McDonald's franchisees reportedly worried new grading system will hurt retention (2024)

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Dive Brief: Dive Insight: FAQs

Dive Brief:

  • CNBC reported Wednesday that a program of inspections developed by McDonald's has sparked franchisee backlash. Operations PACE, which stands for Performance and Customer Excellence, includes a data portal designed to help franchisees and employees identify key trends and evaluate progress toward improvement benchmarks, McDonald's confirmed. It will be rolled out in January 2023.
  • Franchisees told CNBC the program, which would mandate a further six to 10 visits by assessors and company representatives to every location, would put strain on labor by subjecting managers and employees to the stress of frequent inspections.
  • A survey by The National Owners Association, a large group of McDonald's franchisees, found only 3% of franchisees felt Operations PACE's standards accurately reflected operations, CNBC reports. The NOA didn't respond to requests for comment before press time.

Dive Insight:

Operations PACE also provides personalized resources that can assist operators in improving sales growth, profitability and guest counts, McDonald's confirmed.

“We must remain laser focused on maintaining our world-famous standards of excellence in our restaurants.This comprehensive performance management system, designed with ongoing input from franchisees, will offer tailored support and coaching to restaurants to help them provide a seamless McDonald’s experience that will keep customers coming back," McDonald's wrote in an emailed statement.

McDonald's is offering optional "learning visits" this year ahead of the program's official start date in seven months, but this may not be enough to assuage franchisee concerns that the program's inspections could drive away employees. More than 80% of McDonald's operators said in a survey that Operations PACE wouldn't help the company's "people-first" objectives, CNBC reports, and 64% said staffing has gotten worse or somewhat worse.

Employment data from the Bureau of Labor Statistics shows restaurants have struggled to draw workers back into the industry, with employment levels rising over the last year but failing to reach pre-pandemic numbers. Simultaneously, wages have increased throughout the foodservice sector, with BLS data indicating wage levels for non-supervisory employees have surpassed $16 an hour.

Foodservice and hospitality are the only major industries in which wage growth has outpaced inflation in the last year. But worker advocacy group One Fair Wage has pointed to poor working conditions, wage theft and harassment as factors that prevent workers, particularly single mothers and women of color,from entering foodservice. It's possible that frequent inspections, which could add pressure to individual store operations, could also be a stumbling block for recruitment and retention.

McDonald's raised hourly wages at company-owned restaurantsby an average of 10% last spring, and average hourly wages are expected to reach $15 by 2024, the company confirmed. But these changes impacted only a sliver of employees, as the majority of the Golden Arches empire is franchised. And while many franchisees have raised wagesin tandem and rolled out new benefits,operators that can't afford competitive pay hikes may fear putting more responsibility on workers without additional incentive could hurt their labor strategies.

McDonald's franchisees reportedly worried new grading system will hurt retention (2024)

FAQs

What does pace stand for in McDonald's grading system? ›

These regulations are on top of a new grading system called Operations PACE (Performance and Customer Excellence).

What is the pace system at McDonald's? ›

Operations PACE, which stands for Performance and Customer Excellence, includes a data portal designed to help franchisees and employees identify key trends and evaluate progress toward improvement benchmarks, McDonald's confirmed. It will be rolled out in January 2023.

What percentage does Mcdonalds take from franchises? ›

McDonald's franchise royalty fees for U.S. restaurants will rise from 4% to 5% for operators opening new locations. The fast-food giant hasn't hiked royalty fees in nearly three decades.

What challenges has McDonald's faced? ›

Some of the current challenges facing McDonald 's include increased competition from other fast food chains , changing consumer preferences towards healthier options , and the impact of COVID-19 on the restaurant industry .

What does pace mean in grades? ›

One condition that a student must meet to receive financial aid is that a student must make Satisfactory Academic Progress (SAP). One of several measures of SAP is called “Pace” and it is the rate at which you are progressing through your program of study.

What is the failure rate of McDonald's franchise? ›

However, a record 1,750 US restaurants changed hands in 2021 and the number of US outlets continues to shrink even as the company grows in international markets. However, some sources give a failure rate of less than 0.5%, which is very low.

What management system does McDonalds use? ›

As such, the NP6 system is highly effective for McDonald's as part of its wider goal to deliver value-for-money, fast paced services overall.

What is the break system at McDonalds? ›

By law a worker gets a break after 4 hours (10 minutes). They also get a 30 minute break if they work 8 hours. Less than 3.5 hour workers get no break.

What is the pace system? ›

PACE is the new computer system built by the NDIA for the NDIS. The system is based on Salesforce CRM (customer relationships management) technology used worldwide by thousands of big and small businesses.

What is the highest paying franchise to own? ›

What are the most profitable franchises to own?
  • Express Employment Professionals.
  • RE/MAX.
  • Wendy's.
  • Chick-Fil-A.
  • Ace Hardware.
  • UPS Store.
  • Matco Tools.
  • McDonald's.
Jan 1, 2024

Who owns the most McDonald's franchises? ›

Arcos Dorados is the world's largest independent McDonald's franchisee, operating the largest quick service restaurant chain in Latin America and the Caribbean.

Who is McDonald's main competitor? ›

McDonald's is one of the largest and most well-known fast-food chains in the world. Privately-owned Burger King is McDonald's closest competitor. Yum Brands operates Taco Bell, KFC, and Pizza Hut. Subway is the largest restaurant chain in the world in terms of size, but sales have been sliding since 2012.

Which one is a weakness for McDonald's? ›

While trying to cut costs, McDonald's has been slow to introduce new menu items and innovations, which has put it at a disadvantage compared to its competitors. This can result in a decline in sales and a loss of market share. Cost control is a weakness of McDonald's.

What is the biggest threat to McDonald's? ›

Threats (External Factors)

This aspect of the SWOT analysis deals with the external strategic factors that limit the fast-food company's business development. The main threats to McDonald's business are as follows: Aggressive competition in the market for fast food and consumer goods. Healthy lifestyle trends.

What does the class pace stand for? ›

Program for Accelerated College Enrollment (PACE) provides opportunities for qualified high school seniors to get a head start on college by taking college credit courses that will also meet high school graduation requirements.

What is a McDonald's pace visit? ›

At the heart of this effort is PACE, or Performance and Customer Excellence program. It's an assessment program, run through third-party companies. McDonald's has already been using this in some other global markets.

What is the ranking system of McDonald's? ›

The McDonald's hierarchy includes positions in the front area, back area, crew trainer, area leader, assistant shift manager, shift manager, assistant manager, store manager, and then the franchisee and corporate positions.

What does pace stand for in Omaha? ›

About Property Assessed Clean Energy (PACE)

The concept is that the cost of installing water and energy-saving improvements is financed over the lifespan of the improvements. The loan is serviced with a special property assessment that is less than the amount of money saved by the newly reduced energy costs.

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