---
title: "McDonald’s and Subway Attempt To Moderate Frustration Among Franchisees"
url: https://burnaze.com/article/dc0c9ca6-c9cb-45b2-8fad-e1eeb77ec441
source: "1851 Franchise"
original_url: https://1851franchise.com/mcdonalds-and-subway-attempt-to-moderate-frustration-among-franchisees-2715900
category: "Sandwich & sub"
industry: "Restaurants"
segment: "Sandwich & sub"
published: 2021-06-03T16:11:00.000Z
modified: 2026-11-01T02:13:56.817Z
image: https://newimage.1851franchise.com/cdn-cgi/image/quality=85,format=webp,width=1280,height=720/story/featureImage/f5792b737250a590bb47d84179d7f0cd6378.jpg
---

# McDonald’s and Subway Attempt To Moderate Frustration Among Franchisees

**TL;DR:** McDonald's and Subway are attempting to address frustration among their franchisees, with McDonald's CEO Chris Kempczinski downplaying the impact of technology fees and Subway introducing a new franchise agreement with higher royalty rates. Subway's new agreement has been met with criticism from franchisees, who had requested lower fees.

*originally published in 1851 Franchise on 2021-06-03. [Read the original](https://1851franchise.com/mcdonalds-and-subway-attempt-to-moderate-frustration-among-franchisees-2715900).*

## Story

McDonald’s CEO Chris Kempczinski recently suggested that issues at the heart of the dispute — namely, a “$70 million in additional technology fees” — are a “rounding error” when compared to the brand’s financial health, as the brand is recovering from the pandemic with a 13.5% increase in same-store sales on a two-year basis.

Some McDonald’s franchisees, however, are facing severe labor shortages, even offering $50 to anyone willing to come in for an interview.

But Kempczinski said that existing franchisees are acquiring more locations “at pretty healthy multiples right now” and believes “There’s always a push and pull that exists between franchisee and franchisor … That’s just the nature of the business. That’s the nature of the relationship.”

In response to its franchisees’ complaints about the brand’s high royalty rates, Subway is giving franchisees a choice in 2021: pay a 10% royalty (as opposed to the 8% royalty rate in 2020) or keep the old royalty rate but with several new terms, which prevent franchise owners from speaking out against the brand, makes franchise owners pay steep charges if they close their stores, gives corporate the power to dictate store hours and more.

Despite the chain closing more than 1,000 stores a year, Subway is standing firmly by its decision. “Our franchise agreement and all its terms are disclosed in the FDD," the brand said in a statement. “The terms are competitive with others in the QSR franchising industry.”

But the new franchise agreement almost completely ignores franchisees’ requests, who recently asked the brand to cut its franchise fees to 4.5% from 8%.

Operators predict that thousands of franchise owners will be forced to walk away from the brand as a result of Subway’s continuous struggle.

## Entities

- 1851 Franchise (publication)
- Restaurants (sector)
- McDonald's (company)
- Subway (company)
- Chris Kempczinski (person)
- franchisee relations (topic)
- labor shortages (topic)
- royalty rates (topic)
- technology fees (topic)

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Originally reported by 1851 Franchise (https://1851franchise.com/mcdonalds-and-subway-attempt-to-moderate-frustration-among-franchisees-2715900). Summarized by Burnaze (https://burnaze.com/article/dc0c9ca6-c9cb-45b2-8fad-e1eeb77ec441).