McDonald's eliminating monthly Happy Meal subsidies for toys to franchisees

McDonald's eliminating monthly Happy Meal subsidies for toys to franchisees
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McDonald’s has decided to get rid of a decades-long deal to subsidize the cost of Happy Meal toys for its franchisees, a move that may make the meals more expensive in the future.

According to an internal memo obtained by CNN, McDonald’s U.S. leadership informed franchise owners the corporation would no longer be sending $300 every month to its 14,000 locations as part of its "Happy Meal Rent and Service Fee."

According to McDonald’s, the subsidy was no longer “fueling growth in the way it once was.”

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Franchisees could choose to increase the price of a Happy Meal by 20 cents next year, as franchise owners are the ones who decide on the price of menu items.

"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," said the National Owners Association, a group of McDonald’s franchise owners, in a letter.

CNN noted that McDonald's has recently subsidized other business costs for franchisees, pointing to a recent investment of $100 million for marketing.

The fast food giant has managed to maintain a relatively strong performance this year despite the pandemic and its effect on the food and service industry. 

Its celebrity meal partnerships with artists like Travis Scott and J. Balvin gave the company a boost this year, according to Barrons.

The business publication reports that despite the better-than-expected performance, tensions with franchisees have risen as the company announced it would be moving certain costs to operators, resulting in an additional $12,000 per restaurant in expenses for franchisees.