April 15, 2015 / 5:49 PM / 2 years ago

McDonald's relations with franchisees hit new low: survey

3 Min Read

A McDonald's restaurant sign is seen in San Diego, California March 31, 2015.Mike Blake

LOS ANGELES (Reuters) - McDonald's Corp's (MCD.N) relations with its U.S. franchisees have hit a fresh low as the fast-food giant's new chief executive fights to turn around its domestic business amid fierce competition, according to a survey released Wednesday.

Relations "are the worst I have ever seen!" said one of the 32 franchisees participating in the monthly survey, published by Janney Capital Markets restaurant analyst Mark Kalinowski.

"The suits in Oak Brook still don't get it," another franchisee said, referring to the company's top executives.

The respondents represent about 1 percent of McDonald's U.S. franchisees and operate about 215 of the company's more than 14,000 U.S. restaurants.

McDonald's spokeswoman Lisa McComb, who noted the poll size, said the company values franchisee feedback and has a "solid working relationship with them."

Franchisees' survey responses were based on a scale, with 1 being "poor" and 5 being "excellent".

The average rating of the franchisee/corporate relationship came in at 1.48, a historical low and down from the historical average of 2.1.

Franchisees' six-month business outlook rating fell to 1.81, meaningfully below the 2.8 survey's historical average, Kalinowski said.

McDonald's franchisees recently gathered in Las Vegas for closed-door meetings with the parent company. That event, dubbed the "Turnaround Summit", marked the official debut of Chief Executive Steve Easterbrook.

"I came away from the summit completely confused," said another franchisee. "McDonald's management does not know what we want to be."

Respondents also said McDonald's Corp's plan to raise wages in the roughly 1,500 restaurants it operates puts pressure on franchisees, who say they cannot afford do follow suit.

"It will just strain an already-tenuous relationship," another franchisee said.

Fast-food workers from McDonald's and other chains on Wednesday are participating in the latest in a series of national protests calling for higher pay and better working conditions.

Franchisees also questioned McDonald's plan to sell custom burgers at a time when the chain's large menu is slowing service.

The custom sandwich program, called "Create Your Taste," forces franchisees to spend more than $100,000 per restaurant and even then does not offer it through drive-thru windows.

"The Turnaround Summit was a farce. The ideas presented - such as Create Your Taste - DO NOT fit our business model," said the franchisee who complained about "the suits" in Oak Brook.

McDonald's biggest problems are its "unwieldy menu ... and trying to be all things to all people," that franchisee added.

Reporting by Lisa Baertlein in Los Angeles; Editing by Christian Plumb

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