still makes money, but the operators are losing their shirts." The franchisees also complain that fees paid to the corporation have been rising, although the volume needed to increase sales has been falling amid complaints about the taste of the food and heavy competition.

McDonald's last year announced it was slowing expansion and closing some stores it had opened. It also announced Jack Greenberg would become chairman of U.S. operations. The moves were seen by analysts as efforts to placate the company's 1,200 franchisees.

But some franchisees were angered this year by a corporate decision to try to jump-start sales with a promotion to lower prices on selected sandwiches when purchased with fries and a drink.

Franchisees in key cities had chosen to opt out of the campaign, saying they would lose money on the promotion. Most came aboard following personal lobbying by Greenberg.

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