Friday, August 9, 2013

Retail Food Competition Driving Restaurant Franchisee Discontent

Whole Foods continues to drive top line sales and bottom line profits with fresh prepared food stations located in all of their new smaller footprint units and legacy stores.  Once a thriving convenience store chain that sold food, Sheetz now calls itself a restaurant chain that sells gasoline.  Wawa a consumer driven convenience store once located in the Northeastern United States has committed $550+ million dollar to expand in Florida and describes its self as selling restaurant quality fast casual food to-go. In our new Omni-channel retail world legacy restaurants companies are feeling competitive pressure.

Even the strongest of restaurants brands are feeling the heat.  Bloomberg News is reporting that, McDonald's facing a "brewing franchisee revolt".  Elevating the discontent are the undercurrents of competition.  The discontent resurfaced Bloomberg reported when the burger chain “increased fees and costs that the independent business owners pay, such as rent, software and remodeling. Not surprisingly, rising expenses are discouraging franchisees, who operate about 90% of the chain's U.S. locations, from opening new restaurants or refurbishing existing ones”…

The operators say McDonald's has been squeezing them for a while as its overall business stagnated. …noting that the revenue, including rent and fees, McDonald's took in from franchised stores has risen an average of 8% during the past five years, double the 4% increase in total revenue during the same time.

In addition the Bloomberg report said “Some franchisees are paying 12% of their sales in rent, an increase from the historic levels of 8.5%. Since U.S. McDonald's locations on average net about $2.5 million in annual sales, operators who recently renewed leases are paying an average of $300,000 under the new rate, a steep increase from the $212,500 under the previous rate. Not surprisingly, franchisees want McDonald's to roll back fees to the old rate.”

McDonalds understands the consumer right now better than it seemingly understand it franchisees.  Franchisee disequilibrium is important but not as important as the consumer.  Restaurants must refocus on maintaining or growing share of stomach. They must understand the consumer is dynamic not static and meal bundling mix and match options in new non-traditional are a threat their brand.  Success does leave clues and ready-2-eat and heat-N-eat fresh prepared food is driving customer migration. 

Outside eyes can bring new light and assist in your successful growth by creating a platform of insights for consumer convenient meal participationdifferentiation and individualization. Don’t wake up one day and find that you or your company slept; while consumers were on the move.

Interested in learning how the 5P’s of Food Marketing can edify your retail food brand while creating a platform for consumer convenient meal participationdifferentiation and individualization contact us via Email us at: or visit Johnson,,, or

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