It's your decision whether to allow your child to do something or not. I don't know what you mean by 'harm' but it sounds as though the McDonalds party wasn't a good experience for your DS so he probably won't mind if he didn't go to one ever again.
I wouldn't be offended at all if someone declined an invitation because they don't like McDonalds. Acutally, I wouldn't be offended if they declined an invitation without a reason. I don't get all narky over birthday parties. Your reason is a valid one though. I wouldn't allow my kids to go to a birthday party at a circus because it goes against my way of thinking, your stance on Maccas is no different to that in my eyes.
I understand the appeal of having one at McDonalds for parents who don't really have anywhere else suitable to hold a party or who just don't want to host a party at home. But that party just sounds awful. Id be putting in a complaint about the way that girl spoke to the kids because that is just inappropriate IMO. But I'm like you, I would hate the thought of my kids going to a macca's party. We go there sometimes, sure, but I still don't like them LOL.
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