An independent group of McDonald’s franchisees has created a list of 15 standards it considers vital for fair franchising.
In the process, the group drew a line in the sand in front of a franchisor that it believes has fundamentally changed the nature of its relationship with franchisees over the past several years.
The standards make up what the group, the National Owners Association, or NOA, calls the “Franchisee Bill of Rights.” The association sent the standards to its membership earlier this month, which was seen by Restaurant Business.
The rights address topics that many franchisees consider essential to their independence, including the ability to set their own prices, the ability to manage day-to-day operations “without fear of reprisal” and the right to “competitive and flexible sourcing.”
There are also standards such as “the right to profitability-based marketing” and “the right to market protection” that are aimed at concerns many franchisees have about their brands.
Many of these topics take on added importance given that McDonald’s is the world’s largest franchise. And many of these rights appear to refer to some of the more controversial topics in the system in recent years, notably the pricing standard.
“In general, these are standards that the NOA membership expects McDonald’s to follow regarding the business relationship between McDonald’s and its franchisees,” Robert Zarco, a franchise attorney who represents the association, said in an interview. Zarco helped develop the bill of rights for the association.
McDonald’s said that franchisees who join the system agree to a set of standards and terms. In return, they get access to resources like the company’s supply chain and its marketing programs, both of which are considered best-in-class in the restaurant industry.
“Our franchise business model is about creating real opportunity for entrepreneurs to be in business for themselves, but never by themselves,” the company said in a statement to Restaurant Business. “For more than 70 years, McDonald’s has helped thousands of franchisees build a successful business, and we’re committed to delivering that same world-class opportunity for generations to come.
“As a franchisor, we have a responsibility to protect the strength and integrity of the brand and ensure that every owner/operator upholds the standards that make McDonald’s so successful, for the benefit of all.”
A number of franchisee groups have some sort of standards dictating the rights for franchisees, including some who also label their standards a “bill of rights.”
The American Association of Franchisees and Dealers and the Coalition of Franchisee Associations, two franchisee advocacy groups, have each published a “bill of rights” that don’t look dissimilar to the list of standards NOA just published.
Such standards typically establish a code of conduct for franchisors in their treatment of franchisees.
It’s rare to see franchisees of a brand, particularly one as big as McDonald’s, take a step like this. And it’s indicative of many of the ways the company has changed its relationship with franchisees in recent years.
McDonald’s made numerous changes under CEO Chris Kempczinski and his predecessor, Steve Easterbrook, including forcing franchisees to remodel their restaurants before the pandemic.
The company increased its royalty fees on new units in 2024. It made it tougher for family members of franchisees to get stores and tightened standards for operators to renew their agreements.
This year, McDonald’s started assessing franchisees’ pricing decisions as part of a new value standard, which some operators fear encroached too far onto their ability to set prices. NOA said as much in December.
And, indeed, the last of the standards includes “the right to set prices without fear of recourse.”
“Franchisees, as independent owner/operators, have the right to set menu prices for their restaurants based on their own business judgment and market conditions,” NOA says in its bill of rights. McDonald’s, for what it is worth, has repeatedly maintained that franchisees still set their own prices.
Another standard worth noting is “the right to reasonable capital requirements,” which calls on the company to consult operators and get their input before they’re required to “undertake significant capital expenditures.”
Capital costs, including technology upgrades and remodels, often create friction in a franchise relationship. McDonald’s operators have in recent years expressed anger over technology fees and remodel demands that hurt their profitability.
Here’s the bill of rights:
The right to equity and ownership value: Franchisees have the right to maintain and realize the economic value of their businesses, including goodwill, and to expect that system changes or corporate decisions will not arbitrarily diminish that value.
The right to market protection: Franchisees have the right to meaningful protection from encroachment or cannibalization by other corporate or franchised restaurants that would materially harm existing restaurants without good cause or fair and just compensation.
The right to fair and transparent dealings: Franchisees have the right to good faith, fair dealing and reasonable care by the franchisor in all matters affecting their business, including capital investment requirements and operational mandates.
The right to competitive and flexible sourcing: Franchisees have the right to purchase non-food products, equipment, services or supplies from sources that meet McDonald’s standards, rather than being restricted to approved vendors that may create conflicts of interest or higher costs.
The right to full financial disclosure: Franchisees have the right to access accurate, relevant and timely financial and operational data, including the impact of corporate initiatives and promotional programs on store profitability and systemwide performance.
The right to reasonable capital requirements: Franchisees have the right to be consulted and to provide input before being required to undertake significant capital expenditures, remodels or technology upgrades that may not offer a demonstrable return on investment.
The right to profitability-focused marketing: Franchisees have the right to a marketing and advertising strategy that emphasizes profitability, protects brand equity and involves meaningful franchisee input.
The right to local and collective voice: Franchisees have the right to organize, associate and be represented—individually and through independent franchisee associations like the NOA—in discussions and decision-making affecting their businesses without any fear of repercussion, reprisal or increased operational scrutiny by their franchisor.
The right to meaningful representation and consultation: Franchisees have the right to ongoing and transparent dialogue with the franchisor and the ability to participate meaningful in major business decisions, including menu pricing, technology, operational initiatives, marketing and brand positioning.
The right to renewal and transfer: Franchisees have the absolute right to a fair and reasonable opportunity to renew their franchise agreements and to transfer their businesses to qualified family members or third parties, subject only to objective, clearly stated standards of approval.
The right to termination only for cause: Franchisees have the right to maintain their franchise absent material default, and the franchisor may not terminate or refuse renewal without good cause and reasonable notice.
The right to due process and fair dispute: Franchisees have the right to resolve disputes through fair, neutral and cost-effective means, including the right to mediation, and access to courts in the jurisdiction where the franchisee operates.
The right to brand stewardship: Franchisees have the right to contribute to the long-term direction and health of the McDonald’s brand through collaboration and innovation, and to expect that the franchisor will act as a responsible brand steward.
The right to operational flexibility: Franchisees have the right to exercise reasonable business judgment and local discretion in managing day-to-day operations, labor and customer and community relations consistent with system standards without fear of reprisal from their franchisor.
The right to set prices without fear of recourse: Franchisees, as independent owner/operators, have the right to set menu prices for their restaurants based on their own business judgment and market conditions. This right exists irrespective of the pricing decisions of any national, regional or local co-op or franchisor initiative. Franchisees must be free to manage their pricing strategy without fear of intimidation or diminished support from McDonald’s or its affiliated entities.”