Financing

McDonald’s cuts a deal with its franchisees over technology fees

The company reduced a one-time charge by more than 60%. The dispute over the fees had caused a massive rift with its operators.
McDonald's technology fees franchisees
Photo courtesy of McDonald's

McDonald’s has opted to cut a technology fee it planned to charge operators this year by more than 60% as it sought to ease tensions with franchisees that had threatened to land both sides in court.

Bloomberg reported that the Chicago-based burger giant opted to reduce the fees by about $42 million. Multiple sources have confirmed the decision to Restaurant Business.

The reduction was viewed as a way to ease relations between the two sides that had deteriorated over the fee, which the company informed operators of late last year. It was part of a trio of fee changes—along with changes in a tuition program and the end of a subsidy designed to keep down the price of Happy Meals.

The technology fee had bitterly divided the company and its franchisees even as the chain’s sales recovered, with a number of operators apparently willing to take legal action to prevent the charge.

McDonald’s insisted that the fee, totaling more than $68 million, was owed as a result of a shift to a monthly payment schedule from a biannual one.

Operators insisted that the money was not owed. The two sides stopped negotiations and McDonald’s hired the accounting firm KPMG to audit the fund.

It was after this audit was concluded that the company opted to reduce the amount owed.

McDonald’s CEO Chris Kempczinski last month called the problem a “rounding error,” noting that it’s a relatively small amount in the grand scheme of things, and predicted the issue would soon be resolved.

“There are always things that go on in the nature of the back and forth between franchisee and franchisor that make for good headlines,” he said. “We had a few of those at the end of last year that spilled over into this year around things like tech fees and our Archways program and Happy Meal rebates. “In the grand scheme of things, those are rounding errors in the overall health of franchisees.”

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