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McDonald’s franchise owners back vote of no confidence in CEO, poll says

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Chris Kempchinski, McDonald’s, speaks at a press conference in New York, November 17, 2016.

Shannon Stapleton | Reuters

McDonald’s franchisees dissatisfied with ownership changes are expressing no confidence in the company’s CEO and US president, according to a new owner survey that has been viewed by CNBC.

The National Owners Association, an independent franchise advocacy group for McDonald’s owners, recently surveyed its members about changes being made to franchisee leases.

The results show that the vast majority – 87% – of respondents support the announcement of a vote of no confidence in CEO Chris Kempchinski and US President Joe Erlinger.

In addition, almost 100% felt that the company should have cooperated and consulted with owner leaders before announcing changes to the franchise system, and 95% said that the company’s senior corporate management is not in the interests of the owners in their approach to franchising.

NOA has about 1,000 members, and almost 700 of them took part in the survey. As of the end of last year, McDonald’s had over 2,400 owners. Franchisees operate approximately 95% of McDonald’s locations and play a key role in the company’s operations.

NOA did not immediately respond to a request for comment on the poll results.

In late June, McDonald’s warned owners that starting in 2023, it would evaluate potential new operators equally instead of favoring the spouses and children of current franchisees.

He also separates the process of renewing leases by 20 years from assessing whether owners can run additional restaurants. In a message to owners about some of the changes reviewed by CNBC, the company said, “This change is in line with the principle that getting a new franchise term is earned, not given.”

The move sent shockwaves through the franchisee community. It comes on the heels of plans to introduce a new grading system for restaurants next year that some fears will alienate workers at a time of unprecedented labor troubles. The company is actively working to attract new and more diverse owners, according to Erlinger’s message to franchisees, which was viewed by CNBC.

“We’ve thought a lot about how to continue to attract and retain the best owners/operators in the industry — people who represent the diverse communities we serve, bring a growth mindset and focus on performance excellence while creating a supportive work environment. for restaurant teams,” he said.

In December, McDonald’s pledged to hire more multi-cultural franchisees, committing $250 million over the next five years to help those applicants fund the franchise. McDonald’s declined to comment on the new changes or the poll.

McDonald’s controls the lease terms for owners, and there are rumors by some in the franchisee community that the changes are being made to attract new owners with higher rental rates than permanent owners.

A NOA poll showed that 83% of respondents called the new rules “a veiled attempt to raise rents.” And 95% said they don’t feel valued by corporations given recent events. In addition, 71% of respondents said that existing or former owners should not be treated the same as potential new operators.

Other franchisee organizations are also unhappy with the changes.

A separate survey by the National Franchise Leadership Alliance, also reviewed by CNBC, found that nearly 100% of the more than 400 respondents thought McDonald’s management should have collaborated and consulted with owners before announcing changes. Over 90% said the changes were not supported, and 90% said they believed the proposed changes would negatively impact their business.

McDonald’s National Association of Black Operators also voted no confidence in CEO Kempchinski, Restaurant Business Online reported in late June.

Tensions come at a time when McDonald’s US business is strong and franchisee profits are at an all-time high. The company beat earnings and same-store sales guidance last quarter. Shares are down 5% since the start of the year.

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