How Much McDonald's Franchise Owners Really Make Per Year
There's no question about it — McDonald's is the most successful restaurant in the history of the world. The company isn't worth millions, but billions — $148.45 billion to be exact, and that number basically climbs up daily (via Macrotrends). According to McDonald's website, their fast food burger joints are located on every continent in the world except Antarctica, and the brand is constantly striving to evolve its menu.
Ever since Ray Kroc took the franchise concept and applied it to McDonald's, the brand has been growing like hotcakes and there are more McDonald's franchises in North America than anywhere else in the world (via Statista). While opening a McDonald's is not for those with a light wallet, the payoff can be pretty good, and franchise owners — and McDonald's – are making bank with each restaurant.
Franchise owners make a good income
According to Business Insider, the average McDonald's restaurant takes in around $2.7 million a year in sales. That may not be quite as high as Chick-fil-A or Panera, but it's still pretty good. Considering that there are far more McDonald's scattered across the planet than either Chick-fil-A or Panera, it's easy to see why McDonald's is such a rich company.
Some McDonald's franchise owners are naturally going to make more than others, but most franchise owners still pull in an estimated yearly profit of roughly $150,000 (via Fox Business). A profit of $150,000 after $2.7 million in sales isn't even 6 percent, but after food cost, supplies, crew payroll, and about a dozen other costs handed down by corporate, that's what franchisees are left with (via Bloomberg).
Franchise owners can turn to McDonald's corporate for guidance, but getting the stamp of approval to open one is the real difficulty.
Buying a McDonald's franchise cost big bucks
Buying into a McDonald's franchise isn't cheap, and if prospective franchisees want to get a piece of the Mickey D's pie, they'll have to bring some heavy coin to the table. According to Business Insider, the initial investment is between $1 million and $2.2 million.
That price tag is pretty broad, but McDonald's notes that these costs are based on the restaurant's location and size. Even the landscaping factors in. Long story short, it's going to cost a lot more to buy a McDonald's franchise in San Francisco than it is in Saginaw, Michigan.
Oh, and if you're thinking about buying a franchise, keep in mind that 40 percent of that initial investment must be cash or non-borrowed assets. Whether it's McDonald's, Wendy's, or Five Guys, fast food franchise owners do pretty well — at least once they get past that initial investment hurdle.
The franchise business is incredibly profitable for McDonald's
Opening a McDonald's franchise is anything but easy unless you have piles and piles of money to burn. That said, McDonald's would like to get as many franchise owners as possible. The franchise system has been immensely popular for the Golden Arches and is actually how they make a significant portion of their profit. That's right — McNuggets aren't the actual building blocks of this billion-dollar company.
So while McDonald's franchise owners can make a six-figure salary through their restaurant, McDonald's is making even more. It all starts with the $45,000 franchise fee that franchisees pay. Then, there's the never-ending monthly service fee that takes 4 percent of a location's gross sales. After that, franchise owners pay a rental fee each month which works out to be an average of around 10.7 percent of sales. So basically, McDonald's franchise owners are forking over 15 percent of their sales every month to the big Golden Arches machine.
And this system is making bank for McDonald's. So much so that only around 5 percent of the McDonald's locations on the planet are company-owned (via Reader's Digest). The rest are franchise operations that are paid for upfront on the business owner's own dime. McDonald's simply keeps those McNuggets and french fries stocked up while the cash rolls in.
McDonald's probably wouldn't work without franchise owners
While it's certainly obvious that McDonald's makes a killing through the franchise system, this is actually out of necessity — at least for the global growth that McDonald's has achieved. According to Reader's Digest (via The Wall Street Journal), McDonald's raked in 27.4 billion in revenue in 2014, and how that breaks down is pretty telling. As for that revenue, $9.2 billion of it was from franchised locations and $18.2 was attributed to company-owned locations. On the surface, it looks like the company-owned locations are the real money-makers, but that's not the case.
The cost of running a business, especially a restaurant, can really eat into its profits. At the end of the day, McDonald's only keeps around 16 percent of the revenue its company-owned stores make, but it keeps 82 percent of the revenue franchisees pay out to it. All that adds up to mega-bucks for the company, and while franchise owners do make some coin, the business itself is who really wins.