Richard Adams

Richard Adams
Send Message
View as an RSS Feed
  • Is The McDonald's Disaster Getting Worse?  [View article]
    That doesn't sound like anything is working!
    Oct 18, 2015. 10:06 AM | Likes Like |Link to Comment
  • Is The McDonald's Disaster Getting Worse?  [View article]
    Franchisee have to follow a "system" and have little or no flexibility in changing that system. The older and larger the franchise system the more rigid are the policies and procedures. Franchisees are not entrepreneurs in the true sense. If they don't follow the program or system they risk their franchise, simple as that.
    Oct 16, 2015. 04:47 PM | Likes Like |Link to Comment
  • Trying (And Failing) To Support The Long Case For McDonald's At $103  [View article]
    You are correct, McDonald's real estate is already being monetized.

    Many of the discussions about a McDonald's REIT seem to assume that McDonald's charges franchisees below market rents. You'll have to trust me on this but McDonald's franchisees pay percentage rents that are substantially above market with little or no room for increases.

    And these properties are already encumbered with leases and franchise agreements. A REIT would have no power to modify or nullify these agreements. At least until the 20 year franchise agreements rollover and
    then the REIT would have to face franchisees walking away if their rent is increased. As long as McDonald's is a franchising company a REIT is a very poor fit.
    Oct 13, 2015. 08:01 PM | 1 Like Like |Link to Comment
  • Trying (And Failing) To Support The Long Case For McDonald's At $103  [View article]
    This is not a prediction but all should be concerned that breakfast all day will slow down service for all customers and folks will vote with their feet. We won't know the real result until March/April. All the advertising and coupons at this time are creating an artificial success.
    Oct 13, 2015. 11:47 AM | 1 Like Like |Link to Comment
  • Should McDonald's Be Scared Of The Chicken Monster?  [View article]


    Your theorem about on-premise franchisees is dead on and is one of the key elements in Chick-fil-a's success. And, it is proven further by the fact
    that McDonald's has more than doubled their franchisee to restaurant ratio in the United States over the past twenty years. Internationally they are
    franchising to huge joint ventures and other licensed arrangements involving hundreds of restaurants.

    Two decades ago the average McDonald's franchisee in the USA had three restaurants. Today that ratio has grown to 6-7 depending how they are counted. They have been some good times as that change has taken place but there have been many rough spots and the franchising arrangement has been one of the causes.

    But it's too late to reverse this trend. The McDonald's franchise model is
    built around holding the franchisees responsible for remodeling and rebuilding the McDonald's building they are renting. In addition to equipment for new products and new technologies this all takes a lot of cash from the franchisee. The only way McDonald's could change that model would be to stop paying out billions to shareholders in dividend increases and share repurchases and use that cash to remodel their own buildings. Investors just are not going to let that happen.

    The McDonald's business model makes owning one or two franchises a very unappealing proposition, especially for someone new to McDonald's.
    .
    Oct 13, 2015. 09:49 AM | 1 Like Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    It is amazing how few restaurant brands actually want to be in the restaurant business.
    Oct 13, 2015. 09:08 AM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    Also, many MCD franchisees tell us they are beginning to "lap" previous soft quarters potentially making Q4 look better.
    Oct 10, 2015. 11:16 PM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    The only thing you'll learn from Q4 is that McDonald's is a phenomenal marketing machine and that they are very good at giving away food paid for by franchisees. Plus, they are pushing franchisees to get more aggressive on "value" so we'll see increased discounting in Q4 which will distort the numbers. Since headquarters no longer discloses monthly same store sales it will be difficult to tell what's moving the needle (or not moving the needle).
    Oct 10, 2015. 11:07 PM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    That's a nice theory but we won't know the real results until all the promo and Mcspin dies down, sometime in March/April next year.
    Oct 9, 2015. 10:09 AM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    An overly complicated restaurant operation never smooths out, the customers just have to learn to accept the result, or not. If the service is impacted the regular, loyal customers will give it some time but after a handful of visits just not show up anymore. For instance, if the service has been good you'll get in line at the drive-thru even if there's a line of cars. If suddenly the line is moving slowly and you get frustrated you may no longer trust the restaurant, won't get in that line, and eventually you'll start going to Taco Bell where there is no line.
    Oct 7, 2015. 06:28 PM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    Excellent comment - thanks for taking the time to write it.
    Oct 7, 2015. 03:48 PM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    Many McDonald's were/are open 24 hrs. (where it makes sense) and most were already serving breakfast (or a modified breakfast) starting at midnight. So they were probably already catching those stoners.
    Oct 7, 2015. 03:35 PM | Likes Like |Link to Comment
  • McDonald's: The Next 3 Months Are Time To Pay Attention  [View article]
    We won't know the real impact of all day breakfast until a few months into 2017. First we have to get past the initial advertising and promotion period
    (Oct. & Nov.). Then, there is a possibility that trying to serve breakfast alongside an already overly complicated menu will slow down the speed of service in the restaurants. If this happens sales will suffer, not right away, but over a few months. That would start showing up in March or April.

    Let's hope that's not the case.

    By the way, franchisees didn't make this decision. It was made by the new CEO back in March. Franchisees just voted to dedicate their cooperative advertising budget to all day breakfast. McDonald's franchisees don't decide on the McDonald's menu, they just sign up to adhere to the McDonald's system. McDonald's Corp. defines the "system".
    Oct 7, 2015. 03:32 PM | Likes Like |Link to Comment
  • Why All-Day Breakfast Isn't Enough To Save McDonald's  [View article]
    Oops - that should be 3.0% to 4.0% to local and NATIONAL advertising funds.
    Sep 23, 2015. 01:06 AM | 1 Like Like |Link to Comment
  • Why All-Day Breakfast Isn't Enough To Save McDonald's  [View article]
    Normally I ignore people who troll the internet anonymously but tonight I'll make a one time exception. I am an advocate for franchisees. A shill is, "is a person who publicly helps a person or organization without disclosing that they have a
    close relationship with the person or organization". Not so here.

    "corporate receives best-in-class 9-12% royalties from franchisees."

    That's not a royalty but the rent the franchisee pays on top line sales. The royalty comes in the form of "service fees" which in the USA is 4.0% of top line sales. Plus the franchisees pay 3.0% to 4.0% to local advertising funds.
    Sep 23, 2015. 01:01 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
240 Comments
231 Likes