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McDonald's franchisee fight regarding the tech fees could wind up in court

McDonalds franchisee fight regarding the tech fees could wind up in court

May 24, 2021: -At a time when McDonald’s U.S. business continues to outperform, some franchisee are voicing support for potential legal action against the fast-food giant over $70 million in one-time technology fees.

CNBC has obtained a copy of an internal survey of 225 members of an independent franchisee organization, the National Owners Association, which shows around 75% of operators polled say they support owner leadership who filed an injunction to stop the collection fee. Of that group, 17% were undecided, and 9% said they did not support the action. NOA has nearly 1,200 members, and McDonald’s has around 2,000 U.S. franchisees.

The NOA survey results were first reported by trade publication Restaurant Business.

KPMG is performing an independent audit of the situation currently and is expected to finish by mid-May.

The fees have been a source of conflict in the latest months. In an email February from NOA to its members seen by CNBC, the group’s board said McDonald’s had not proven franchisees owe technology fees of $423 a month on past uncollected dues that amount to $70 million.

According to the internal communications, McDonald’s agreed to an independent audit to resolve the dispute but has maintained it has “absolute confidence” the fee is owed to the company.

“What we do not do, is allow our suppliers to dictate to us what we owe and what we don’t owe other than based on services rendered. If we are in this kind of relationship, we find a different supplier,” said the email to owners from the NOA board in February.

The division goes beyond the technology fee dispute. Few franchises have also expressed frustration with rising technology fees and the performance of the company’s technology, more broadly.

Separately, the NOA board also shared with members a recommendation from advisory firm Glass Lewis that McDonald’s board chairman Enrique Hernandez Jr. and compensation chair Richard Lenny not be reelected at the company’s shareholder meeting regarding their handling of the firing and severance for former CEO Steve Easterbrook.

The NOA board did not provide its voting proposals, but a source familiar with franchisee leadership said the sharing of the report was “unprecedented.” All directors were reelected at the meeting Thursday, despite campaigns to oust the two directors over Easterbrook’s severance.

In November 2019, Easterbrook was terminated for having a relationship with an employee in violation of company policies. The company is now suing to claw back his package, alleging that he lied about other employees’ associations.

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