Like other major QSRs, McDonald’s has made clear in recent months that technology and digital developments are top of the priority list for the mega-chain moving forward. But not everyone agrees with Corporate’s approach to this plan, and McDonald’s franchisee owners are fighting back. As Restaurant Business notes, the National Owners Association (NOA) has “pushed back” against a temporary tech fee and is now considering forming a technology cooperative that would give them more power when it comes to decisions about digital strategy.
The fee in question, which is part of a series of changes McDonald’s announced at the beginning of December, would charge operators $423/month for technology investments to cover a $70 million “lag” from an old payment structure. Those tech fees would begin in March 2021 and remain until the $70 million is paid back to McDonald’s.
This isn’t the first time McDonald’s and its franchisees have gone toe-to-toe over tech, and news of these new fees reignited some old tensions. It has also prompted the NOA, an independent group of McDonald’s franchisee owners and operators, to explore the idea of forming a technology cooperative that would give them more voice when it comes to decision-making moves about tech.
McDonald’s controls most of the technology in its stores, charging franchisee owners a fee for using that tech. That arrangement might have worked well in an era when “technology” was a cash register and a credit card machine. But thanks to the pandemic, franchisees have, suddenly and irrevocably, found itself in a restaurant industry whose terms are increasingly dictated by tech in order to accommodate the shift to takeout and delivery formats. The moves follow similar ones from a host of other brands, including Sweetgreen, Chipotle, Shake Shack, and many others.
Of all the QSRs out there, McDonald’s has been one of the more aggressive brands to push this technology. In recent months, the chain has expanded new drive-thru technology from its 2019 Dynamic Yield acquisition, introduced more self-order kiosks, and announced a new app, loyalty program, and store formats for 2021. As Restaurant Business notes, “These efforts have resulted in considerably higher costs for franchisees, whose monthly payment to McDonald’s for technology is 10 times what it was a decade ago. “
A technology cooperative would give franchisee operators more direct say in what technology gets developed and how money is spent, according to the NOA. “You should have a vote in how that pot of money gets invested,” the board said.
As part of a statement provided to Restaurant Business, McDonald’s noted that its process “includes collaboration with a franchisee-led technology team” and that the company is “confident” it has the tools in place to “drive future growth through technology.”
The battle between McDonald’s and its franchisees is, as I mentioned above, an old one. But given the rapid deployment of tech to the QSR industry, it’s also a fight that will get more intense, not less, in the coming months.
It’s worth noting, too, that while the franchisee model is hugely popular — it allows a brand to quickly grow with less capital — it may not be the most beneficial one moving forward. McDonald’s is the largest franchise in the world, with other notable names being KFC and Burger King. But Starbucks, another chain that has grown rapidly in recent years, rarely franchises, and in fact argues that franchising can hurt brand continuity, quality control, and even company culture.
As technology continues its rapid invasion of the restaurant industry, its costs and expectations could strain more chains’ relationships with franchisees, and indeed call the viability of whole model into question at some point in the future.
