McDonald's Plans Royalty Fee Hike For Some Franchisees Starting 2024: Report

McDonald's Corporation MCD franchisees who add new restaurants will reportedly see an increase in royalty fees beginning January 1st.

The company will also shift its terminology, calling the payments "royalty fees" rather than "service fees."

The fast-food behemoth is increasing its fees from 4% to 5%, marking the first such hike in nearly 30 years, reported CNBC.

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Current franchisees who maintain their existing restaurants, pursue new 20-year franchising agreements for their existing footprint, or purchase an existing franchised location” will not be impacted.

Moreover, rebuilt locations or restaurants that shift ownership within families will be exempted from the hike.

The augmented rate will be applied to new franchisees, purchasers of company-owned restaurants, relocated eateries, and other situations involving the direct involvement of the franchisor, added the report.

The report cited McDonald's U.S. President, Joe Erlinger, who highlighted the company's continued growth ambitions, noting, "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."

Franchisees operate ~95% of the 13,400 U.S. McDonald's outlets. They cover rent, monthly royalty fees, and other operational expenses as part of their association with the brand.

Price Action: MCD shares are trading higher by 0.52% at $272.64 on the last check Friday.