McDonald’s is raising royalty fees for operators looking to open new locations, reports CNBC News. The QSR is raising the fee from 4% to 5%, beginning on January 1. In addition to raising the price, McDonald’s will also stop calling the payments “service fees,” instead use the term most franchisors favor, “royalty fees.”
It’s the first time in nearly three decades that the company is raising its fees. “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,” McDonald’s U.S. President Joe Erlinger told CNBC.
The higher rate will affect, among others, new franchisees, buyers of company-owned restaurants and relocated restaurants.
The change will not affect existing franchisees maintaining their current footprint or those who buy a franchised location from another operator, said CNBC News. Rebuilding existing locations and restaurants transferred between family members will also not be affected by the price increase.
“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 viewed by CNBC.
Reuters reported that, according to that same internal message, “average cash flows for these U.S. franchisees have grown more than 35% over the past five years.”
McDonald’s is winning the contest for digital, with its app downloaded as many times as the next three QSR apps combined.