McDonald’s announced internally last week that it will no longer issue its roughly $300 per month Happy Meal Rent and Service Fee to each of its 14,000 U.S. restaurants starting next year. The funding, which subsidizes the price of Happy Meal toys for customers, has been around for two decades and will officially end on January 1st, 2021.
McDonald’s said the subsidy is “no longer fueling growth in the way it once was,” noting that franchisees could opt to increase the price of a Happy Meal by 20 cents next year to offset. After all, the fast food giant doesn’t set the prices of its menu items, but rather allows franchisees to decide by themselves depending on location.
McDonald’s said it would use the money from Happy Meal subsidy to fund other investments, including benefits for restaurant crew. “The family business is absolutely a priority. We just believe the dollars are better invested elsewhere,” said Charlie Strong, chief field officer for McDonald’s U.S.A., according to The Wall Street Journal.
According to franchisees, the elimination of the subsidy will likely result in costlier Happy Meals in 2021. “COVID is surging, and they’re worried about taking our Happy Meal subsidy?” a franchisee told Business Insider. “It’s not something that families in America want. They want a value-priced Happy Meal.”
Another franchisee commented: “I’m not going to eat [the cost of keeping Happy Meal prices the same without a subsidy]. If McDonald’s doesn’t want to eat it, why would I?”
In an official statement, the National Owners Association, a group of McDonald’s franchisees, said it “does not support” nor did it endorse the elimination of the Happy Meal subsidy. “We believe the Happy Meal rebates represent a token of partnership and acknowledgement by the company that each owner [and] operator invests to drive affordable family business to our restaurants,” said the group.
While the issue on the Happy Meal subsidy reignited tensions between McDonald’s and franchisees, the former said it’s finding ways to provide other subsidies to its restaurants, including a recent $100 million investment in marketing.