McDonald’s shares rise despite franchisee backlash on upgrade costs

McDonald’s Corp. shares climbed 0.3% on Tuesday, despite a Bloomberg report highlighting franchisee resistance to costly store upgrades. The fast-food chain’s initiative to overhaul locations and menus is facing pushback from U.S. franchise owners, who were caught off guard by the roughly $800,000 per-store cost announced two weeks ago. When combined with existing remodel expenses of at least $400,000, franchisees could face a total bill of about $1.2 million per restaurant.

The company has promised around $8.5 billion in cash and rent relief to help offset these costs, though support levels vary. McDonald’s insists it remains committed to the plan and has formed task forces with franchisees and executives to review the financials. The upgrades are part of CEO Chris Kempczinski’s “Next” business strategy, aimed at improving food quality, service, and efficiency.

The move comes as McDonald’s seeks to restore investor confidence after a 32% drop in shares from late February through September, wiping out nearly $80 billion in market value. Franchisees have raised concerns about the project’s cost and lack of transparency in recent meetings, worrying about increased debt and unclear expectations for sales growth from the changes.

The company is also dealing with slowing U.S. sales, partly due to a weak value lineup last quarter. Rising costs for beef, labor, and equipment have added pressure across the industry. Analyst Gregory Francfort of Guggenheim Securities suggested franchisees may negotiate to reduce the price tag by 20% to 40% as they accept some elements while resisting others.