McDonald's Franchise Costs, Fees & Owner Salary (2023)

INVESTMENT

$521,000

-

$2,503,000

OPERATING PROFIT

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Emily

Updated

February 15, 2024

Is

McDonald's

a franchise?

Yes,
McDonald's
is a franchise and
currently
accepts
franchise
applications

McDonald's, the iconic fast-food brand known globally for its Golden Arches, was founded in 1940 by brothers Richard and Maurice McDonald in San Bernardino, California. Initially opened as a barbecue restaurant, it was reconfigured into a hamburger stand in 1948, employing a production line system.

The brand's significant franchising journey began in 1955 when Ray Kroc, a milkshake mixer salesman, opened the first franchise in Des Plaines, Illinois, and later acquired the company from the McDonald brothers, leading to its global expansion. Headquartered in Chicago, Illinois, McDonald's has grown into one of the world's largest chains of fast-food restaurants, serving approximately 68 million customers daily across 119 countries.

The brand is distinguished by its extensive menu that includes iconic items such as the Big Mac, Chicken McNuggets, and its world-famous fries, along with Happy Meals, various breakfast items, and more. McDonald's differentiates itself from competitors through its consistent focus on service speed, menu innovation, and global brand recognition.

The franchise model of McDonald's is highly sought after due to its proven system of success, comprehensive franchisee training, and strong corporate support, making it a leading choice for entrepreneurs looking to invest in the fast-food industry. The company places a strong emphasis on community involvement, sustainability, and innovation, continually adapting to consumer trends and preferences to maintain its market-leading position.

How many

McDonald's

franchises

are there?

In 2022, there were
14804
outlets in the United States, of which
12772
are franchises, and
2032
are corporate-owned.

What are the

McDonald's

franchise

fees?

Initial franchise fee

$45,000

Royalty fee

4.0%

Advertising fee

4.0%

Initial Franchise Fee ($45,000)
The initial franchise fee for a traditional McDonald's franchise is $45,000. This fee is due in full at the beginning of the new term franchise. The fee may be higher than $45,000 depending on the time the new term franchise begins. However, there are certain exceptions and variations to this fee based on the type of location and other factors. For instance:

  • Franchisees of Satellite locations are required to pay a $500 initial franchise fee upon opening of the Satellite.
  • Franchisees of STO and STR locations pay a $22,500 lump sum initial franchise fee.

Service Fee (4% of Gross Sales)
The service fee is a monthly fee based on the gross sales of the franchise. This fee is payable monthly on the 10th day of the next month.

Rent (Varies)
The rent varies and is payable on the 1st day of the month. The base rent and pass thru rent, if applicable, are both due on this date.

Advertising Fee (Varies)
Most franchisees participate in local advertising cooperatives and the national advertising fund (OPNAD). The contribution rates are established by the franchisees and, depending upon then-current advertising costs and needs, may or may not exceed the required 4% of Gross Sales. "Grand Opening" promotions are strongly recommended.

Technology Fees (Varies)
There are various technology fees associated with different software and platform maintenance, including Point of Sale (POS) software maintenance, digital technology software maintenance, kiosk technology software maintenance, and others. These fees cover the support, integration, and localization of the respective technologies.

How much does

it cost

to start a

McDonald's

franchise?

It costs between
$521,000
and
$2,503,000
to start a
McDonald's
franchise.

Starting a McDonald's franchise involves various costs, and the total investment range is estimated to be between $521,000 to $2,503,000. Below is a breakdown of the costs associated with starting a McDonald's franchise, as outlined in the FDD:

Type of Expenditure Amount
Initial Franchise Fee $45,000
Real Estate and Building – 3 Months’ rent $0 to $313,000
Signs, Seating, Equipment, and Decor $1,100,000 to $1,650,000
Opening Inventory $20,000 to $39,000
Miscellaneous Opening Expenses $51,000 to $62,000
Utilities $0 to $500
Travel and Living Expenses While Traveling $3,000 to $39,000
Additional Funds – 3 Months $250,000 to $355,000
Total $521,000 to $2,503,000

It's important to note that the real estate costs are a significant part of the total investment, and the costs can vary significantly based on the location and size of the restaurant.

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Does

McDonald's

provide

training

to its

franchisees?

Yes,
McDonald's
provides training to its franchisees.

McDonald's provides training for franchisees through a structured program. Here are the key points regarding the training provided:

  1. Hamburger University:
    • McDonald's operates Hamburger University (HU), which is the international training center for the McDonald's System.
    • Franchisees and their managers, both present and future, are required to enroll at Hamburger University or at other training centers as designated by McDonald's from time to time.
    • McDonald's bears the cost of maintaining Hamburger University and any other training centers, including overhead costs of training, staff salaries, materials, and all technical training tools.
  2. Basic and Advanced Instruction:
    • McDonald's provides both basic and advanced instruction for the operation of a McDonald's System restaurant to franchisees.
    • The training covers various facets of conducting a McDonald's restaurant, including guest satisfaction, operational standards, financial controls, and leading people.
  3. Restaurant Leadership Curriculum:
    • The basic minimum core training, known as the Restaurant Leadership curriculum, must be completed by franchisees to be qualified to operate a McDonald's restaurant.
    • Existing franchisees are not required to complete the curriculum to acquire an additional restaurant.

Does

McDonald's

provides

territory

protection?

Franchisees are granted the limited right to operate a McDonald's Restaurant at a specific location designated by McDonald's. The rights granted are limited to the franchised business location and any additional business locations designated under an Additional Business Amendment to the Franchise Agreement.

If McDonald's offers the opportunity to operate a food truck as an extension of an existing McDonald's Restaurant location, the food truck can only be used and operated at locations registered and approved by McDonald's.

This means that while franchisees have a specific location to operate, they do not have a broader exclusive territory, and their operations are confined to the designated and approved locations.

Can a

McDonald's

franchise

be run as

a passive

investment?

McDonald's expects the franchisee to be actively involved in the operation of the restaurant. The franchisee is required to personally devote full time and best efforts to the operation of the restaurant business.

This requirement is highlighted in the new term franchise ownership section, where it is stated that the franchisee will be the "approved operator(s)" of the restaurant and is expected to personally devote full time and best efforts to the operation of the restaurant business.

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