McDonald's Corp. told some U.S. franchisees to seek other ways to finance store improvements after Bank of America Corp. declined to increase lending.
Store owners have exhausted financing used to pay for upgrades and equipment to make lattes and espressos, and Bank of America won't provide more money as it works on the planned purchase of Merrill Lynch & Co., McDonald's said in a memo that was obtained by Bloomberg News.
Banks have tightened credit following Lehman Brothers Holdings Inc.'s bankruptcy filing, the government takeover of Fannie Mae and Freddie Mac and more than $500 billion in writedowns and losses. Bank of America's reluctance to increase the loan may show that even well-known brands such as McDonald's face difficulties financing expansion.
``This is the first signal that turmoil in the financial markets is reaching McDonald's,'' Richard Adams, a former McDonald's franchisee in San Diego, said in a telephone interview. He's a consultant to about 300 of the company's franchisees and said he had spoken with someone who's seen the memo.