McDonald’s faces European Commission probe over treatment of franchisees

Claims fast-food group could face penalties as high as 10 per cent of its global turnover

The complainants claim McDonald’s earns 66 per cent of its European revenue by collecting rent from franchisees (Getty Images)

McDonald’s has been accused of abusing its dominant market position in Europe by imposing restrictive contracts on franchisees.

A coalition of Italian consumer organisations and trade unions, including the UK’s Bakers Food and Allied Workers Union, said it had a lodged a formal anti-trust complaint against the fast-food group with the European Commission.

The group claimed that if McDonald’s were found guilty, it could face penalties as high as 10 per cent of its global turnover. Based on 2014 sales, that would equate to $9bn (£6bn).

In its complaint, the coalition alleges that McDonald’s is the only fast-food company that requires franchisees to lease property owned by the franchisor, and that it charges excessive rents.

It said 66 per cent of the restaurant chain’s revenue from franchisees in Europe comes from collecting rent.

Another complaint is that restrictive contract terms can result in an increased prospect of financial difficulties.

The coalition has urged the EU competition enforcer to step in and look at the franchising system. The European Commission confirmed it had received the complaint and will now look into it.

A McDonald’s spokesman 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.

He added: “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.”

Mic Mills at the broker Capital Index, commented: “The shine may dull somewhat on the Golden Arches.”

Separately McDonald’s is due to face protests on Wednesday in Whitehall by members of the GMB union in the campaign for a £10-an-hour living wage and an end to zero-hours contracts.

A spokesman for McDonald’s said every employee is given a permanent contract and all start on the national minimum wage or above.

He added: “We have never used exclusivity clauses [in zero-hours contracts], nor do we ask our employees to be on call. All McDonald’s employees start on national minimum wage or above and all receive an annual pay and performance review which can lead to pay increases of up to 4.5 per cent.”