- Justin Sullivan/Getty Images
McDonald’s is forcing some franchisees out of business, Bloomberg reports.
The franchisees at risk are those who operate only a handful of restaurants.
McDonald’s is reportedly pushing them out of business with requirements for costly equipment upgrades and restaurant remodels, which franchisees have to finance.
For example, equipment for McDonald’s new customizable burgers, called Create Your Taste, reportedly costs between $120,000 and $160,000. Total restaurant remodels can cost up to $2 million.
Many smaller operators can’t afford the upgrades, so they end up selling their restaurants to McDonald’s or to larger operators.
As a result, the share of operators with 10 or more stores has jumped 12% to 245 in the last two years, according to FranchiseGrade.com data cited by Bloomberg. Meanwhile, the share of operators with five or fewer stores has dropped 4.6% to 1,842 over the same period.
Shifting more restaurants to the control of larger, more deep-pocketed operators is beneficial for McDonald’s because those franchisees have the funding for costly upgrades and remodels.
But the strategy leave some franchisees bankrupt, as Business Insider has previously reported.
Read the full story at Bloomberg.