Photo courtesy of McDonald’s
McDonald’s franchisees support taking legal action against the company over a one-time assessment of $70 million in technology fees pending the outcome of an independent audit of the fund, according to a survey from the company’s independent franchise association.
Nearly three-quarters of operators in the survey from the National Owners Association said they would support the filing of an injunction to stop the collection of the fee. Restaurant Business obtained a copy of the survey results on Thursday.
The result suggests what many operators have long speculated—that franchisees could be headed for a courtroom to keep the company from collecting the fees, which McDonald’s argues is owed because of a shift in how those funds are collected.
The dispute over those fees has divided the company and its U.S. franchisees for much of the year, casting a cloud over what has otherwise been a strong run for the Chicago-based burger giant—currently enjoying double-digit, two-year same-store sales increases thanks to its new chicken sandwich and various marketing promotions.
“This boils down to McDonald’s fault either in miscommunication or accounting,” one anonymous operator wrote in a survey response. “Either way, they need to drop this and eat it.”
The technology fee was at the center of a dispute between the company and its franchisees that emerged in December, after the company sent an email to operators detailing the fee along with the end of a Happy Meal subsidy and a request that operators help fund a tuition program.
That led to a “pause” in communication from franchisees. That pause ended in February, but the dispute over that technology fee remained. McDonald’s franchisees said they had “irrefutable” proof that the funds are not owed. Joe Erlinger, president of McDonald’s USA, countered that the company has “absolute confidence” the funds were owed.
McDonald’s independent auditor is looking at the issue and is expected to come out with a report this month.
In the survey, 74% of operators said they would support operator leadership seeking an injunction if the auditor, KPMG, recommends in favor of the technology fee. Of the remaining, 9% said no and the other 17% were undecided. There were 225 responses to the survey, representing about 10% of the chain’s domestic franchisee base.
Operators have been privately talking about the potential for legal action for months, given how dug in both sides are on the topic. But the issue has also raised franchisee concerns about the company’s technology, in general. Franchisees have been upset with growing technology fees and what they see as substandard results from vendors. “The technology is broke and does not deserve to collect fees,” one operator wrote.
Said another, “some things need to be decided in court and this is one.”
Not everybody was on board. One operator noted that if the independent auditor shows the funds were owed then, “we have to determine if going further is actually going to have a different outcome, and at what expense to the relationship.”
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