McDonald’s raises fees for franchisees in first price hike in 30 years

McDonald’s franchisees who open new outposts in 2024 will have to pay an increased royalty fee of 5% — the first time in nearly three decades that the fast-food giant increased the fee, .

For the past 30-some years, a Golden Arches franchisee only had to cough up 4% royalty fees, a percentage of gross sales in addition to rent and other expenses such as payments towards the company’s mobile app.

These higher rates — which McDonald’s used to refer to as “service fees,” but will now call “royalty fees” — will only affect new franchisees, buyers of company-owned restaurants and relocated restaurants, according to an internal message reviewed by CNBC.

Existing franchisees who plan to maintain their current fooꦿtprint or who buy a franchise from another operator, as well as those who rebuild existing locations or transfer their franchise to a family member, will not be affected by the price hike.

“While we created the industry we now lead, we must continue to redefine what success looks like and position ourselves for long-term success to ensure the value of our brand remains as strong as ever,” McDonald’s US President Joe Erlinger wrote in a message to US franchisees that was obtained by CNBC.

“We’re not changing services, but we are trying to change the mindset by getting people to see and understand the power of what you buy into when you buy the McDonald’s brand, the McDonald’s system,” Erlinger told the outlet.

The Post has sought comment from McDonald’s.

Though franchisees won’t be impacted by the price hike straight away, the increase will likely create more waves when it takes effect on Jan. 1.

It wouldn’t be the first time McDonald’s has clashed with its franchisees, who run about 95% of its over 13,500 locations nationwide.

This year, McDonald’s faced backlash for implementing a new grading system that called for as many as 10 annual visits from company and third-party assessors, as well as additional inspections for food safety per location each year.

when the initiative was announced that the program — called Operations PACE, which stands for Performance and Customer Excellence — “kills morale” and could make it harder on managers facing a tough hiring environment.

Just this month, McDonald’s franchisees in California bashed the company when a landmark fast-food bill called 🃏AB 1228🦂 took effect.

The bill, which was approved by California lawmakers last year,  with equal numbers of workers’ delegates and employers’ representatives, along with two state officials, empowered to set minimum standards for wages, hours and working conditions in California.

It includes a wage floor of $20 for California workers at fast-food chains, and a late amendment could see wages increasing to $22 per hour — a move that franchisees in the state bashed for increasing their costs.

“The new ‘AB 1228’ legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisee🦩s at a projected annual cost of $250,000 per McDonald’s restaurant,” the advocacy group representing some 1,000 McDonald’s franchisees said in the memo obtained by FOX Business. 

“These costs simply cannot be absorbed by the current b🎉usiness modelꦐ.”