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McDonald's receives formal complaint

Jan 12

Written by:
12/01/2016 14:22  RssIcon

Fast food giant accused of unfair contracts for franchisees

The BBC today reported that McDonald's stands accused of "abusing its market power by imposing unfair and restrictive contracts on people operating its franchise restaurants in Europe."

A formal complaint has been made to the European Commission by a group of Italian consumers' organisations including the The Service Employees International Union (SEIU) and the Bakers Food and Allied Workers Union in the UK.

They accuse McDonald's of forcing franchisees to pay excessive rents and high fees. Franchisees own and operate 73% of McDonald's restaurants in Europe.


Lack of consumer choice

The consumer organisations and unions claim franchisees are prevented from switching to competitors because McDonald's makes them sign longer-than-average contracts.

They also said licensees lease premises from the company at above market rates.

It is claimed this leads to poorer consumer choice and higher prices in franchise stores as opposed to those owned directly by the company.


Tax avoidance claims

McDonald's received $9.27bn (£6.40bn) in revenues from its franchised restaurants worldwide in 2014.

Last year a report revealed that the fast food giant avoided over €1 billion in tax between 2009 and 2013 in the EU on this revenue.

The report outlined how the company moved its European headquarters from the UK to Switzerland and used intra-group royalty payments, channelled into a tiny Luxembourg based subsidiary with a Swiss branch, to avoid paying the full rate of corporation tax in a number of European countries including the UK, Spain and Italy.

In a statement, McDonald's said:

"We are proud of our franchisees and are committed to working closely together so that they have the support they need to operate their restaurants and their businesses. "This approach, with the principle of sharing risk and reward, has been successful for many years and has helped create the best business opportunities for our franchisees and the best overall experience for our customers."

The European Commission told the BBC it would now study the submission. It has the powers to launch an investigation if it believes the allegations are founded.


See where McDonald's ranks on our ethical shopping guide to Fast Food Chains.



This story has been added to our corporate database. The database powers all our live product guides, giving the score for each company on our rankings tables. Find out more about how we rate companies.






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