4 ms·

One part of this I don't understand is why would McDonald's benefit from their franchises constantly needing their ice cream machines serviced.

by srj 5y ago

toomuchtodo 5y ago
“Kytch points to documents from the time of Taylor's acquisition by Middleby in 2018 that show the company receives close to 25 of its revenue—from all its customers, not just McDonald's—via repair contracts with Taylor distributors, which Kytch argues provides an incentive to maintain the machines' fragility.“ The missing piece is the kickback to McDonald’s, or a similar financial incentive from Taylor to maintain the status quo. I imagine that’d be a component of discovery or information requested by a federal regulator.
- fedreserved 5y ago
  https://youtu.be/SrDEtSlqJC4 https://youtu.be/SrDEtSlqJC4 This video did a good indepth investigation. From memory Taylors hq is within 5 miles of McDonald's HQ. To close for comfort when you see the type of shenanigans they go through to pad Taylors revenue
- HeyLaughingBoy 5y ago
  Well is that repair contract a retainer? i.e., "I pay you $10,000/year and every time my machine breaks you send out a tech within 4 hours to fix it at no extra cost? or is the actual cost of repairs the customer incurs? If it's the first (and I think it is), then Taylor has every incentive to make the machines as reliable as possible. Service calls are expensive and most companies don't make a lot of money doing them. OTOH, a service contract (e.g., maintenance contract in software) is often lucrative because the customer is buying peace of mind. Years can go by in which the contract isn't needed and the seller (Taylor) pockets the cash, but the buyer keeps paying for it because it's cheap insurance.
FranksTV 5y ago
Mcdonalds doesn't make money selling hamburgers. It makes money leasing real estate, and equipment to franchisees.
- bluGill 5y ago
  True, but franchises only stay franchises because they are making money. McDonalds in general tries to ensure that franchises make money. They won't let you get a franchise if you they don't think it will be good for all. All includes other franchises in the area - there are only a few cases where there is a McDonalds "near" another, and most are owned by the same person. (The only cases I know of is the original McDonalds has a bigger one across the street because the original is too small for the traffic and would be closed without the historical significant; and a case where one is inside a mall while the other is outside, and thus get different traffic)

One part of this I don't understand is why would McDonald's benefit from their franchises constantly needing their ice cream machines serviced.

by srj 5y ago

One part of this I don't understand is why would McDonald's benefit from their franchises constantly needing their ice cream machines serviced.

toomuchtodo 5y ago

“Kytch points to documents from the time of Taylor's acquisition by Middleby in 2018 that show the company receives close to 25 of its revenue—from all its customers, not just McDonald's—via repair contracts with Taylor distributors, which Kytch argues provides an incentive to maintain the machines' fragility.“ The missing piece is the kickback to McDonald’s, or a similar financial incentive from Taylor to maintain the status quo. I imagine that’d be a component of discovery or information requested by a federal regulator.

fedreserved 5y ago
https://youtu.be/SrDEtSlqJC4 https://youtu.be/SrDEtSlqJC4 This video did a good indepth investigation. From memory Taylors hq is within 5 miles of McDonald's HQ. To close for comfort when you see the type of shenanigans they go through to pad Taylors revenue
HeyLaughingBoy 5y ago
Well is that repair contract a retainer? i.e., "I pay you $10,000/year and every time my machine breaks you send out a tech within 4 hours to fix it at no extra cost? or is the actual cost of repairs the customer incurs? If it's the first (and I think it is), then Taylor has every incentive to make the machines as reliable as possible. Service calls are expensive and most companies don't make a lot of money doing them. OTOH, a service contract (e.g., maintenance contract in software) is often lucrative because the customer is buying peace of mind. Years can go by in which the contract isn't needed and the seller (Taylor) pockets the cash, but the buyer keeps paying for it because it's cheap insurance.

FranksTV 5y ago

Mcdonalds doesn't make money selling hamburgers. It makes money leasing real estate, and equipment to franchisees.

bluGill 5y ago
True, but franchises only stay franchises because they are making money. McDonalds in general tries to ensure that franchises make money. They won't let you get a franchise if you they don't think it will be good for all. All includes other franchises in the area - there are only a few cases where there is a McDonalds "near" another, and most are owned by the same person. (The only cases I know of is the original McDonalds has a bigger one across the street because the original is too small for the traffic and would be closed without the historical significant; and a case where one is inside a mall while the other is outside, and thus get different traffic)