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McDonald’s is one of the most successful fast-food chains in the world. It has a presence in 119 countries and serves millions of customers every day. But how profitable is it? How much money can you make owning a McDonald’s franchise? By answering these questions, I will highlight why McDonald’s is as popular as it is and help you decide if buying a McDonald’s franchise is right for you or not.
McDonald’s Franchise
The franchise has been a part of our American culture for nearly 50 years, and it continues to grow even in today’s declining economy. The company has long been an iconic part of American culture, having touched many people’s lives and become a mainstay of our culture. A quick search online will reveal McDonald’s revenue was $22.87 billion in 2021 and 40,000+ McDonald’s restaurants worldwide. Realistically, you must be quite well off or have a lot of savings if you want to own a McDonald’s franchise. But, given the popularity and potential of the restaurant franchise, we thought it would be a good topic to discuss what one should expect when they purchase a franchise.
McDonald’s Franchise Business Model
The McDonald’s franchise business model is a well-established and proven system. The company has been in business for over half a century, so it’s no surprise that there are so many successful franchises out there.
McDonald’s started franchising in 1961 and has since grown to almost 40,000 locations worldwide. The company has two basic models for its franchises: company-owned locations and independently owned franchises. There are a total of 2,770 company-owned locations and 35,085 franchised locations. About 93% of the total units are owned and operated by independent local business owners.
1. Company-Owned Locations
The company owns these McDonald’s restaurants, and the individuals who run them pay rent to the parent company. These restaurant owners are responsible for purchasing supplies, managing employees, and paying bills. They also receive assistance from McDonald’s corporate offices when needed.
In exchange for this assistance, they must abide by certain rules set forth by McDonald’s headquarters, such as following national advertising campaigns and using standardized operating procedures (SOPs). These guidelines are intended to protect brand consistency among all locations while allowing each owner some flexibility in running their individual businesses.
2. Franchise Locations
McDonald’s also allows people to buy into their franchise program through a licensing agreement where they pay a fee upfront to open up their own restaurant under the McDonald’s name.
Requirements for being a Franchise Owner
As stated very succinctly on the McDonald’s website:
We require our franchisees to devote full time and best efforts to operating the business, including exhibiting personal management, financial management, fiscal responsibility to reinvest, and leadership in the restaurant business. We do not permit investors or partnerships. This opportunity is a significant investment. You will need a minimum of $100,000 in unencumbered funds to begin the application process to be considered as a potential franchisee candidate.
The prospective Franchise owner must pass the following stages before getting inducted into the Franchise Training Program.
- Application
- Phone Interview, Background/Credit Check
- Panel Interview
- Financial/Asset Verification
- Review of Legal Documents to Enter Training Program.
Remember that McDonald’s does not allow any partnerships or many investors in a single restaurant.
Benefits of being part of the McDonald’s Franchise
McDonald’s franchise business model is a great way to enter the restaurant business. McDonald’s franchises offer a wide range of benefits, including:
1. A proven business model.
McDonald’s has been around for more than 50 years and has perfected its menu, operations, and marketing plan. As a result, you know exactly what you’re getting into when buying a McDonald’s franchise.
2. Low startup costs
Unlike many other fast-food franchises, McDonald’s requires only a minimum investment of about $100,000 to open a restaurant — far less than many other franchises require.
3. Limited financial risk
McDonald’s provides all building materials and equipment needed for your restaurant, including kitchen equipment, signs, tables, chairs, faucets, and sinks. In addition, it supplies training manuals that cover everything from operating your store to cleaning the toilets and dealing with customers’ complaints. You also have access to its supply chain to don’t have to worry about running out of food or supplies during busy periods like the lunch rush or late at night when teenagers are looking for burgers after school lets out.
McDonald’s Franchise Cost
McDonald’s franchisee startup costs can reach as high as $2 million for new restaurants and up to $1 million for existing ones. Franchise fees for McDonald’s range from $45,000 to $1 million depending on the location — whether it is a free-standing or mall location — as well as if you’re purchasing land or leasing it from someone else.
The total cost will vary depending on your location and type of restaurant you open — whether it’s an urban location or a suburban one. You’ll also pay a monthly royalty fee of 4% of gross sales (including food sales and non-food sales) plus an advertising fee of 2% of gross sales that goes toward promoting your store through national campaigns and local marketing initiatives such as coupons and contests. Construction Expences, Hiring and Traing the staff, Inventory and Equipment aresome of the other costs involved.
How much does a Mcdonald’s franchise make?
A franchisee’s total revenue will depend on the location, sales volume and how well it performs. McDonald’s does not disclose how much profit its franchisees make on average, but based on publicly available information from other sources we can guess a rough estimate.
In general, however, most locations generate between $250,000 and $300,000 in annual revenue at full capacity (with no downtime). This means that if you own a single store you can expect to make anywhere from $150,000-$200,000 annually after all expenses are paid out.
Conclusion
Starting a McDonald’s franchise can be a very lucrative and rewarding business. Investment into the McDonald’s franchise is initially high, but with the right business model, your return on investment will be just as high.
There are many other considerations to take into account before making such a decision. Do you want to run your own business? Are you financially prepared to make an investment of this magnitude? Can you afford it while still providing for your family and paying off existing debt? You will want to weigh your options carefully before deciding that this is the right business opportunity for you.
Also, check if Franchises in general are a good investment option.