Other deals soon followed. In 1998, McDonald's was participating in retail access pilot programs in Massachusetts, Missouri and Pennsylvania and had inked a deal in California in anticipation of the opening of retail markets there.
The most widely publicized of these agreements was the four-year, $180 million pact the hamburger giant signed in California, with PG&E Energy Services. Under that arrangement, PG&E Energy Services will supply 75 megawatts of electricity to more than 800 McDonald's franchisee and corporate restaurants formerly served by California's investor-owned utilities.
The pact will eventually be expanded to include more than 400 other McDonald's restaurants currently served by municipal utilities, once those areas are open to competition. And dozens of McDonald's suppliers in California have been allowed to opt into the deal, too.
Getting to that point wasn't easy for McDonald's, which ultimately decided to appoint statewide energy teams in each state where retail markets are being deregulated. The team sorts through the competing proposals to find the best deal for McDonald's in that state.
Franchisee Brownstein sat on the California team. "Some of the energy companies came in and wanted to see how naive we were," says Brownstein. "McDonald's is notorious for doing its homework," he says, and many of the companies competing for the business apparently had not. Some of them promised big savings initially, then changed the terms of the deal when negotiations began in earnest. Others offered McDonald's a discount, but when asked, "A discount off what?" they were clueless, he says.
"It was a very intense bidding process," recalls Faye Worthy, director of national account sales for PG&E Energy Services. "They asked very hard questions, and they were very thorough. It was probably one of the most professional procurement teams I've ever worked with, and one of the most knowledgeable."
"McDonald's is very open and honest, and very up front about what it wants and expects," says Kerry Vestile, manager of national accounts for Cadence, a Cincinnati-based power marketing company that is providing about 653 kilowatts of electricity to eight McDonald's restaurants in a Massachusetts direct access pilot program. McDonald's is also "very relationship-oriented," Vestile says. "If you get their business, and you do a good job, the business is yours to lose."