McDonald’s Is Desperate to Modernize Its Franchisees – TheTradersWire

McDonald’s Is Desperate to Modernize Its Franchisees


McDonald’s (MCD) has pledged to dig deep in its own pockets to win back core customers and the reported 500 million of U.S. orders it has lost to rivals over the past five years.

The fast-food chain believes that its U.S. restaurants need a major makeover to tempt back old customers and is now willing to put this plan into action by financing 55 percent of the required costs, according to the Wall Street Journal. Sources speaking to WSJ said that in the past the company has paid up to 40% of franchisees’ remodeling costs and sometimes more for smaller upgrades, but a franchisee owner told the newspaper that this new proposal is “unprecedented” as it aims for a complete revamp instead of small changes in equipment or decor. (See also: The Cost of Buying a McDonald’s Franchise.)

The upgrades, which are likely to cost anywhere between $150,000 to $700,000 per location, aim to revamp dated restaurants and revolutionize all angles of the business, from how customers order their food to the service provided by employees. Key investments being mooted include introducing new employee uniforms, enhancing desert counters and installing self-order kiosks and table-locator technology to ensure that staff are better able to swiftly bring food to tables.

One anonymous franchisee told the Wall Street Journal that financing for these widespread changes is desperately needed as roughly half of McDonald’s U.S. restaurants are outdated because lagging sales have made franchisees reluctant to invest money in them.

A letter detailing these plans, titled the “Experience of the Future” initiative, was sent to U.S. franchisees on Wednesday. In the letter, the company warned that only those willing to approve the company’s national advertising campaign, centered on supporting its new $1, $2 and $3 value menus, will receive funding for upgrades.

Investors Buy Into McDonald’s Turnaround Strategy

McDonald’s value menu forms part of the company’s goal to salvage its image as the number one provider of affordable food. In recent years, the restaurant chain has lost business to rivals such as Wendy’s (WEN) and Burger King (QSR), prompting CEO Steve Easterbrook to embark on an aggressive strategy to cut costs, weed out underperforming restaurants, introduce healthier food and place a greater emphasis on what McDonald’s does best. (See also: McDonald’s Doubled Its CEO’s Compensation in 2016.)

Investors appear to be encouraged by Easterbrook’s turnaround plans. At $144.21, shares in the company have climbed 28 percent since November, driven in part by an impressive set of first quarter results. Better than expected profit and same-restaurant sales were attributed to lower costs, the introduction of an all-day breakfast, $1 drinks and Big Mac promotions. (See also: McDonald’s Profit Beats as Turnaround Gains Steam, Shares at Record High.)
Published at Fri, 12 May 2017 10:55:00 +0000

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