Owning a business is challenging enough, especially in an environment of economic uncertainty, rising costs, shifting consumer preferences and increased competition.
For a franchise system, the stakes are even higher. They rely on independent operators to uphold brand standards, so when things go wrong, the consequences can be more devastating.
Many fast food chains use the franchise model to expand rapidly, allowing them to build brand awareness and enter new markets more effectively than they could on their own.
Franchisees are business owners who purchase the right to open and operate a company-branded store and benefit from its established reputation and customer base.
Although this model can bring high profits, it also comes with huge risks. The more franchisees a company has, the harder it is to maintain consistent quality, and if not handled correctly, one mistake can permanently damage the company’s reputation.
The only McDonald’s (MCD) franchise at 1330 Jackson Street in downtown Oakland, California, will permanently close on November 30, affecting approximately 40 employees just before the winter holidays, abc7 News reports.
Employees claimed they were notified of the closure just days before Thanksgiving and were told they would not be allowed to move to a nearby location. The sudden announcement triggered a workers’ strike on November 25, with many older employees expressing shock and frustration.
“These workers were given ten days’ notice that the location was closing,” California Fast Food Workers Union organizer Maria Maldonado told ABC7 News. “That’s not enough time to find a new job. Many of these people cried when they heard the location was closing, and now they’re going to have to struggle this holiday season.”
Despite the workers’ claims, the warning notice was submitted on October 30, 2025.
McDonald’s has closed its only location in downtown Oakland, California.Shutterstock” loading=”eager” height=”540″ width=”960″ class=”yf-1gfnohs loader”/>The closure follows a health controversy at a downtown Oakland McDonald’s location in May 2024, when the Alameda County Department of Environmental Health temporarily closed the restaurant after live and dead rats were found inside.
A leaked video obtained by KRON4 News shows rats crawling around the restaurant, and employees claim they were threatened with termination if they documented the issue.
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In response, workers went on strike, as documented in a video posted by the California Fast Food Workers Union on X (formerly Twitter).
“As a small business owner in Oakland, it is very important to me that my employees have a safe workplace. When we became aware of this issue, we immediately contacted pest control and continue to work with them to resolve the issue,” McDonald’s franchise owner Joseph Wong explained to KRON 4.
This isn’t the first time McDonald’s has faced problems with franchisees. In April 2025, the Massachusetts Attorney General’s Office issued citations against McDonald’s, Dunkin’ Donuts and Subway franchise operators for violating child labor laws.
The charges were filed because franchisees Cafua Management Company, The Brewster Company and Knight Food Service, Inc. failed to obtain necessary permits to employ minors and 16- and 17-year-olds who exceeded the state’s nine-hour work day limit.
A McDonald’s franchisee was fined $63,930 for allowing minors to work during prohibited hours and scheduling shifts that exceeded the maximum allowed shift length at eight Massachusetts locations between May 2021 and May 2024.
According to the U.S. Bureau of Labor Statistics, approximately 17% of new restaurants close within the first year of opening. The long-term survival of restaurants is more challenging, with about half closing within five years and only 34.6% surviving more than 10 years, Oysterlink data shows.
According to Statista, by 2024, there will be 33.2 million businesses in the United States, of which 821,589 will be franchises. Veterans own one in seven franchises in the United States, about 14%, and contribute $41 billion to the economy annually.
However, franchising also comes with risks.
“Labor experts say franchise chains have higher violation rates than company-operated chains because they invest less in maintaining their brand reputations,” The Washington Post’s Lauren Kaori Gurley and Emmanuel Martinez wrote.
“They are also under pressure to keep labor costs low to cover high operating costs, especially franchise fees.”
McDonald’s is one of the largest and most successful franchises in the world. In the third quarter of fiscal 2025, global comparable sales increased by 3.6% year-on-year, with U.S. sales increasing by 2.4%. The growth was primarily driven by revenue from franchised restaurants, which rose 7% in the quarter to $4.2 billion.
Still, the food industry remains a tricky one. Foodservice traffic fell 1% in the quarter ended June 2025, according to Circana.
Restaurant Data reports that 13,265 independent restaurants and 2,712 chain stores closed in the first half of 2024.
“Consumers are saying, ‘We’re struggling, or we’re starting to struggle, or we’re thinking more carefully about our spending,'” said Michael S. Kaufman, a restaurant consultant and lecturer at Harvard Business School. “I don’t know if the ability to maintain a large fleet of traditional casual dining restaurants is sustainable.”
Despite the improvement, McDonald’s remains cautious.
“We continue to remain cautious about the health of consumers in the U.S. and top international markets and believe pressure will continue into 2026,” McDonald’s Chief Executive Officer Christopher J. Kempczinski said on the earnings call.
“The fundamental aspiration of our brands is to get consumers through our doors and keep them coming back. Especially in today’s difficult macro environment, this is more important than ever.”
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This article was originally published by TheStreet on December 1, 2025, and first appeared in the Restaurants section. Click here to add TheStreet as your preferred source.
