'Traumatized' McDonald's franchisees face coronavirus sales slump, as some slam the company over 'anemic' response

• A survey of McDonald's franchisees highlights tensions within the system, with one owner-operator calling the corporate response to the coronavirus pandemic "wobbly and mealy-mouthed."
• McDonald's same-store sales were down an estimated 25% to 30% in the first week of April but have since improved, according to the survey by Kalinowski Equity Research.
• In early April, McDonald's franchisees and corporate offices clashed over franchisees' proposed pandemic relief plan.
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A recent survey of McDonald's franchisees reinforces tensions between the corporate office and the independent owners, who control 95% of the chain's locations.

McDonald's same-store sales were down an estimated 25% to 30% in the first week of April, 20% to 25% in the second week of the month, and have improved since then, according to a report from Kalinowski Equity Research released on Monday. The report draws from a survey of McDonald's franchisees across the US, and forecasts a 20% drop in same-store sales at McDonald's in the second quarter.

While sales are improving, Kalinowski's survey of franchisees found a number of owner-operators ready to speak out against perceived inaction from McDonald's corporate during the coronavirus pandemic.

"McDonald's anemic response is on every owner/operator's mind," said one franchisee. "We have had it with a franchisor who has constructed their leg out of rubber. Looks real, sounds real, but when it comes time to use it, gets wobbly and mealy-mouthed."

In early April, McDonald's franchisees and corporate offices clashed over the National Franchisee Leadership Alliance's pandemic relief plan, according to letters between franchisee groups and the corporate offices obtained by Business Insider.

McDonald's decision to decline a two-week extension for franchisees' April payments and permit only deferral, as opposed to abatement, of rents sparked backlash from the NFLA and the National Owners Association, McDonald's independent franchisee group.

"Brands will be made or broken during these times," NOA president Blake Casper wrote in an April 7 letter to McDonald's US president Joe Erlinger. "We believe that Friday's decision combined with an admonishment to owner leaders to not 'act on emotion' is a microcosm of a much larger leadership clash that we hope is not inevitable."

Erlinger responded to Casper in an April 9 letter, saying that the franchisees' plan failed to "recognize that the company has finite resources."

"Your letter suggests that owner/operators in our US business are losing faith in management, but this faith seems predicated on unlimited financial support," Erlinger wrote. "If that's how the NOA seeks to define its relationship with McDonald's, then in reality, we don't have a relationship."

Read Erlinger's full letter here.

'Traumatized' franchisees voice concerns

McDonald's corporate office and franchisees worked together to debut a free meal deal for healthcare workers last week. At the same time, McDonald's announced that the system would be rolling out new safety policies, such as giving workers masks at work and putting up safety barriers.

McDonald's declined to comment on the survey ahead of the company's earnings on Thursday. In the company's preliminary filings, it reported US same-store sales dropped 13.4% in March.

Numerous franchisees surveyed by Kalinowski had harsh words for McDonald's response to the coronavirus pandemic.

"The company's lack of stepping up with anything other than deferrals is problematic to say the least," reads one response.

"They are so far removed. ... They say 'Let's keep the doors open, we need to be there for our customers.' That's like Mayor Vaughn in 1975 telling people how the beaches are open on the Fourth of July," the same franchise said, referencing the movie "Jaws."

Another franchisee said they "have been traumatized by all aspects of this thing."

"Once I get back to a neutral ground, I plan on selling and retiring," the franchisee continued. "This is not the world or McDonald's I grew up with. I have put in my time, and it's time to go. I have given everything for decades."

According to one franchisee who spoke with Business Insider on Monday, at least some of the tension highlighted in Kalinowski's survey have continued through April. The franchisee — who asked to remain anonymous in order to speak freely about the situation — said that the only fault he could find with the survey's responses was that they were not scathing enough in their assessment of McDonald's.

Other issues mentioned by franchisees surveyed included the bungled rollout of PPP loans, scared employees refusing to come to work, and the media's focus on the negativity during the pandemic. One franchisee said that, if the same-store sales slump caused by the pandemic continues for 90 days, many smaller franchisees will be forced out of business.

Experts say that while larger franchisees across various chains without significant debt are likely safe, many smaller franchisees will struggle to survive the pandemic. Overall, McDonald's is in a far better position than most independent restaurants — an opinion echoed by one franchisee surveyed.

"I believe that the McDonald's system is in a better position to survive than most," one franchisee said. "Once this is over, many 'mom and pop' restaurants will not re-open."

If you're a McDonald's worker or franchisee with a story to share, email ktaylor@businessinsider.com