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A statement that indicates a person is not all there. The happy meal is symbolic of a well rounded, mentally healthy individual. However, being a few fries short, the happy meal isn't quite as happy, and may well be mentally disturbed. Frequently used when someone does something very odd or otherwise demonstrates abnormal mental capacity. For example:
Guy 1: Did you see Richard Simmons on Leno last night?
Guy 2: Yeah, he's a few fries short of a happy meal. | 
