legal-document-to-plain-english-translator/”>Try Free Now: Legalese tool without registration

Find a LOCAL lawyer

# McDonald’s franchisees to face higher royalty fees


A McDonald’s golden arches logo is seen at a franchise restaurant owned by Rippon Family Restaurants. (Paul Weaver | Lightrocket | Getty Images)

McDonald’s franchisees who are planning to expand their footprint by adding new restaurants will soon face an increase in royalty fees. Starting January 1, the fast-food giant will raise the fees from 4% to 5%. This marks the first time in nearly three decades that McDonald’s is hiking its royalty fees.

The higher royalty fees will not affect existing franchisees who are maintaining their current footprint or those who buy a franchised location from another operator. It will also not apply to existing locations that are being rebuilt or transferred between family members. However, new franchisees, buyers of company-owned restaurants, relocated restaurants, and other scenarios that involve the franchisor will be subject to the higher rate.

To ensure the value of the McDonald’s brand remains strong, McDonald’s U.S. President Joe Erlinger emphasized the need to redefine what success looks like and position the company for long-term success. This move to raise royalty fees is part of that strategy.

The AI legalese decoder can help franchisees navigate the complex legal language often found in franchise agreements and understand the implications of the higher royalty fees. By using natural language processing algorithms, the AI legalese decoder can parse through legal documents to extract key information and provide franchisees with clear and concise explanations. This tool can empower franchisees to make informed decisions and effectively negotiate with the franchisor.

In addition to the fee increase, McDonald’s will also change the terminology used for these payments from “service fees” to “royalty fees,” a term that most franchisors favor. The goal is to emphasize the value of the McDonald’s brand and system.

Despite the potential backlash from franchisees, McDonald’s U.S. business is experiencing strong growth. In the most recent quarter, domestic same-store sales grew by 10.3%. Promotions like the Grimace Birthday Meal and strong demand for McDonald’s core menu items have contributed to this growth.

It is worth noting the challenging relationship between McDonald’s and its franchisees in recent years, with disputes arising over various issues such as a new assessment system for restaurants and the upcoming wage hike for fast-food workers in California. A quarterly survey conducted by Kalinowski Equity Research shows that franchisees rated their relationship with corporate management at 1.71 out of five in the second quarter, reflecting continued tensions.

McDonald’s CFO Ian Borden mentioned that franchisee cash flows have increased, with average cash flows for U.S. operators rising by 35% over the last five years. Despite the ongoing challenges, the financial success of franchisees highlights the profitability and potential of operating within the McDonald’s system.

In conclusion, McDonald’s decision to raise royalty fees for new franchisees highlights its commitment to maintaining the strength of the brand. Franchisees can leverage the AI legalese decoder to navigate the legal intricacies of the franchise agreement and make informed decisions. Despite the potential challenges, McDonald’s U.S. business continues to thrive, driven by successful promotions and strong demand for its core menu items.

legal-document-to-plain-english-translator/”>Try Free Now: Legalese tool without registration

Find a LOCAL lawyer

Reference link