About McDonald’s Franchising Business
McDonald’s is the American fast-food company famed for its trademark golden arches logo and the “I’m Lovin’ It” slogan. The company, founded in 1955, started franchising in the same year.
Franchising continues to be a big part of McDonald’s business history, with over 90% of its restaurants currently franchised. McDonald’s currently has 39,396 restaurant units worldwide, according to Entrepreneur Magazine. 36,467 of these are franchises with 12,788 units in the US and 23,979 units spread over 100 countries. The remaining 2,679 units are owned by McDonald’s.
The company still actively seeks to open new franchises in the US and worldwide in line with its long-term goal of increasing its franchise unit share to 95%. This provides new franchisees an opportunity to align with McDonald’s established brand by buying a franchise.
Key Takeaways:
- McDonald’s actively seeks new franchisees to join its existing franchise business.
- New franchisees are more likely to buy existing McDonald’s franchises than get approved for a new one.
- Franchisees should consult with Fransmart professionals in the franchise industry to get the full details about buying a McDonald’s franchise, as well as to explore other opportunities with newer brands.
- McDonald’s offers one of the best profit margins in the restaurant industry, along with Ike’s Love & Sandwiches, Rise, The Halal Guys, Brooklyn Dumpling Shop.
Buying A McDonald’s Franchise
You can either become a McDonald’s franchise owner by starting a new franchise or buying an existing one. You are more likely to become a new McDonald’s franchisee in the US by buying an existing franchise than by buying a new one. Comparatively, franchises like Ike’s, Rise or Brooklyn Dumpling Shop offer new locations with low startup costs and low competition levels, which can be better options.
Although buying an existing franchise is the most likely way you’ll become a McDonald’s franchisee in the U.S., you need to find out why an existing franchise unit is up for sale before you invest.
It’s difficult to conduct due diligence on your franchise investment by yourself. Fransmart, the leading franchise development company for emerging brands, is committed to helping you make the best franchise investment decisions with the help of its dedicated team of professionals. Fransmart has helped open over 5,000 restaurants for its current and past franchise development portfolio brands like The Halal Guys, JARS, and Taffer’s Tavern. Fransmart was the company that turned Five Guys and Qdoba into international sensations.
What Makes a McDonald’s Franchise Investment Attractive
McDonald’s is the most well-known fast-food restaurant there is. As a franchisee, you will enjoy the benefit of an established customer base and support for the McDonald’s brand.
The 40%+ profit margins McDonald’s offers are also highly impressive for a fast-food chain. According to Investopedia, McDonald’s has a way to help franchisees make high profits with various menu items that are cheap to produce but sold for multiples of the production costs.
McDonald’s is one of the most responsive companies in the QSR industry. With the rise in demand for healthier and freshly made foods, McDonald’s revamped its menu, including the removal of additives and preservative. These actions continue to help grow McDonald’s baseline and make it a profitable franchise investment for you.
The other Profitable Franchise opportunities in the fast-casual industry available for sale are:
- RISE SOUTHERN BISCUITS & RIGHTEOUS CHICKEN
- BROOKLYN DUMPLING SHOP
- CURRY UP NOW
- IKE’S LOVE & SANDWICHES
- JARS BY FABIO VIVIANI
- SLAPFISH
- THE HALAL GUYS
- TAFFER’S TAVERN
- SAVANNAH SEAFOOD SHACK
The Cost of Buying a McDonald’s Franchise
Start-up costs range between $464,500 and $2,313,295. These costs cover the franchise fee, inventory, equipment, construction, interior décor, exterior landscaping, signage, hiring, and training. There are also ongoing fees such as rent and royalty fees that exist while the business operates.
Here’s the Cost Breakdown:
| Fee | Low | High |
| Initial Franchise Fee | $0 | $45,000 |
| Real Estate and Building – 3 month’s rent | Base Rent: $0,
Percentage Rent: 0% |
Base Rent: $229,000
Percentage Rent: 28% |
| Signs, Seating, Equipment, and Décor | $325,000 | $1,550,000 |
| Opening Inventory | $10,000 | $39,000 |
| Miscellaneous Opening Expenses | $46,500 | $58,195 |
| Travel and Living Expenses While Training | $3,000 | $37,100 |
| Additional Funds – 3 months | $80,000 | $355,000 |
| ESTIMATED TOTAL* | $464,500 | $2,313,295 |
The franchise agreement term is 20 years which is renewable upon fulfilment of operating conditions over the past years of operation.
How To Finance Your McDonald’s Franchise
McDonald’s has established relationships with third-party companies that offer financing to cover equipment costs for new franchises. Although you are expected to pay at least 40% of the total cost, McDonald’s partnerships with financial services firms will help finance the remaining.
If you are buying an existing franchise, McDonald’s requires that you have at least 25% of the purchase price of the franchise in cash. The remaining debt can be financed over the next seven years with a financial services firm based on agreements and company policies.
McDonald’s Franchise Support System
You will get great brand support as a franchisee at McDonald’s, including training staff members, and business and marketing support. Here’s the breakdown of its training framework:
- On-The-Job Training: 500 hours (minimum)
- Classroom Training: 72 hours
- Further Training: Available at local McDonald’s restaurants
The ongoing business support McDonald’s offers includes co-op purchases, business meetings and conventions, newsletters, toll-free lines, online support, grand opening, site selection, and proprietary software. McDonald’s also offers marketing support such as loyalty programs, email marketing, SEO, regional advertising, ad templates, website development, and social media advertising.
Advantage and Disadvantages of Buying a McDonald’s Franchise
These are some of the benefits of buying a McDonald’s franchise:
McDonald’s Brand and Customer Base
McDonald’s trademarks are recognized in the US, giving your new business a huge boost. There is also an established demand in the US and worldwide for McDonald’s menu favorites, including the Big Mac, Filet-O-Fish, and the Egg McMuffin sandwich. These food items, which have been developed over the years by the company and its operators, will sustain your new franchise business in the long term.
Ongoing Business Support
McDonald’s offers you initial training and continuing support for your new franchise. The regional offices available in the US and worldwide also help support a collaborative business environment in all McDonald’s franchises.
Retain Business Ownership Rights
McDonald’s support, and training system do not eliminate your ability to run your business on your terms. You reserve the right to run your business autonomously after the initial training process. You only need to use the available support system at McDonald’s.
Disadvantages of a McDonald’s Franchise
Mature Brand
McDonald’s is a very old brand that is constantly having to reinvent itself to try and keep up with today’s consumer. Additionally, there isn’t the long runway needed for an investor to build wealth with a mature brand that there is with an emerging concept.
Saturated Market
McDonald’s are everywhere. It is going to be hard to find a prime territory to locate your franchise.
Secondary Purchase
It is hard for new investors to get a new franchise. Most McDonald opportunities are to buy an existing franchise. If that location was creating amazing ROI for its owner why would they be selling it?
Conclusion:
While the allure of owning an iconic McDonald’s restaurant might be strong, wise investors will explore other opportunities with newer emerging brands to see if there is more upside in these new concepts. Fransmart, the leading franchise development firm for emerging brands, can help you evaluate a McDonald’s franchise against some of the hottest new brands available for franchise today.