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McDonald's Franchisees Gripe Over Aggressive Discounting

April 17, 2013

Not all McDonald's franchisees are lovin' the heavy discounting the company has been urging on them.

That's according to a franchisee survey released this week by Janney analyst Mark Kalinowski just ahead of McDonald's first-quarter earnings announcement on April 19. The survey focused on questions about discounting, and, among other topics, March and April sales projections. Mr. Kalinowski surveyed 25 franchisees who own 180 restaurants total. That's a fraction of McDonald's 14,000-plus U.S. locations, prompting Mr. Kalinowski to add the caveat: "Please keep in mind that these commentsmay or may not be representative of the U.S. franchise base in general."

The survey results are interesting given that the coming earnings report is expected to focus on the chain's value menu. The company has been heavily promoting dollar-menu items in the early part of this year and late last year rejiggered its marketing calendar to make room for value promotions, particularly for its dollar menu. Franchisees are stressed about the aggressive dollar menu and value promotion in recent months, the Janney survey found, because it eats away at profits. "Although the quick-service restaurant business has been competitive for years -- decades -- perhaps there is more discounting going on today by McDonald's than usual," said Mr. Kalinowski in his note discussing the survey.

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