McDonald's is facing resistance from U.S. franchisees over an approximately $800,000 per-location bill to overhaul stores under its new business initiative, according to a Bloomberg report. Combined with scheduled remodels costing at least $400,000, franchisees face a total bill of about $1.2 million per restaurant. McDonald's has pledged approximately $8.5 billion in cash and rent relief to offset part of those costs, with support levels varying by franchisee, and said it remains confident in its plan and has set up task forces with franchisees and company leaders to review the financials. The upgrades are part of CEO Chris Kempczinski's "Next" business plan, which aims to improve food quality, service and efficiency, and come as McDonald's works to restore investor confidence after shares plunged 32% from late February through the end of September, erasing nearly $80 billion in market value. Guggenheim Securities analyst Gregory Francfort wrote that franchisees will likely look to negotiate the price tag down 20% to 40% as they accept certain elements of the plan and push back on others.
McDonald’s CorporationFranchisees resist the ~$800,000 per-store upgrade bill plus $400,000 remodels, forcing McDonald's to fund ~$8.5B in relief and negotiate down the Next-plan capex.
