Tension reemerges between McDonald’s and its franchisees

Operators say the company pressured suppliers not to attend a recent National Owners Association meeting.
Photograph courtesy of McDonald's Corp.

Tensions between McDonald’s and many of its U.S. franchisees appear to have reemerged in recent weeks amid a dispute over what operators say is corporate pressure aimed at diminishing support for its newly created franchise association.

In July, McDonald’s told suppliers that the National Owners Association (NOA) was not a sanctioned franchise organization, several sources told Restaurant Business. The company has some internal groups designed to represent franchisee interests.

A number of suppliers ultimately decided not to attend the meeting as a result of company comments, several sources said.

“While you ultimately must decide whether to attend or not, we remind you that McDonald’s only engagement is with the recognized national franchisee leadership bodies,” a July letter to suppliers said, the text of which was provided to RB.

It referred to internal groups, including the National Franchisee Leadership Alliance and groups that oversee supply chain and advertising, whose leadership is chosen by operators. It also referred to affiliated diversity groups of owners.

The company said that costs associated with NOA memberships, sponsorships and booth fees “are not to be passed along in the cost of goods sold to McDonald’s distributors and ultimately to McDonald’s restaurants.”

A company representative said that the letter was sent to alleviate confusion among suppliers regarding the status of the association and whether they should attend.

But operators believe the company is putting pressure on suppliers to keep them from supporting the association.

That could be viewed as an effort to delegitimize the franchise association. More practically, the withdrawal of supplier attendance or sponsorship could hurt the association financially.

It’s relatively common for suppliers to attend and support independent associations. Accountants, suppliers, lenders and other companies will attend meetings to build relationships with the franchisees. And their support can help fund the group’s activities.

While a representative indicated that nothing about the company’s view of the association has changed, the letter has intensified tension between the company and the operators who formed the group.

McDonald’s has traditionally had a cooperative relationship with its franchisees—more so than most other franchised brands. But it also has a history of pushing back against the formation of independent associations.

NOA’s creation last year was seen as something of a historic moment for the chain and its relationship with operators. McDonald’s relies heavily on franchisees, who operate 95% of the chain’s 13,900 domestic locations. The association is the first broad-based independent association in the company’s history.

Tensions had eased in the months since then. McDonald’s appeared to make nice with the group and made a number of concessions to address franchisee concerns. For instance, it gave them two more years to remodel restaurants under its “Experience of the Future” design. And it renegotiated its delivery deal with Uber Eats, bringing down the commission rates paid on delivery orders and ending the exclusive arrangement. The moves appeared to have improved relations between the company and its franchisees.

Interest in the association has only grown in recent months, and sources said membership was up. The group has met four times, including the initial meeting that led to its formation.

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