Customers who’ve been asking whether McDonald’s would ever bring back the Snack Wrap have a potentially powerful new ally: The chain’s franchisees.
The National Owners Association, an independent group of McDonald’s operators, said in a letter to its membership seen by Restaurant Business, that the company should consider bringing back the item. That way, the company could offer value without discounting the chain’s core menu.
“McDonald’s created the Snack Wrap as a value offering and now many QSR competitors are promoting them while McDonald’s has removed them from the menu,” the association said. “Snack wraps are craveable, relatively simple to produce, would require only a couple new menu items on the prep table and could easily satisfy the call for more affordable options on the menu. Let’s bring them back!”
That’s not the only idea the association had for bringing more value items to its menu. The group argues that McDonald’s should use CosMc’s as a test site for an affordable beverage platform. “McDonald’s can be the affordable beverage destination,” the group said.
But both ideas hint at a broader level of concern among many of the chain’s franchisees, who worry that the company’s recent comments regarding traffic among low-income diners is now leading to pressure from executives to push more discounts.
Franchisees argue that their own costs continue to go up, even as some costs have moderated. Operator cash flow did not keep pace with inflation last year. Had it done so, the typical store would have generated another $24,000 per restaurant, NOA said.
Among the cost increases hitting franchisees is insurance. Some operators renewing their policies are paying as much as 45% more for insurance with a higher deductible.
Other costs come from the franchisor itself. In its message, NOA argues that McDonald’s focus on efficiency and profitability in recent years has effectively transferred more costs to operators. For instance, the company funds 50% of its Archways to Opportunity scholarship program. That contribution goes away at the end of this year.
The company eliminated a corporate technology support role that has led operators to hire their own organizational IT person and construction and project management costs have been shifted to owners.
“There have been many notable changes by McDonald’s to improve their operating margin, and we applaud them for their financial stewardship,” NOA said. “However, the company’s … cost cutting measures have resulted in franchisees being required to cover thousands of dollars of costs annually.”
McDonald’s, for its part, notes that average cash flow is up 50% since 2018 and last year was one of the highest years for that metric in the company’s history.
Franchisees operate the bulk of the chain’s 13,500 U.S. units, and though the company uses third-party advisors to make pricing recommendations, ultimately those charges are up to the franchisees themselves.
And franchisees largely drive value and discounting decisions at the local level, according to the company.
Same-store sales at the chain’s U.S. restaurants rose 4.3% in the fourth quarter, with sales coming from higher prices rather than from traffic. CEO Chris Kempczinski suggested that the company lost low-income consumers, those making $45,000 a year or less.
“From an industry standpoint, we actually saw that cohort decrease in the most recent quarter, as eating at home has become much more affordable,” he said. The comment generated considerable coverage amid media attention regarding $18 Big Mac meals in Connecticut and Idaho.
And other chains say they haven’t had similar problems. Burger King said that it saw higher traffic last quarter from all income groups and Taco Bell’s sales were higher in low-income areas.
It’s not as if McDonald’s had a bad quarter. On a two-year basis, for instance, its same-store sales were better than both Burger King and Taco Bell last quarter.
NOA, in its email, doesn’t back off the need for more value. Kempczinski’s comments “were not a new or unique message,” the association said. “Value has always been at our brand’s core.”
But, the group said, that value should not involve discounts to its core menu items.
Instead, the operators argue that the company should return to its past, which involved creating specific items geared toward the value customer. The McDouble, for instance, is a Double Cheeseburger with one less piece of cheese and was created to ensure franchisees wouldn’t lose money on the product at a low price point.
The Snack Wrap was discontinued in 2016 as the brand sought to simplify its menu. But the item still has a cult following eight years later, thanks to social media. McDonald’s executives hinted again at the return of a chicken wrap, though one based on its popular McCrispy sandwich.
In the meantime, competitors have stepped into the void. Rival Burger King introduced a trio of Royal Crispy Wraps last year at $2.99. They helped generate strong initial sales for the fast-food chain.
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