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McDonald's, Franchisees Battle Over Financial Assistance

By Eric Volkman – Updated Apr 15, 2020 at 3:05PM

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The spat comes during a tough time for the fast-food incumbent.

McDonald's (MCD -0.80%) is at odds with one association of its franchisers, according to an article published Tuesday in The Wall Street Journal. That organization, the National Owners Association (NOA), is pressing the fast food giant to provide more financial relief for franchisees coping with significantly weaker business in the face of the SARS-CoV-2 coronavirus pandemic.

The newspaper quoted a letter from the NOA to McDonald's which read, "[o]ur membership and most owners are increasingly losing faith in the partnership and company leadership," over the perceived lack of support. McDonald's communications indicate that it feels it provides sufficient help already.

The exterior of a McDonald's restaurant.

Image source: McDonald's.

Publicly, McDonald's maintains that it is not in serious conflict with the NOA. A spokesperson for the company told the Journal that, in the newspaper's words, "it is engaged in productive discussions with franchisees."

"Everybody is trying to pull together to get us through this," the spokesperson said.

McDonald's has held up better than many restaurant chains and franchise operators, since many of its outlets are equipped with drive-through windows and the company has a robust system in place for online ordering. Still, its restaurants are clearly struggling, as evidenced by the 13% decline in U.S. same-restaurant sales for March.

The NOA is an almost 1,300-strong body of select franchisees located throughout the country; it was created in 2018. It's smaller than the National Franchisee Leadership Alliance, which represents all franchisees.

Shares of McDonald's were down by nearly 3.1% in mid-afternoon trading on Wednesday, a deeper decline than those of the broader market and many of the company's peer consumer goods stocks.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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