Some Franchisees Staging a Quiet Big Mac Attack

McDonald’s Corp. says you deserve a break today, but some of its franchisees apparently don’t agree.

A number of the company’s 2,700 franchisees have quietly boosted the price of fries and drinks to recover lost profits from a yearlong promotion that cuts certain sandwiches to 55 cents with the purchase of add-ons.

In its Campaign 55 promotion, McDonald’s has offered significantly discounted breakfast sandwiches with the purchase of hash browns and coffee of any size. On Friday, the Oak Brook, Ill.-based chain extended the promotion to its larger sandwiches, beginning with the Big Mac. Any size fries and drink must be purchased with the sandwich to get the lower price.

But the boost in prices on the fries and drinks--as much as 12% in some restaurants--dilutes the savings customers will see under the promotion, which is aimed at boosting domestic sales. The increase also boosts costs for people who choose to buy sandwiches not on sale.

But Dick Adams, who represents hundreds of disenchanted franchisees, said the increases are “not all that dramatic” and contended some franchisees saw no other choice.

“There’s a great deal of concern in this entire promotion about what the customers will buy,” said Adams, a frequent critic of McDonald’s corporate management. “If they buy a large drink and large fries, franchisees will be OK, but if they buy a small drink and small fries, they lose money.”

McDonald’s large sandwiches cost more than 40 cents to make, and many franchisees are concerned that slashing prices 75% will cut sharply into slim profit margins.

“The whole deal is you make your money back on the drink and fries,” said Bob Srygley, who owns four stores in Arkansas but has not raised prices. He said there was no groundswell of customers for Big Macs on Friday.

The promotion is “going to have to increase sales in order for this thing to work or it will cost you in food costs,” he said. “The jury’s still out, but I hope it works.”

Shares of McDonald’s lost 50 cents to close at $51.125 on the New York Stock Exchange.

McDonald’s executives say franchisees will make up for the loss in profits through additional customer traffic. But some restaurant owners are concerned customers will merely switch from other large sandwiches to the discounted one and purchase small drinks and fries, which are less profitable than larger combinations offered under the Value Meal program.

A McDonald’s spokeswoman did not return calls seeking comment. But Ed Rensi, president of McDonald’s domestic division, recently sent a letter to franchisees urging them not to raise prices.

“Our customers know when we’re offering real value . . . and they know when we’re being greedy,” Rensi said in the memo, obtained Friday by the Associated Press.

Rensi also attached a 1977 memo by company founder Ray Kroc that also warned against raising prices. Kroc wrote: “Let’s let our competition make the mistake of seeing how high they can raise their prices while we continue to do what made us successful in the first place.”

A survey of 55 McDonald’s restaurants in every state found that 14 had raised prices for large fries and medium-size Cokes by an average of just over 6 cents, according to the Wall Street Journal.