McDonald’s Franchisee: Company Told Me To Pay Employees Less

McDonald’s, the largest fast food employer in the country, is at the center of the ongoing debate about minimum wage levels, and about the relationship between franchisees and their corporate overlords. One owner of a McDonald’s franchise in California says the folks at McDonald’s HQ have an answer for franchisees who complain about paper-thin profit margins on their food — pay employees less money.

In a “First Person” piece posted in today’s Washington Post, the franchisee says smaller operators like her family — they only own a single franchise after McDonald’s did not renew their other store — are being squeezed by the corporate office’s demand for bottom-dollar prices on menu items.

“We try and accommodate our workers, but there’s several issues,” she writes. “The way McDonald’s does it, they work to bring customers into the stores with their very low prices. So the difference for us between a dollar hamburger and a $3 hamburger is huge.”

She says that she complained to McDonald’s years ago that it needs to get away from pushing low-value, low-profit sandwiched, but that the company’s response was “Just pay your employees less.”

The franchisee admits that the low-price stuff does get bodies in the door, but claims that recent pricing changes have taken away her ability to make money on the higher-priced items.

“[I]nstead of sticking with low-price stuff at one level and giving people an opportunity to go up if they wanted a bigger drink to pay more, now we’ve got all size drinks are a dollar,” she writes. “So McDonald’s has gotten itself in a trap. And as an owner operator, and if you don’t do their dollar sandwiches or other discounts, you get punished.”

According to the franchisee, she believes McDonald’s is trying to rid itself of smaller operators like her and her family in favor of mega-franchisees who run dozens of locations.

“Now there are franchisees with 50, 60 restaurants,” she writes. “The way that McDonald’s works is, you pay them rent for the building and the land, and it’s a triple net lease. Plus you pay them for advertising and promotion and PR. Then you pay the bills and what’s left at the bottom is what the owner operator gets.”

And she clarifies that “This is not just a McDonald’s problem,” that this squeeze play is a “standard thing” in fast food industry.

A 2013 survey of McDonald’s franchisees found a growing level of discontent among the franchise owners, as McDonald’s HQ was asking them to improve service and offer new menu items while also continuing to sell value-priced food.

And McDonald’s HQ then screwed up by forcing franchisees to try to sell chicken wings at a price that was significantly higher than people can get at their local sports bar.

Because McDonald’s corporate office gets so much in return and exerts so much influence over franchisees’ businesses, the National Labor Relations Board Office of the General Counsel recently declared that franchisees and McDonald’s HQ should be considered “joint employers,” meaning the corporate office could be held responsible for franchisees who violate labor laws.

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  1. Liberal says:

    Every thing the operator said is true. Business is business. The model is a gold mine for the company. The operator is squeezed just as hard as the employee. It rolls down hill. unfortunately the employee is the real loser.

  2. furiousd says:

    I worked for a family-run business that paid franchise fees essentially for use of the name, luckily it was a parent company that meddled next to never. There was a rebranding push and they tried to get us to do a number of alterations but it was basically to make the places that had additional attractions pay more in franchise fees for the branding signage. We kindly declined. Coming from that experience I can’t imagine what it’s like to try and run your own place at the behest of an overly-involved parent company. That alone is enough to sway me to the “corporate McDonald’s is co-owner” side of the argument for those that want to include them in their lawsuits. I’m much more on the laissez-faire side of things in general anyway, I don’t like to be meddled with.