Title: McDonald’s Franchisees to Face Higher Royalty Fees in 2022
Starting January 1, 2022, McDonald’s franchisees will experience an increase in royalty fees. This marks the first time in nearly three decades that the fast-food giant has raised its fees. The increase, from 4% to 5%, is part of McDonald’s efforts to redefine success and ensure the continued strength of its brand.
Existing franchisees who maintain their current footprint or purchase a franchised location from another operator will not be affected by the fee hike. However, the higher fees will apply to new franchisees, buyers of company-owned restaurants, relocated restaurants, and other scenarios involving the franchisor.
Under the new arrangement, these payments will now be referred to as “royalty fees” instead of “service fees,” signifying a shift in McDonald’s terminology. Currently, franchisees operate approximately 95% of the chain’s 13,400 U.S. restaurants and already pay rent, monthly royalty fees, and other charges.
Impact and Expectations:
The fee increase may not immediately affect many franchisees. However, there is anticipated backlash due to the company’s strained relationship with its U.S. operators. McDonald’s and its franchisees have previously clashed over issues such as a new assessment system for restaurants and a planned wage increase for fast-food workers in California.
Nevertheless, McDonald’s U.S. business has been thriving, with robust sales growth and increased cash flows for franchisees in recent years. The fee hike aims to ensure the long-term prosperity of the brand and provide continued support for franchisees.
McDonald’s decision to raise its royalty fees starting next year marks a significant change for franchisees. While existing franchisees will remain unaffected, new franchisees and those involved in various scenarios will be subject to the 1% increase. McDonald’s U.S. President Joe Erlinger emphasized that this increase is part of the company’s efforts to redefine success and solidify its brand’s strength. As franchisees navigate the fee increase, their partnership with McDonald’s is expected to continue evolving amid the broader context of their relationship with the corporation.