The sun is setting on the $3 Happy Meal

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Inflation happens. We know this. But upcoming cost increases out of the McDonald’s camp may have less to do with inflation and more to do with corporate devilry.

I’ll explain: According to The Wall Street Journal, the average cost of a Happy Meal at a U.S. McDonald’s restaurant is currently $3.76. The low cost is partially because of something called a “Happy Meal Rent and Service Fee,” a monthly payment the company makes to franchisees to help subsidize the cost of Happy Meal toys. The subsidy amounts to about $300 per month per franchise—but as of January 1, 2021, McDonald’s will stop making these monthly payments. That means franchisees may have to bump up Happy Meal costs to cover the difference.

According to The Wall Street Journal, McDonald’s execs reportedly told franchisees that they could raise Happy Meal prices to compensate for losing the monthly subsidy. As you may have guessed, franchisees aren’t in love with this possibility. The National Owners Association told CNN that it “did not support, nor did we endorse” the cancellation of the Happy Meal subsidy. “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.”

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Individual franchisees also have... thoughts. “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.” I guess you could say franchisees are caught between a rock and a Play Place.

Staff writer @ The Takeout, joke writer elsewhere. Wrangling dogs and pork shoulder in Chicago.

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DISCUSSION

My first take is that this is just a financial shell game. OK, corporate subsidized the Happy Meal toys, but it came back to them in franchise fees. Now, the franchisee will be paying for the toys and two possibilities may now occur. 1. The franchisee eats the cost and keeps the Happy Meals at $3. The result is a lower franchise fee payment to corporate. 2. The franchisee raises the prices of Happy Meals to compensate for the cost of the toys. The result is fewer Happy Meal sales and, again, a lower franchise fee payment to corporate.

I hope McDonalds did some analysis instead make an obtuse decision to placate the shareholders.