to weigh giving franchisees board seat
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[March 18, 2017]
By Lisa Baertlein
LOS ANGELES (Reuters) - McDonald's Corp
<MCD.N> investors will vote soon on whether to give the franchisees who
operate most of the fast-food chain's restaurants the opportunity to
elect a board member, the proponent of a shareholder proposal said on
The proposal, which faces long odds of success, is believed to be the
first of its kind and has attracted great interest in the franchise
community, which includes not only restaurants but also hotels and
convenience stores among other businesses.
Roughly 85 percent of the company's restaurants are operated by
franchisees, who pay rent and royalties to McDonald's. McDonald's
long-term goal is to raise that to 95 percent.
"We think franchisees should be in the room when the company's most
important decisions about operating and strategy are being made," said
Maureen O'Brien, director of corporate governance at Segal Marco
Advisors, which provides advice to pension plans and oversees a trust
owning more than 5,000 McDonald's shares.
O'Brien said the proposal was being made on behalf of investors, not
McDonald's, which petitioned regulators to omit the proposal from the
ballot at its upcoming shareholder meeting, did not immediately comment.
But the company, which has been in turnaround mode for two years,
recently said that franchisee cash flow growth is at or near all-time
highs in many markets around the world. Franchisees recently have
tangled with McDonald's over everything from restaurant renovations to
the popular but margin-squeezing Dollar Menu.
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The sign outside a McDonalds restaurant is seen in Westminster,
Colorado, U.S. January 23, 2017. REUTERS/Rick Wilking
O'Brien said the U.S. Securities and Exchange Commission rejected McDonald's
request, meaning the proposal will appear on the McDonald's proxy due in the
Under the proposal, McDonald's would create a new class of stock that does not
have monetary value but would allow franchisees to elect one director, O'Brien
The proposal is a long shot, but it could mark a big change in the board dynamic
at McDonald's and other heavily franchised U.S. restaurant chains if adopted,
restaurant analysts and consultants said.
"If you put a franchisee on the board, it could potentially have a major impact
on the direction of the company. It's a really significant role," said Bob
Goldin, partner and co-founder of food industry strategy firm Pentallect Inc.
"If this happens, it won't just be McDonald's," Goldin added, noting that
McDonald's is a bellwether for business.
McDonald's has not yet set a date for its annual shareholder meeting. The event
was held on May 26 last year.
(Additional reporting by Ross Kerber in Boston; Editing by Tom Brown)
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