Yes, McDonald's Franchise Fee Hike Is a Red Flag for Investors
With nothing more than a passing glance, it doesn't seem like that big of a deal. Fast food chain McDonald's (NYSE: MCD) hasn't raised its franchise royalty rates in nearly three decades, after all, despite bolstering its powerful brand name during that time stretch.
Besides, the royalty increase from 4% of sales to 5% of sales only applies to new (or newly acquired) stores, and the company isn't actually opening a lot of new restaurants these days. It only established 266 new units last quarter, which is a drop in the bucket compared to its total of 40,801. Those already-established locales will continue paying their current franchise royalty rate of 4% -- at least, for now.
Given all the other fee increases the company has imposed just within the past few years, however, this latest move underscores the idea that McDonald's is struggling to drive new, meaningful growth. That should be a concern for any current and would-be shareholder.
Source Fool.com
