Ernst & Young will conduct an independent audit of the new technology fees McDonald’s assigned to franchisees at the end of 2020, according to a report from Business Insider.
The review, requested by a group of McDonald’s operators called the National Franchisee Leadership Alliance, will look into the $423-per-month technology fee McDonald’s announced in December of last year. Franchisees contest they owe this fee and have paused non-essential communications with corporate in response.
The monthly technology fee, which corporate would begin charging franchisees next month, is part of a $70 million debt McDonald’s claims its operators owe for a “lag” from an old payment structure. McDonald’s controls most of the technology in its stores and charges franchisees a fee for use of that tech. Tech has been an ongoing point of friction between McDonald’s and its franchisees for years now, with operators with operators increasingly frustrated over how much they must pay.
This is further aggravated by the sheer amount of tech getting implemented at McDonald’s restaurants nowadays, from Dynamic Yield’s artificial intelligence system in the drive-thru to the increasingly popular McDonald’s mobile app. And McDonald’s is just getting started when it comes to digital ordering, drive-thru tech, and other digitization efforts of its business.
According to Restaurant Business, franchisees argue they do not owe back pay for tech such as the mobile app. McDonald’s corporate, on the other hand, says it has “absolute confidence” that these fees are owed to the company.
Franchisees will start talking with McDonald’s field officers over the issue, but non-essential communication with corporate remains paused. Restaurnat Business noted that the end of these talks between corporate and franchisees could well mean that the dispute eventually goes to court.
While McDonald’s seems to have more disputes with its franchisees than most major QSR chains out there, the ongoing battle highlights some of the complications of digitizing a QSR brand. The pandemic’s impact on the restaurant industry has shifted the bulk of business for QSRs to off-premises meal formats, which increasingly rely on digital ordering. Whether other QSRs that rely on a franchise-based model encounter some of these issues as they digitize their businesses remains to be seen.
Meanwhile, the Ernst & Young review is expected to take a few weeks at the very least.