An important point about owning the franchise real estate: a rental agreement is far stronger for the landowner than a franchise agreement is for a franchiser. The McDonald's franchise agreement specifies the address the franchise must be located. In effect, McDonald's can cancel a franchise agreement by ending the rental agreement. This gives them enormous power to enforce company-wide standards on cleanliness and mandate suppliers. Other chains (eg: Burger King) do not own the majority of their franchise properties and have had more significant problems with enforcing franchise standards.
Source: McDonald's: Behind The Arches, John F. Love (July 1, 1995)
Edit: changed ie to eg, thanks for the correction all
>The McDonald's franchise agreement specifies the address the franchise must be located. In effect, McDonald's can cancel a franchise agreement by ending the rental agreement.
I don't think you are really taking a position, just acknowledging McD has power to enforce Franchise Agreements more than others Franchisors because separately they tend to also be landlord. on first reading though I thought your comment was suggesting more nefarious behavior because the dual relationship landlord/franchisor.
Just in case anyone else read your comment that way, I would just say as a lawyer I would feel pretty confident taking a case on behalf of a Franchisee who paid significant franchise fees to McD and was otherwise in full compliance with the Franchise Agreement, but my client's Franchise Agreement was de facto cancelled (and presumably Franchise fees kept by McD) because McD terminated the lease without cause.
Certainly if the Franchisee gave McD cause under either a Franchise or separate lease Agreement (failure to pay rent; using non McD suppliers; etc...) that is a different story, but legally McD couldn't just engage in the collection of Franchise fees only to evict tenants in a scam like fashion. again I don't think you were suggesting it, that was just my initial interpretation.
My interpretation of what he says was basically McD's has more leverage. Part of establishing a restaurant is establishing enough return clientele at a certain location. And a large portion of the clientele might stay with the owner if it turned into a Jack in the Box. But this number drops off a cliff if it's also across the street. So the BATNA for a non-McDonalds franchisee is just switching franchises, and taking a hit to their business. But the BATNA for a McDonald's franchise is starting all over again.
Actually, the book expands on that. Originally, McDonald's franchise agreements had exclusive territories (in fact, a franchise agreement could be for an entire region/state/country). McDonald's franchise agreements eventually specified a particular address (own by McDonald's) without any exclusive territory. If you lose the rental of that property, you lose the ability to run the franchise.
Yup, our owner/operator didn't always like to follow the company line, and was rewarded by a new franchisee an exit north of his highest volume location. Of course his agreement gave him right of refusal for the new location, but the numbers didn't add up; so Oak Brook found a willing franchisee who ended up spending a fortune for a relatively low performing store. Eventually that location paid off (20 years of growth will do that), but for the original owner/operator, he saw a 25% yoy decline in sales. Oak Brook has a huge amount of leverage to keep franchisees in line and quiet.
Point well made! The book described it as mechanism to force a negligent franchise owner to sell their franchise (not unilaterally take their investment).
> There are 1,200 McDonald's restaurants in the UK. 65% of which are franchised and 35% company-owned. We take great care in selecting our franchisees and once they're with us, we invest heavily in a comprehensive training programme and providing ongoing support for them.
> We actively encourage our franchisees to expand their business and this is evident in the fact that, on average, a McDonald's franchisee owns five restaurants. Our franchisees commit to operating their restaurants for 20 years so they're also often heavily involved in their local communities – for instance, being involved with local business groups, local environmental initiatives or supporting local grassroots football.
This is why I just go with (ex: Burger King) because everyone can understand it. When you have enough ambiguity and misunderstanding of a language/grammar syntax, it's better to avoid it in a public forum.
i.e. -> id est. Usually translated to English as "That is". Implying that subject is the definite case.
Stealing from wiktionary: "The three U.S. states on the west coast have mild seasonal variations in temperature (i.e., warm winters and cool summers)."
e.g. -> exempli gratia. Usually translated to English as "For example". Implying that the subject is simply one example of many.
Stealing from wiktionary again: "Continents (e.g., Asia) contain many large bodies of water."
Ah, right, no. "i.e." is an abbreviation for the Latin "id est", meaning "that is".
"For example" would be "e.g.", ("exempli gratia" in Latin.)
"E.g." is illustrative, whereas "i.e." is exhaustive.
I hadn't heard "i.e." expanded to "in example" before - that explains one source of misunderstanding (despite being grammatically incorrect in its own right).
Edit: It seems you've since been unfairly downvoted for explaining what you meant. Please folks, don't do that. I asked the question, and @fraserharris answered honestly.
So THAT is why many people get it so wrong. I never understood (as a non-native speaker from a 24h country, I still struggle with pm/am and have to look it up every time, so I get why other non-natives may mix it up, but I'm seeing I.e./e.g. confusion mostly among native English speakers... for whom the Latin origin must be a similar situation I now realize).
Source: McDonald's: Behind The Arches, John F. Love (July 1, 1995)
Edit: changed ie to eg, thanks for the correction all