Despite McDonald’s decision to increase royalty fees for the first time in almost three decades, franchisees across corporate brands aren’t about to see their operating costs rise, but it underscores the need for business owners to keep up with changes in franchise business models. It is possible that the economics of franchising will continue to increase due to a number of factors, including regulations of the industry and technological advancements.

In McDonald’s case, the change from 4% to 5%, starting Jan. 1 — which applies to franchisees in the U.S. and Canada who add new restaurants, buy company-owned restaurants, relocate restaurants and other scenarios involving the franchisor, but not existing franchisees — brought the fast-food giant in line with other restaurant franchises, who charge royalty fees of 5 to 6 percent, Kenny Rose, chief executive of franchise investing platform FranShares said.

According to the International Franchise Professionals Group, a membership-based organization, franchise royalty fees outside of fast food can be even higher, up to 12% or more.

Some franchisers may follow McDonald’s lead, especially if they are below industry norms, despite industry participants not expecting franchisers to raise royalty fees en masse, said Keith Miller, a principal at Franchisee Advocacy Consulting and a spokeswoman for the American Association of Franchisees and Dealers. 

McDonald’s increase is in line with the industry average, according to the International Franchise Association. Its data shows that 62% of brands in the quick-service restaurant space changed royalties on average by 1.3% over a 30-year period.

There is significant value associated with a brand like McDonald’s, and franchisees are in a race to stay ahead of their own corporate rivals.

“Franchisors compete with each other for quality franchisees,” said Robert Branca Jr., who owns several Dunkin’ franchises and serves on the Coalition of Franchisee Associations and International Franchise Association boards. There is no doubt that McDonald’s is well known and well known to everyone. Compared to a lesser brand, they have the clout to obtain a higher royalty fee.”

However, not all McDonald’s franchisees were happy with the new fee structure.