McDonald's Royalty Fee Hike Sparks Backlash From Franchisee Advocacy Group: 'Do Not Underestimate The Impact'

The decision by McDonald’s MCD to raise its royalty fee, a first in three decades, has met with stern opposition from a prominent franchisee advocacy group, Business Insider reported. 

The National Owners Association (NOA), which represents approximately 1,000 McDonald’s franchisees, labeled the fee increase as “detrimental” to the brand.

The NOA, comprising operators who own multiple restaurants, claims that operators are earning less today than in 2010. McDonald’s, with over 13,400 restaurants in the U.S., plans to raise its monthly royalty fee from 4% to 5% of gross sales. This revision, starting Jan.1, applies to new restaurants, relocated stores, or previously company-owned locations taken over by franchisees.

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The NOA urged franchisees to have attorneys review changes to their franchise agreements, implying that McDonald’s might reduce services by rebranding the fee as a royalty fee.

“The change of nomenclature from service fees to royalties is very significant,” NOA stated. “Do not underestimate the profound and transformational impact this will have on our rights to receive the all-important services, support, and assistance that McDonald’s is now obligated to provide us.”

McDonald’s denied claims of reducing services. 

“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,” stated Joe Erlinger, President of McDonald’s USA.

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