McDonald’s Corp. is streamlining the process for franchisees who’ve failed inspections to get back in compliance, which should make it quicker for operators to recover their ability to open new restaurants.
In a memo seen by Bloomberg News, the chain told franchisees they can regain good standing after passing two consecutive follow-up visits. The changes will shorten a timeline that previously also included a waiting period for regular inspections, a process that could take six months or more. Timing under the new framework will depend on how quickly operators can address the issues.
The revision is significant for franchisees, since operators that aren’t in good standing generally can’t open additional restaurants and aren’t eligible to sign new contracts if their current agreements are expiring.
It’s the latest update to a broader initiative that took effect Jan. 1, which McDonald’s has said will result in better-run restaurants. Operators have pushed back against parts of the program, known as PACE, saying it has resulted in an increase in surprise visits from corporate-appointed inspectors. Franchisees run more than 90% of the company’s locations.
In the memo, McDonald’s said it won’t conduct inspections on Sundays, at least temporarily. For the time being, it also won’t penalize operators for equipment they can’t repair due to supply-chain constraints.
PACE evaluates restaurants for food safety, cleanliness, service and quality. Food-safety performance has risen to an all-time high, according to the memo, which was signed by McDonald’s Vice President for National Operations Val Mathelier.
In an email, the company pointed Bloomberg to a message from McDonald’s US President Joe Erlinger following the company’s earnings report in late July. The program has helped improve customer-satisfaction scores, Erlinger said, and contributed to a decrease drive-thru times.
Staff turnover has also declined, with quit rates reaching an 18-month low, he said.
McDonald’s reported second-quarter sales and profits that exceeded analysts’ estimates, though it warned of slower growth later this year given a challenging economic backdrop. Shares have risen 9.1% in 2023 as of Thursday’s close, just behind the 9.7% gain of the S&P 500 restaurants index, following a 1.7% decline in 2022.
Author: Daniela Sirtori-Cortina