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The pressure led to a shake-up last October, when McDonald's CEO and chairman Michael Quinlan brought in Greenberg. He carries an unlikely pedigree--he was an attorney and accountant at Arthur Young who moved over to his client, McDonald's, as chief financial officer in 1982. He spent lots of time building the financial structures needed for the company's overseas development, but has little experience in burger warfare. That's part of his charm. "I don't feel defensive," he says. "I'm the new guy on the job."
The new guy has spent much of his time with the franchisees, "two-thirds listening, one-third talking," which means he's been hearing criticism about too many locations, too many lame commercials, too many promotions--or was that not enough promotions? He is also taking action. The company recently canceled a plan to guarantee service in 55 seconds, an extension of Campaign 55, when franchisees objected.
In a group of 2,750 entrepreneurs (who run 84% of the stores), a couple of hundred figure to be unhappy at any given time. A tougher environment always increases the background noise. But there is also some real shouting going on by a number of dissidents in a group called the consortium, organized by Dick Adams, a former Mac franchisee and executive.
The dissidents are most vocal about a corporate-expansion strategy that they claim has flooded some markets with stores. "I can put up with a Burger King but not with another McDonald's down the road," says Bob Srygley, a consortium member based in Monticello, Ark. Complains LuAnn Perez, whose store on Route 50 in Cameron Park, Calif., is flanked by others: "Business was great until four other McDonald's were built between Sacramento and us." She and her husband are suing the company over the sale of their business.
McDonald's store owners have always paid a steep price for access to burger riches: they can operate no other businesses, they have no exclusive territories, and they generally take orders from headquarters in Oak Brook, Ill. Franchisees own nothing other than a 20-year agreement, renewable at the company's option, to equip and run a restaurant in return for 12.5% off the top in royalty and rent. (The rates can be higher for some sites.) They spend a minimum of 4% of sales for marketing. Last year McDonald's got $1.8 billion from its U.S. franchisees.
When McDonald's was rolling its sesame-seeded success across virgin country, obtaining a franchise was a ticket to a fast-food fortune. Says a winner in Georgia, who insisted on anonymity: "You see a lot of affluence, and you think it's waiting for you when you grab the keys." But as competition stiffened, a set of Golden Arches has become less golden and more arch. The average franchisee owns 3.4 stores, each of which generates about $1.5 million in sales. With profits falling, though, the resale value of a store is half that of three years ago, according to the consortium's Adams.