McDonald’s to raise royalty fees for new US restaurant operators
MCDONALD’S is raising royalty fees for new US franchise operators for the first time in nearly three decades, according to an internal letter viewed by Reuters.
The burger giant is raising the fees that franchise owners pay for the brand to 5 per cent from 4 per cent, starting Jan 1, for any new restaurants they open.
This “will help us maintain our competitive edge – so we can continue offering opportunity to independent small business owners and their families for generations to come,” according to the letter.
The change will not affect existing franchisees who are maintaining their current footprint or who buy a franchised location from another operator. It will also not apply to rebuild existing locations or restaurants transferred between family members.
The fast-food giant operates more than 13,000 locations across the US, with 95 per cent of the restaurants run by franchisees as of Dec 31, making up nearly 30 per cent of its total revenue in 2022.
It will also change the term for payments in the US from “service fees” to “royalty fees”, used by all other McDonald’s markets around the world.
Royalty is a fee paid by restaurant operators to the owner and the rate is set based on the revenue generated by the licenced property.
The company had said in July it expects revenue growth to moderate in the second half of the year as signs of easing inflation prompt it to temper menu prices, even as it reported better-than-expected quarterly profit. REUTERS
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