McDonald's franchises to get more leverage?


Franchisees could get a louder voice in setting franchisors’ strategic direction if a first-of-its-kind proposal is approved by McDonald’s Corp. shareholders later this spring.

The proposal would require the company to give a board seat to franchisees, who would also be granted a share of special stock for each store they own. The share would not have an economic value, but would enable the bearer to vote for a director.

The plan was put forth not by franchisees, but by an advisor to institutional investors, Segal Marco Advisors. It argues that franchisees are key stakeholders in a company’s direction and operation, and their involvement on the board through a representative director would strengthen McDonald’s corporate governance.

The request by Segal Marco is believed to be the first of its kind.

McDonald’s had asked the Securities and Exchange Commission for permission to omit the proposal from its shareholder proxy materials, but the agency declined.

Still, observers say the measure has a relatively slim chance of passing. Segal Marco represents a trust that controls just 5,200 shares, which translate into votes. The consulting firm would need a steep multiple of that number to ensure its proposal is adopted.

The plan wasn’t the only suggestion in recent weeks that franchisees are getting more of a say in the operation of their franchisors.  Last week, a group of Buffalo Wild Wings franchisees took the side of the brand’s management in its power struggle with an activist investor. Earlier, that investor, Marcato Capital, had wooed the franchisees, noting that it would be likely to sell them company stores and expand their business.

A day before the BWW announcement, a group of Jack in the Box franchisees revealed that they had hired a lawyer and advisor to forge a “true partnership” with the brand’s parent company.


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