McDonald’s Franchise Ownership FAQs

Aspiring entrepreneurs looking for a reliable opportunity in the restaurant industry should explore the possibility of opening McDonald’s franchises. This globally recognized fast food chain is consistently on the lookout for skilled franchisees to help grow its brand. Individuals who possess a customer-first mentality and have substantial financial resources may find themselves well-suited for McDonald’s franchise ownership.

Basic Facts About McDonald’s Restaurants

With more than 38,000 McDonald’s restaurants worldwide in more than 100 countries, the massive corporation is the world’s leading global foodservice retailer. If you’re considering starting your own business and you’re interested in a possible McDonald’s franchise ownership, the following facts about the corporation might help you decide:

• Approximately 93% of McDonald’s restaurants across the globe are owned and managed by independent local entrepreneurs.
• Before purchasing restaurants, McDonald’s mandates that its franchisees undergo a training program lasting 12 to 18 months.
• McDonald’s supports its employees. The Archways to Opportunity program offers scholarships to eligible McDonald’s employees and eligible employees of participating independent franchisees. Likewise, the McDonald’s HACER scholarship program provides scholarships and college resources for eligible Hispanic students.
• McDonald’s feeds 68 million customers every day.
• The McDonald’s corporation was first opened as a barbecue restaurant by Dick and Mac McDonald in 1940 before becoming a hamburger stand. It has since grown into the largest chain of hamburger fast-food restaurants on the planet.

READ MORE: See Our Franchise Guide

McDonald’s Franchise Cost

McDonald’s requires its franchisees to make an initial down payment equal to 40 percent of the total cost of a new restaurant or 25 percent of the total cost of an existing restaurant. As the total cost varies by location, so will the initial down payment, although franchisees typically need a minimum of $500,000 of non-borrowed personal resources to be considered to open a McDonald’s franchise.

In 2021, the initial investment to purchase a McDonald’s franchise ranged from $1,008,000 to $2,214,080, and the initial franchise fee is $45,000. McDonald’s manages all the site evaluations, acquires the property, and constructs the building before selecting a new franchisee. Equipment and pre-opening costs can range from $1.2 million to $2.2 million.

McDonald’s Franchise Fee

During the duration of the franchise agreement, McDonald’s franchisees are required to pay the corporation several fees to run their businesses under the McDonald’s brand. These franchising fees consist of a service fee that amounts to 4% of the sales for each month. Since McDonald’s owns the properties, franchisees also pay a monthly rent, which averages around 10% of their total monthly sales. Additionally, franchisees incur advertising and promotion costs that equal another 4% of their sales.

McDonald’s Franchises Profit

With a median annual sales volume of $2.9 million, the majority of McDonald’s franchisees recover their investments within 6 to 9 years. Despite a profit margin of 10% or greater, it is estimated that McDonald’s owner-operators take more than 8 years to recoup their initial investments when launching new restaurants. On average, U.S. McDonald’s franchisees earn an annual profit of $1.8 million per restaurant across the United States.

• READ MORE: Buy Your First Franchise: Secrets Revealed

McDonald’s Franchise Owner Salary

While the national average salary of a fast-food franchise owner is just $66,000, McDonald’s restaurant franchisees earn significantly more, averaging salaries of about $150,000 a year. Considering the money franchisees spend to open their own McDonald’s restaurants and the hefty profits each franchise model garners for the corporation, it’s only fair these business opportunities carry a generous salary.

McDonald’s Franchise Requirements

What is the McDonald’s franchisee selection process? Once the company has completed the site selection process for each of its new restaurants, McDonald’s awards franchises to the most qualified candidate. It’s particularly interested in offering opportunities to minority and women operators. In addition to capital requirements, certain qualifications must be met to be considered for McDonald’s franchises, including:

Significant Business Experience

McDonald’s seeks individuals who have demonstrated successful ownership or management of multiple business units or multiple departments.

Growth Potential

McDonald’s also looks for franchisees with the capability to grow rapidly with the company.

Business Plan

Prospective McDonald’s franchisees must also demonstrate the ability to develop and execute a business plan.

Financial Knowledge

McDonald’s franchisees need to effectively manage finances and have a solid grasp of business financial statements.

Management Skills

A McDonald’s franchisee must also showcase a commitment to personally manage the day-to-day operations of the restaurant business.

Willingness to Train

Before they can open a new McDonald’s restaurant, franchisees must complete an extensive, comprehensive training program at Hamburger University. They also must commit to working at a nearby McDonald’s restaurant for 9-18 months so they can become proficient in all aspects of operating a McDonald’s restaurant.

Customer Service Experience

New operators at McDonald’s must be able to effectively manage an organization that recruits, trains and motivates restaurant workers to deliver an exceptional customer experience.

Good Credit History

To qualify for ownership of a McDonald’s franchise, prospective franchisees are required to have a satisfactory credit history.

Is Opening a McDonald’s Restaurant Worth It?

While McDonald’s ranks among the top franchises globally in terms of sales, owning a McDonald’s franchise can be quite expensive. So, is it worthwhile to open a McDonald’s restaurant?

While owning a McDonald’s franchise might be expensive, it’s also a choice that’s highly likely to succeed. After all, most franchisees recoup their investments in under a decade. It’s recommended that entrepreneurs interested in owning their own McDonald’s restaurants speak to a few current franchisees before beginning the application process.

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This article, "McDonald’s Franchise Ownership FAQs" was first published on Small Business Trends