Is McDonald’s Pushing Out Smaller Franchisees?



Is McDonald's Pushing Out Smaller Franchisees?

After more than three decades of operating McDonald’s restaurants, Ted Lezotte in 2015 sold the last of his six stores in Michigan. Lezotte says looming costly remodeling – one rebuild was estimated at $1.9 million – helped spur his decision. “In today’s financial world, it’s becoming necessary to have more than a couple [of stores] to survive,” he says. The chain is looking for franchisees who have 8 to 10 locations, he says: “Ten kind of gives you a good footing” in case one isn’t doing so well. Of his six stores, one was closed, the rest sold to larger McDonald’s operators.

McDonald’s has long been famous for its small-owner-focused franchise system, in which entrepreneurs with only a store or two would sweat the details of their restaurants, yielding better customer service. Lately, however, the fast-food giant has begun shedding mom and pop owners in favor of bigger operators. Since 2014 the number of U.S. McDonald’s franchise owners has dropped 2.6 percent, while the number of franchised locations has grown 1.2 percent, according to data compiled by researcher FranchiseGrade.com. The chain’s biggest franchisees are getting larger, while those who own five locations or fewer are on the wane.

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