McDonald’s announces unexpected closure, sparking major backlash

MCD -1.17%

Owning a business is already challenging enough, especially in an environment of rising costs, shifting consumer preferences, and increased competition, all amid an uncertain economy.

For franchise systems, the stakes are even higher. They rely on independent operators to uphold the brand's standards, so when things go wrong, the repercussions can be more damaging.

Many fast-food chains adopt the franchise model to expand quickly, enabling them to build brand recognition and reach new markets more efficiently than they could on their own.

A franchisee is a business owner who purchases the rights to open and operate a company's branded location, benefiting from its established reputation and customer base.

While this model can be highly profitable, it comes with significant risks. The more franchisees a company has, the harder it becomes to maintain consistent quality, and if not properly handled, a single mistake can tarnish a company's reputation forever.

McDonald's closes its only downtown Oakland location

A McDonald's (MCD) franchise at 1330 Jackson St., the only location in downtown Oakland, California, will permanently close on November 30, affecting around 40 workers just before the winter holidays, according to abc7 News.

Employees claim they were notified of the closure only days before Thanksgiving and told they would not be allowed to transfer to nearby locations. The abrupt notice triggered a worker strike on November 25, with many longtime employees expressing shock and frustration.

"These workers were given ten days' notice that the location would be closing," Maria Maldonado, an organizer with the California Fast Food Workers Union, told abc7 News. "That is not enough time to find a new job. Many of these people were crying when they heard the location was closing and will now have to struggle this holiday."

Despite the workers' claims, the WARN notice was filed on October 30, 2025.

McDonald's rat infestation controversy

The closure follows a health controversy at the downtown Oakland McDonald's location in May 2024, where the Alameda County Department of Environmental Health temporarily shut down the restaurant after live and dead rats were found on the premises.

A leaked video obtained by KRON4 News showed rats crawling inside the restaurant, and employees claimed they had been threatened with termination if they documented the issue.

More restaurant closures:

• 61-year-old fast-food chain quietly closes dozens of restaurants nationwide 

• 37-year-old Italian restaurant chain quietly closes most locations

• Iconic frozen yogurt chain makes comeback after closing 2,650 stores

In response, the workers went on strike, as captured in a video posted on X (formerly Twitter) by the California Fast Food Workers Union.

"It's very important to me as a small business owner in Oakland that my employees have a safe place to work. When we became aware of the issue, we immediately contacted pest control and continued to work with them to address the issue," McDonald's franchise owner Joseph Wong explained to KRON 4.

McDonald's past issues with franchisees

This is not the first time McDonald's has faced issues with franchisees. In April 2025, the Massachusetts Attorney General's Office filed citations against franchise operators of McDonald's, Dunkin' Donuts, and Subway for violating child labor laws.

These charges were filed because the franchisees, Cafua Management Company, The Brewster Company, and Knight Food Service, Inc., failed to obtain the necessary permits to employ minors and scheduled 16- and 17-year-olds beyond the state's nine-hour daily limit.

One McDonald's franchisee received a $63,930 fine for allowing minors to work during prohibited hours and booking their shifts longer than the maximum allowed at eight Massachusetts locations between May 2021 and May 2024.

Risks of franchising in the U.S.

Data from the U.S. Bureau of Labor Statistics show that about 17% of new restaurants close within their first year. Long-term restaurant survival is even more challenging, with approximately half of restaurants shutting down within five years and only 34.6% surviving past the 10-year mark, according to Oysterlink.

In 2024, the U.S. had 33.2 million businesses, with 821,589 being franchised establishments, according to Statista. Veterans own one in seven U.S. franchises, around 14%, contributing $41 billion annually to the economy.

However, franchising comes with risks.

"Labor experts say that franchised chains have higher rates of violations than corporate-run chains because theyare less invested in preserving a brand’s reputation," wrote Lauren Kaori Gurley and Emmanuel Martinez for The Washington Post.

"They are also under pressure to keep labor costs low to make up for steep operating costs, especially franchise fees."

McDonald's boosts growth amid industry struggles

McDonald's is one of the world's largest and most successful franchises. In the third quarter of fiscal 2025, global comparable sales rose 3.6% year over year, with U.S. sales up 2.4%. This growth was primarily driven by revenue from franchised restaurants, which increased 7% to reach $4.2 billion in the quarter.

Still, the food industry is a tricky business. Food service traffic dropped by 1% in the quarter ending June 2025, according to Circana.

Restaurant Data reports that 13,265 independent establishments and 2,712 chain locations closed in the first half of 2024.

"Consumers are saying, 'We're struggling, or we're beginning to struggle or we're thinking more carefully about what we spend,'" said Harvard Business School Consultant and Lecturer on Restaurants Michael S. Kaufman. "I don't know that the ability to maintain the large fleets of traditional casual dining restaurants can continue."

Despite improvement, McDonald’s remains cautious.

"We continue to remain cautious about the health of the consumer in the U.S. and our top international markets and believe the pressures will continue well into 2026," said McDonald's CEO Christopher J. Kempczinski in an earnings call.

"It's a foundational expectation of our brand to bring consumers through our doors and keep them coming back. And especially in today's difficult macro environment, it's more important than ever."

Related: McDonald's drops more than a 2025 Christmas Grinch meal

This story was originally published by TheStreet on Dec 1, 2025, where it first appeared in the Restaurant section. Add TheStreet as a Preferred Source by clicking here.