McDonald’s has evolved its franchise business model over the past decade. | Photo courtesy of McDonald’s.
This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
The biggest news in recent weeks has come courtesy of McDonald’s, which is writing into its global franchising standards a new value component.
Last week, we wrote about questions the company’s franchisees have about that new standard, which is not insignificant. But as big a deal that the standard is, the fact that it represents a continued evolution of the fast-food giant’s relationship with its franchisees is a bigger one.
Over the past several years, McDonald’s, largely under CEO Chris Kempczinski, has taken several steps that, in effect, centralizes more control in Chicago. It has reorganized its field offices to speed decision-making. It has also tightened standards for renewal of restaurants while making it tougher for family members of existing franchisees to get stores. The company’s remodel push before the pandemic was particularly aggressive.
McDonald’s has long had one of the industry’s toughest franchise agreements. But years ago it used to boast that it would put that agreement in a drawer and ignore it, in favor of a cooperative working relationship with franchisees. The efforts recently represent a change in that policy, one that effectively pulls that agreement back out again.
None of this is to say that McDonald’s doesn’t work with operators. It does, as much as any other brand. But the changes, including the new value standard, have fundamentally altered the nature of that relationship.
This week’s financial news
Take all this new economic data with a big, fat grain of salt because of the shutdown, but it looks like restaurant sales predictably declined in October when the government wasn’t operating.
Olive Garden and LongHorn Steakhouse add more evidence to the suggestion of a casual-dining comeback. One reason? Delivery. But don’t ask Olive Garden if it plans to use third-party sites anytime soon.
We just concluded our series on the impact of AI on the restaurant industry. You can find all six episodes of the podcast series here. That said, AI is not here to fix your labor costs.
This is the time of the year when, desperate for stories, we produce stuff like this. And this. And this.
Selling to a private-equity group? Don’t let your customers find out.
Number of the week
Darden talked about its deliberate approach to growth. None of its chains grew unit count by more than 5% over the past 12 months.
Quote of the week
“I want to remind everybody that we think growing way too fast is an issue in the industry.” -Darden CEO Rick Cardenas on the company’s slower approach. I don’t do quotes of the year—way too lazy for that—but this would be a front-runner.
On the blog
I wrote about McDonald’s, Darden, private equity and why AI isn’t coming for your labor costs. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive we concluded our AI in restaurants series. On The Week in Restaurants we looked at the year’s biggest stories.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.
