McDonald’s Happy Meals may be more expensive next year, franchisees say. Here’s why

Happy Meals may be more expensive at McDonald’s next year.

In 2021, McDonald’s plans to eliminate the Happy Meal Rent and Service Fee subsidy it pays to its franchise owners, CNN reported. The subsidy allows franchisees to keep the price of Happy Meals down.

The restaurant chain announced the news Dec. 3 in an internal email obtained by CNN and several news outlets. The deal will end on Jan. 1, according to Business Insider.

McDonald’s pays each of its restaurants $300 a month — or $3,600 a year — in an effort to keep Happy Meal prices low, Restaurant Business reported.

The deal has been in place for more than 30 years, according to the outlet.

The change has been met with frustration from franchise owners.

The National Owners Association, a group of McDonald’s franchisees, said it doesn’t support the deal coming to an end.

“We believe the Happy Meal rebates represent a token of partnership and acknowledgment by the company that each owner [and] operator invests to drive affordable family business to our restaurants,” the association said in a letter, adding that it “does not support, nor did we endorse,” its elimination, CNN reported.

Some franchise owners have said they won’t “eat” the cost to keep Happy Meal prices low once the subsidy ends, according to Business Insider.

In a statement to the outlet, McDonald’s said franchisees set menu prices, and that McDonald’s only controls prices at company-owned stores — roughly 5% of McDonald’s locations in the U.S.

The company told franchise owners they could increase the price of Happy Meals by 20 cents to offset the subsidy, which McDonald’s said is “no longer fueling growth in the way it once was,” CNN reported.

Franchise owners, however, say customers “want a value-priced Happy Meal,” Business Insider reported.

The end of the subsidy comes as franchisees are facing more fees.

McDonald’s is looking to change its Archways to Opportunity employee education initiative into a joint-funded program, Restaurant Business reported.

Archways to Opportunities seeks to support restaurant employees with college tuition or their pursuit of a high school diploma, according to the outlet. The chain has invested $100 million into the program, but hopes to shift to a new model in which McDonald’s matches franchisee contributions.

McDonald’s also plans to charge franchises monthly for technology investments rather than every six months, Restaurant Business reported.

The end of the subsidy coupled with new fees are causing tension between McDonald’s and franchise owners, but the company said it’s subsidizing restaurants in other ways, referencing a $100 million marketing investment, CNN reported.