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Comment by krger | Hacker News Reader

> they get paid all the same

I haven't looked at a McDonalds franchise contract, but every QSR franchise contract I've seen requires the franchisee to pay the brand a percentage of each location's gross sales.

Broken ice cream machine = less gross sales. Less gross sales = less money going to the brand.

It's also not great for customer satisfaction.

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Would McDonalds Corp rather sell let's say 1,000 ice creams for $1,000 total at a 2% cut ($20) or an ice cream machine repair (maybe $1,000)?

They're fleecing the franchisees via repairs.

Thank you for pointing this out! This kind of a simple revenue calculation can be highly insightful.

Why would McDonald's corporate be getting paid for machine repairs?

The repairs are handled by local distributors of Taylor machines. Taylor itself makes money on replacement parts and machines.

There haven't been any allegations of kickbacks to McDonald's corporate, so I don't get it.

Aren't most of their ice cream products like <$5? I recall the cones are only like $1. My guess would be that, if there is some kind of arrangement between McD's and Taylor, it's probably way more profitable than the losses they'd see from 10-13% of their ice cream machines being down per month.

Isn't the cost of the ingredients some $0.2 (I have no idea, just estimating by the taste), so that machine is printing money when working?

It's surprising they cannot build a machine that does not break that easily.

I wouldn't be so sure. Milk, cream, and sugar are relatively expensive ingredients, and labor is very expensive.

Milk/cream is not cheap. It takes a lot of energy to freeze that mixture as well. Most people don't try to measure this, but the ice in your soda probably costs more than the rest of the sugar water (in bulk/wholesale as restaurants buy soda, if you pay retails prices things are different)

Yes, I looked into franchising many years ago and that was my recollection as well -- often groups also sell you the inputs/ingredients and force you to purchase through them to "maintain quality/consistency" which would seem to be another reason why McD would want more volume/sales.

> often groups also sell you the inputs/ingredients and force you to purchase through them to "maintain quality/consistency"

QSR franchisees are famous for cutting every corner they can get away with (as well as cutting even more corners until they get caught by the brand or local health/labor inspectors), so maintaining quality and consistency is a very real concern for these brands.

Yes, that's fair, but it's also a great way to guarantee recurring revenue for a franchisor whose franchisees are obligated to purchase from them

I thought we were talking about an ice cream machine and not an ink jet printer.

All the same to the MBAs at these companies looking to squeeze the last penny out of everything

Inkjet printers merely have DRM. Franchises have way more power; they have legally binding contracts.

I believe when this first came out it was highlighted that a lot of employees moved back and forth between McD and Taylor. The implication that residual stock or friends across town could influence the situation.

>The implication that residual stock or friends across town could influence the situation.

Yes, that could explain why McDonalds execs would try to discourage franchisees from using Kytch.

It doesn't, however, explain why McDonalds execs seem not to have a problem with 20% of their locations not being able to sell a product that people apparently like enough to complain when they can't get it, which is what the top-level comment was talking about.

Apparently if the ice cream machine is broken, the franchise can move more product in other higher-margin categories.

So no, it doesn't mean less gross sales.

Yep.

me: "I'll have a milkshake please"

McD: "ice cream machine's broke"

me: "ugh. Ok, I'll just have a coke"

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