McDonald's is eliminating a four-decade-old deal with its franchisees that subsidized the price of Happy Meal toys for customers. That could mean pricier Happy Meals next year.
Beginning next year, McDonald's will stop issuing a roughly $300 per month contribution to each of its 14,000 US restaurants called the "Happy Meal Rent and Service Fee," according to an internal message from its US leadership obtained by CNN Business.
The chain told franchisees the subsidy is "no longer fueling growth in the way it once was" and that franchisees could opt to increase the price of a Happy Meal by 20 cents next year to offset. McDonald's doesn't set the prices of its menu items, but rather lets franchisees decide depending on location.
The National Owners Association, a group of McDonald's franchisees, said in a team message that it "does not support, nor did we endorse" the elimination of the Happy Meal subsidy.
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"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," it said in the letter.
Tensions are flaring once again between franchisees and corporate over that subsidy loss and new fees coming into place next year. However, McDonald's said it's finding ways to provide other subsidies to its restaurants, citing a recent $100 million investment in marketing.
Following a dismal spring, McDonald's business has rebounded with sales finally growing again. New menu items and innovations, like spicy chicken nuggets and celebrity meals, sent US same-store sales 4.6% higher for the third quarter.