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McDonald's raises franchise royalty fees for the first time in 30 years

McDonald's will use the term "royalty fees" instead of "service fees".
McDonald's has decided to increase royalties to new partners. From January 1, the new size of the commission will be 5% instead of 4%. This is the first increase by the fast food giant for almost thirty years.

McDonald's - unsplash

It is reported that existing franchisees will not be affected by the innovation. In addition, the increase will not affect restaurants that will open after renovation but will apply to outlets that change locations.

"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 U.S. President Joe Erlinger said in a message to U.S. franchisees.

Another significant change from January 1, 2024 - McDonald's will use the term "royalty fees" instead of "service fees". The company said it tries to "change mindsets by getting people to see and understand the power of the brand."

As of the third quarter of 2023, 95% of all U.S. restaurants are under franchisees' control. In total, the chain includes about 13,400 establishments.
Earlier it was reported that the percentage of EBITDA per McDonald's restaurant is falling and will soon reach a 12-year low of about 12.25%.

Despite the strong sales growth that restaurants generate, franchisees are making less money per restaurant today than in 2010. McDonald's sales increased 10.3% in the most recent quarter.

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