Franchisees of burger behemoth McDonald’s revealed yesterday that up to 40 restaurants will be closed by the end of the year because they “aren’t very profitable”.
John Maier Rowell, head of a group of McDonald’s Brazilian franchisees and owner of two outlets, explained to Dow Jones that a number of outlets are struggling in Brazil because of a policy by the company to open its own restaurants close by to established outlets run by franchisees.
There are about 270 franchised outlets in Brazil, and over 40 are currently in litigation with the parent company over rent issues or accusation that McDonalds’s is “cannibalising” the revenues of franchisees with nearly placed outlets.
In terms of exactly how many outlets would be affected, he said: “Our franchisee group would probably put the number at 25, but personally I’d say 40 restaurants will be closed.”
The closures in Brazil, which is the company’s eight largest market with over 1200 outlets, are part of a global strategy to shut around 250 restaurants. None of the restaurants closed so far have been run by franchisees.
An official spokesperson for the company in Brazil denied that more closures would occur this year, pointing to the fact that the company is in the process of opening a total of 54 restaurants and 72 kiosks throughout the course of 2001.