BIG MACS NO MORE: MCDONALD'S CEASES OPERATIONS IN

UNCLAS KINGSTON 002349

SIPDIS

STATE FOR WHA/CAR, EB/CBA

E.O. 12958: N/A
TAGS: ECON ETRD JM
SUBJECT: BIG MACS NO MORE: MCDONALD'S CEASES OPERATIONS IN
JAMAICA


1. (U) Friday, October 14, effective 8p.m. local time, all
McDonald's outlets remaining in Jamaica closed their doors.
In a September 29 letter sent to Charge, the President of
McDonald's Caribbean Division Jose Hernandez stated that the
company's "intent is to continue the search for a qualified
local franchisee." The Jamaican locations have been
operated by the parent company since 2003, when Patricia
Issacs-Green sold her franchises back to the company.
Despite rumors that the company never gained the market
share that they hoped for, it appears that the strict
licensing requirements of the company were the primary
reason.


2. (U) McDonald's had been operating in Jamaica since 1995.
At its height, there were 11 stores around the island. This
initial aggressive push, when few other U.S. "Quick-Service
Restaurants" (QSRs) existed, proved too optimistic, and the
local franchisee, Issacs-Green, scaled back to eight
outlets. In 2003, however, she decided to sell her stores
back to her corporate parent, ostensibly to "spend more time
with her family and pursue other interests." McDonald's
sent Steve Blackwood to Jamaica to run the operation while
seeking a suitable franchisee to take over.


3. (U) McDonald's franchising requirements, however, are
significant. In addition to the service fees, marketing
fees and monthly rents that are industry standards,
McDonald's also requires that the franchisee spend nine
unpaid months learning all aspects of their corporate
culture, and must commit to making the restaurant(s) their
only business interest. In the opinion of local
entrepreneurs, it was this requirement that made searching
for a successor to Issacs-Green virtually impossible. Becky
Stockhausen, the Director of the American Chamber of
Commerce and a longtime resident of Jamaica, told Econoff on
October 13: "Jamaican [businesspeople] would simply never
sign off on a commitment to one interest over the long
term." Jamaican investors, she said, own and operate many
different businesses, and the concept of putting all of
one's time into a single project would simply not appeal to
the business culture here.


4. (U) Marielena Santana, corporate spokeswoman from
McDonald's Puerto Rico-based Caribbean Division, also
emphasized the corporate atmosphere as the reason why the
company had difficulty finding a franchisee, and stated that
in smaller international markets like Jamaica, the company
does not typically direct operations. She noted, however,
that Blackwood will remain in Kingston for several months,
in order to assist the approximately 250 employees who will
have to transition to new employment, and to ensure that the
company meets all its financial and legal responsibilities.
She said that the company hopes to find a suitable Jamaican
franchisee in the future, but Stockhausen and others stated
that they felt that it will be virtually impossible for the
company to regain even the minimal foothold that it had here
once they leave.


5. (U) Comment: This is not the first Caribbean island to
lose McDonald's, despite the subsequent presence and success
of other QSRs like Burger King and Kentucky Fried Chicken.
Stockhausen noted that Barbados and Trinidad and Tobago have
seen the company come and go while others survive. While
this might seem to suggest an Achilles Heel in their
globally successful armor, indications are that it is not
the product, but rather the corporate demands that have led
to this result. If they intend to return and prosper in
Jamaica, it would appear that some flexibility may be
required. End comment.