Hacker News Reader

THis "theory" doesn't make any sense. It's the Franchisee who doesn't get the sales AND pays the huge cost for an official repair rep to come out and basically restart the cleaning cycle. This doesn't jive with crushing an upstart DQ; they're only really competitors in that they both sell "fast food". Ice cream @ a McD is a loss-leader (soft serve) or minor line item (McFlurrys) while it is the core product of DQ, despite their hot food offerrings.

> Ice cream @ a McD is a loss-leader (soft serve) or minor line item (McFlurrys) while it is the core product of DQ, despite their hot food offerrings.

IMO this is actually the point being made. There's no need to run a loss leader if the competition doesn't exist.

1. if it's a loss leader that they don't want to continue, why not just... stop offering it? After all, you see "participating restaurant" disclaimers everywhere. Why can't a particular franchise just choose not to participate if it's not in DQ territory?

2. Regardless of whether it's a loss leader, I doubt the marginal cost of the ice cream is more than the $1 or whatever the discounted price is. They paid for the expensive ice cream machine and the counter space. They might as well use it.

As the theory goes, they want to stop DQ from moving in more than they want to recover the counter space used by the offline ice cream machine.

because customers drive in to purchase the loss leader, and even when unavailable will purchase alternate items

> lce cream a McD is a loss-leader (soft serve) or minor line item (McFlurrys)

This is why the franchisee has little incentive to keep them functioning until there's a competitor next door? I don't know if it has to even do with the whole Kryst debaucle

And now that car dealer ads have to specify the exact car they're referring to (by VIN or stock number), that one car will often be the only one the amazing deal applies to and once it's gone, so is the deal.

At least somebody can actually get that deal now, so it's better I guess.

It's additionally better because you now have the option to call and ask "Is the car from the ad still available and will you hold it for me until I arrive?"

> And now that car dealer ads have to specify the exact car they're referring to (by VIN or stock number), that one car will often be the only one the amazing deal applies to and once it's gone, so is the deal.

Sure, if its just one they have to identify it and say something like “1 at this price” but that also tells you up front what the deal is.

DQ is Dairy Queen. For anyone else that is confused.

I'm thinking how awesome the snicker blizzard is.

I'm also thinking about how McDonald's anticompetitive behavior may have an unintended anti-obesity effect.

Again, I'm thinking how awesome the snicker blizzard is.

I don’t understand your opening sentence. Why would they keep it unplugged?

The gist I'm getting is that McDonald's doesn't want to be in the ice cream/soft serve business. But it also doesn't want more competition than it already has.

So every McDonald's has an ice cream machine as a more sort of "break glass in case of emergency" situation. Or in this case "in case of DQ". But if there is no DQ in the area, why operate the machine? Just have it be "broken". It's not like people have an option they didn't have before.

I think it is less a matter of intent and more a matter of incentives. McDonald's is probably perfectly happy to be selling more ice-cream and make money that way. But they just don't care about maintenance (franchise reasonability) and it isn't impacting the bottom line significantly, so nobody really wants to fix the contracts and/or vendor performance issues. If there was a better competitor out there, McDonalds might use them, but they just don't care enough (meaning aren't incentivized enough) at the corporate level.

> But if there is no DQ in the area, why operate the machine?

Why operate the grill or fryer? To sell food and make money. Instead of selling someone a meal for $7 McDonalds can sell them a meal + a mcflurry for $10. Why wouldn't they want to do this?

It doesn't make any sense that a bunch of franchise owners are all in together on some kind of ice cream conspiracy. Surely the truth is less interesting, it's most likely just a boring cost/benefit analysis. There seems to be some flaw with the machines they use that make them particularly prone to breaking down and difficult to maintain. So some stores that don't sell a lot of ice cream anyway decide it's not worth the cost of keeping them running, while other stores that sell more do keep them running.

And surely it's no coincidence that the markets where people buy more ice cream are also where Dairy Queen stores are more likely to open up.

The core point is it's not profitable or as profitable as other items. So ice cream is offered as a loss leader in areas with a DQ and turned off in areas without on but advertised nationally.

For the up-thread commenters, It's like people here can't fathom that a Fortune 107 corporation wouldn't implement policies that follow an ECON 101 supply/demand curve.

> a meal for $7 McDonalds can sell them a meal + a mcflurry for $10. Why wouldn't they want to do this?

you're assuming the consumer has a marginal $3 to spend and wouldnt instead spend $7 on a (burger + mcflurry) vs (Burger, fries, soft drink). I would guess that the latter has a much higher margin. So for the same $7 spend you can make more profit if your icecream machine is down.

But, if DQ can do the deal for $7 then foot traffic may move to DQ, meaning McD's loses _both_ profitable options. So, the game is to dissuade the market from the preferred package (burger + icecream) towards the more profitable package (burger , fries, softdrink) .

I'd also add that they probably know that the marginal cost of driving to 2 locations means they're just gonna get what they can at 1 stop. That is few people would buy the burger at mcdonald's and then drive to DQ for the mcBlizzard.

Kinda feels like playing roller coaster tycoon all over again.

I'm not saying it is or isn't the real cause, I'm saying that's what I feel the OP was trying to convey. That's what I read in his comment.

And I agree with you, it's likely got a way more pedestrian and human answer. The machines require some amount of maintenance or repair that is simply annoying. And eventually, people prefer to not be annoyed. So maybe one day, you just let the ice cream machine be broken instead of doing the annoying thing. Even if the store sells ice cream like gangbusters. The guy slinging cones for minimum wage isn't seeing a single cent difference if he sells 1 or 1000.

Parent post appears to be alleging that McDonalds - or their franchisees - only serve ice cream purely to starve competitors out of the fast food market, and then disconnects or damages those machines in order to get out of having to actually sell that ice cream.

Personally, I don't think that holds water. Everyone involved in this drama wants ice cream in the stores. It's not like McDonalds corporate has some Jobsian disgust towards putting ice cream and a burger in the same meal or anything. The far easier explanation is that McDonalds paid Taylor for a custom machine that's extremely temperamental, not that they secretly want to ban their own product because it's ice cream.

The machines frequently require technicians to come out and work on them, to the tune of several hundred dollars per hour, which the franchisee must pay. They are not permitted to get a less tempermental machine or use independent technicians.

It's a cost problem.

You would think that the McDonalds franchise owners would push back on McDonalds corporate about this issue. They would rightly be complaining that they are losing revenue because the Taylor ice cream machine has low reliability.

Even one service call per month is a significant cost to a low-margin business like a quick-serve restaurant.

It is quite possible there is some hinky corporate politics and such within McDonalds corporate that is preventing improvement here.

McDonald's exerts extremely extremely tight control over its franchisees by corporate standards. Every single thing about a McDonald's is meticulously specified and regulated by corporate, from the equipment installations to the number of pickle slices that go on a burger and the soap that goes into the bathroom.

Franchisees in general don't wear the pants in this relationship. If McD corporate says you use this machine, tough shit, you use that machine. I'm sure the feelings of franchisees are broadly speaking "taken into consideration" but it's not like there's a union here, the dynamic here is that franchisees will shut their mouths and go make some money for daddy.

It's a weird arms-length model that has run into some trouble before, particularly surrounding labor law, as McD corporate has some very detailed expectations on how franchisees will hire, fire, pay, and operate their employees.

Anyway basically if McDonald's says "you will take those things out of our machine" yeah, franchisees are absolutely going to hop to it. tbh if McDonald's were smart they'd just have done it without the "ackshually this thing will steal your girlfriend, poison your customers, and kill your dog" defamation, because if they'd simply said "we're terminating our business relationship with Kytch, have it removed in the next 2 weeks" franchisees absolutely would have done it anyway. Now they are fighting a lawsuit about it because they just had to get a dig in.

>but it's not like there's a union here

https://nationalownersassociation.com/join/

Haha, fair, guess I should have checked.

But anyway, corporate wears the pants is the dynamic. It's a very very tightly managed and top-down "franchise".

Oh I know that McD is at the top when it comes to controlling franchisees.

But if 13% of restaurants have the ice cream machine non-functional at any given time, that means half or more of them are having the problem at some time in the last month.

If you're going to ignore a problem at that scale... well, that's just terrible.

I have to wonder if Taylor agreed to custom-build McDonalds an ice cream machine specifically because they figured they had implied license to hose franchisees on service costs. Or, in other words, if McDonalds had said "make the machine reliable enough to serve ice cream 100% of the time with no service calls", then Taylor would have charged 10x or something. The fact that McDonalds is libeling Kytch sounds like Taylor is speaking through McDonalds' mouth.

Even if McDonalds had been more reserved, however; Kytch still has some industrial-espionage claims that might go somewhere.

Also, for those wondering exactly how controlled McDonalds' franchise relations are: McDonalds franchisees are required to rent their locations from McDonalds, because McDonalds front-runs their business partners and buys the most valuable land[0] from under them. Literally nothing about the business of being a McDonalds franchisee works the way capitalism or business ownership is "supposed" to work[1]. It's more like paying to work at a somewhat-lucrative job than actually owning a business. McDonalds is a richest-of-the-rich company that sells business opportunities to the poorest-of-the-rich crowd[2], who are looking for a way to park lots of wealth[3] in a safe asset.

[0] Typically, land immediately next to US Interstate off-ramps or equivalently high-traffic highways

[1] Unless you're a left-winger, in which case the McDonalds "strip our business partners of capital interest in the store" policy is how capitalism is "supposed" to work, and treating your business partners as equals is a historical aberration.

For the record I do find the left-wing critique of capitalism to be at least somewhat grounded in current business reality.

[2] Menial labors of the capitalist class. If you define "poor, middle-class, and rich" based on how people make their money (poor: unskilled labor, middle-class: skilled labor, rich: capitalism), then you can recursively subdivide that grouping further, with richest-of-the-rich being people whose wealth comes from owning other businesses through some means (usually trademark or copyright).

[3] McDonalds wants their franchisees to hold at least $750,000 of liquid capital and be able to invest between $1,000,000 and $2,200,000 into their stores.

From what I understand, Subway is also very strict with the franchisees. At least as far as food suppliers go.

It is all in the name of "quality" or more truthfully "consistency".

Even so, unless you're a relatively small regional chain, you'd think that having at least two different equipment suppliers would help corporate drive down costs for the franchisees, and thereby make more profit for themselves.

That's what is so strange about this entire situation. McD corporate historically has been laser-focused on profit, which they get through scale (volume) and efficiency. I don't see how there aren't some people in corporate getting fired for this. If the ice cream machines work, they franchisees sell more product. This generates more revenue (and profit) selling the restaurants more ice cream mixture, as well as increasing profits for the restaurants themselves. Which also generates more profits for corporate too. Because of course corporate double-dips.

Money being left on the table... that doesn't sound like McDonalds.

Every restaurant franchise has strict guidelines for every detail. If they don't everything will go to shit. They'll end up like Denny's.

>Personally, I don't think that holds water.

While not quite as deliberate an action as (great?) grandparent was suggesting, I could see the possibility existing where fixing the machines is too much hassle until a competitor opens and they begin having a noticeable impact on customer retention, increasing the expected ROI on fixing the machine enough for management/owner to take action.

The "whoops it's unplugged" was a joke about the root cause, but also intended to imply equivalently poor attempts to keep the machine working. That is I do not think they literally did not plug it in, but I do think they are not trying very hard to keep the machine up and running.

I read the article and DQ wasn't mentioned. What are you getting at?

parents point is that operating the machines regularly is of no interest to mcdonalds (likely bad margins) and its only interested in ensuring other niche fast food restos dont start to take up market share instead.

ie: if i want icecream i can get it at macdonalds, instead if DQ, unless the machines are broken. if DQ gains significant market share they "fix" the machines and DQ loses its market share.

not saying this is fact. just fleshing out parents

Where is the evidence of such a strategy though, besides the fact that machines are always broken? Even the franchisees would rather have a working machine.

There is none, but "broken McDonald's ice cream machine" is a whole category of meme.

So people start wondering my McDonald's is so plagued by machines that seem to only work on the third Thursday following the fifth month after the Lunar eclipse.

But it's likely a combination of disinterested staff and machines that require more involved maintenance.

Not to mention, there's several points of failure. Not only can various parts of the machine break; the drum that spins the mix, the compressor to keep the mix cold, leaks in various hoses and lines, but you can simply run out of mix.