Is McDonald’s a good franchise to own? How much does it cost and how much money can you make if you own a McDonald’s franchise? Taken from the McDonald’s 2017 franchise disclosure documents, the total cost to buy your own McDonald’s franchise is going to range from just over 1 million dollars to about 2.2 million dollars. Many people see the franchise fee advertised online for $45,000 dollars and they think that is all that you need to buy a McDonald’s franchise; well that is not the case at all. You actually need a minimum of $750,000 dollars in liquid capital, which is a requirement in order to qualify to buy a McDonald’s franchise. You are also required to have a very strong business background, which preferably is in a managerial or supervisory, as you are typically going to be managing anywhere between 50 to 125 employees in your store depending on the size.
If you think that McDonald’s franchise is a sit, back and relax while your store makes you money type of business, think again. Taken from their website McDonald’s requires you to actively participate in the business and will not sell a franchise to investors, investor groups or corporations. After buying a location, some of the ongoing fees for your McDonald’s will include a service fee, which is equal to about 4% of your gross sale, advertising, and promotion fee of an equal amount of 4%, which can vary depending on if you are part of any local cohorts. There are a lot of other small fees as there are always are in franchising such as licensing and software and of course monthly rent and staffing. Your monthly base rent will vary depending on the total amount the McDonald’s had to invest in the acquisition and development of the building and the land.
The big question that everyone always wants to know is how much money can you make owning a McDonald’s franchise? Profitability usually varies from unit to unit. How successful the unit is depends on the location and how long the restaurant has been in business. A snapshot sourced from Janney Capital Markets gives the approximation of what a day in the life of a newer franchise owner looks like. The snapshot gives the potential of a McDonald’s financial scenario, with a net sale of 2.7 million. Once you backup your payroll, your taxes, your advertising fee, maintenance, utilities, supplies, rent insurance and a few other expenses you will remain with just about 150,000 dollars.
McDonald’s lately also had challenges financially as a corporation leading to a closure of hundreds of US-based stores and hundreds more in other countries. It is interesting to note that a recent survey of McDonald’s franchisees indicates that many are not happy with how the company is being run. It appears that the culture at McDonald’s is also on the decline not only in the financial scenario. So is a McDonald’s franchise really a good investment? The trends indicate that the opportunity is nowhere near the peak as back in the 80s and the 90s. It will definitely be prudent to look at several competing franchises and emerging franchises to compare your options, and see which one might be the best fit. If you are looking to own a McDonald’s franchise, one thing that is certain, is that McDonald’s is not a short-term success, you would have to commit to opening more stores within a certain time frame. It would be easy to say that it is not a profitable investment to own especially if you are focused on making profits quickly and within a short time, probably it is the kind of investment that your kids will enjoy but not you as the investor.
