Friday, December 26, 2014

Will health reform doom McDonald's $1 menu?

"This business will no longer make sense"

Will health reform doom McDonald's $1 menu?

Fast-food franchisees will have to be dragged to a forced employee health insurance program, if Janney chain-restaurant analyst Mark Kalinowski's 40th (quarterly, formerly bimonthly) survey of McDonald's operators is a guide.

Kalinowski asked 29 operators of 192 U.S. Mickey Ds about business conditions, and added a special question about how Congress's mandatory health insurance proposals would affect their stores. Operators estimated it would add $40,000 to $150,000 to yearly operating expenses, per store.

And boy, did they squawk: "It will crush us." "The business will no longer make sense." "It will affect hiring and salary decisions." "I hope (the non-compliance) penalty is tax deductibile!" 

Plus: "Dollar Menu for all competitors will be gone."

But McDonald's franchisees aren't just scared of what Congress will do. They also rate the economy just 2.2 on a scale of 1 to 5 - lowest in the survey's history, according to Kalinowski. They rate relations with the parent McDonald's corporation even worse - just 1.7, below the 2.2 survey average - after poorly-received McCafe and Monopoly promotions and relentless demands for restaurant upgrades financed by franchiser profits or loans.

Still, one operator was upbeat: "The best thing we have going for us is that operator relations and strategies are even worse for our main competitors, especially Burger King," which Kalinowski rates "Buy" at current prices. He's "Neutral" about McDonald's.

About this blog

Joseph N. DiStefano
Business Videos:
Also on Philly.com:
Stay Connected