Mcdonald’s Franchisee Fight Over Tech Fees Could Wind Up In Court
- A number of McDonald’s franchisees are voicing support for a potential legal action against the fast food giant over $70 million in past technology fees, according to a recent survey.
- The survey was conducted on behalf of the National Owners Association, an independent franchisee organization. About 10% of McDonald’s franchisees participated.
- Nearly 75% of operators polled say they support owner leadership filing an injunction to stop the collection of the fee.
- KPMG is currently performing an independent audit of the situation and is expected to finish by mid-May.
At a time when McDonald’s U.S. business continues to outperform, some franchisees are voicing support for a potential legal action against the fast food giant over $70 million in past technology fees.
CNBC has obtained a copy of an internal survey of 225 members of independent franchisee organization, the National Owners Association, which shows nearly 75% of operators polled say they support owner leadership filing an injunction to stop the collection of the fee. Of that group, 17% were undecided and 9% said they did not support the action. NOA has some 1,200 members and McDonald’s has some 2,000 U.S. franchisees.
The results of the NOA survey were first reported by trade publication Restaurant Business. McDonald’s did not immediately respond to request for comment.
KPMG is currently performing an independent audit of the situation and is expected to finish by mid-May.
The fees have been a source of conflict in recent months. In a February email from NOA to its members that was viewed by CNBC, the group’s board said McDonald’s hadn’t proven franchisees owe technology fees of $423 a month on past uncollected dues that amount to $70 million. McDonald’s has agreed to an independent audit in an attempt to resolve the dispute, but has maintained it has “absolute confidence” the fee is owed to the company, according to internal communications viewed by CNBC.
“What we do not do, is allow our suppliers to dictate to us what we owe and what we don’t owe other than on the basis of services rendered. If we find ourselves in this type of relationship, we find a different supplier,” said the February email to owners from the NOA board.
The division goes beyond the technology fee dispute. Some franchisees have also expressed frustration with rising technology fees and the performance of the company’s technology, more boadly.
Separately, the NOA board also notably shared with members a recommendation from advisory firm Glass Lewis that McDonald’s board chairman Enrique Hernandez Jr. and compensation chair Richard Lenny not be reelected at the company’s shareholder meeting, over their handling of the firing and severance for former CEO Steve Easterbrook.
The NOA board did not provide its own voting proposals, but a source familiar with franchisee leadership said the sharing of the report was “unprecedented.” All directors were re-elected at the meeting Thursday, despite campaigns to oust the two directors over Easterbrook’s severance.
Easterbrook was terminated in November 2019 for having a relationship with an employee in violation of company policies. The company is now suing to claw back his package, alleging that he lied about having other relationships with employees.