Why You Probably Wouldn't Be Able To Start Your Own McDonald's Franchise
The ubiquity of McDonald's may cause some to want a piece of the profits. According to QSR, the average sales of a McDonald's restaurant dangles a bit below $2.7 million, so of course, we would want in. However, the likelihood that any of us would actually be in the position to own and operate a McDonald's restaurant is slim.
The issue is one of having enough money in the first place that such revenue may lose some of its luster. According to the McDonald's website, the investment to launch a franchise falls between $1,008,000 and $2,214,080, which includes the $45,000 initial franchise fee. Furthermore, applicants must have at least $500,000 liquid assets; that is to say, assets that could be converted to cash with ease. However, McDonald's admits that the total amount needed could be higher in some cases.
Other costs are detailed in the document "Your Path to Becoming a McDonald's Franchisee." In addition to the initial fee, there is the $20,000 – $35,000 for opening inventory, the $900,000 – $1,500,000 for signs, seating, and decor, and $45,000 – $55,000 for miscellaneous opening expenses. For these costs, McDonald's requires at least 25 percent in cash as a down payment. The rest will be financed for seven years, though the document notes that you would experience the favoritism McDonald's brand enjoys when you turn to the nation's leading lending services. If you feel financially secure enough to invest in such a venture, you probably have better options available.
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"As a fast-food franchise owner, you're often fighting a war for pennies," Kenny Rose, CEO of Semfia, explained to The Hustle. In an estimated financial breakdown of a McDonald's location, the roughly $2.7 million in sales can be reduced to a total operating income of $153,900 (which could allow you to make a good income). This is in part due to the daily costs accrued by any food venture, which include ordering food, employee pay, and utilities.
However, a good amount of the surprise costs can be found in the franchisor-franchisee relationship. Namely, the franchisee can "own" a pre-established brand while the franchisor misses out on having to pay the above-mentioned operating costs. Yet, because McDonald's owns the McDonald's brand, they claim a 4 percent royalty, which would not bankrupt you but puts a dent in your bottom line in an industry built upon bare-bones costs. Also, as listed in the McDonald's franchisee document, franchisees are expected to pay monthly contributions for advertising and promotions as well as technologies for newer products, whether the franchisees want them or not. Then, because McDonald's owns the land upon which your franchise is built, they can charge rent, which The Hustle estimated at $391,000 annually. This is why outlets like Quartz describe McDonald's business structure not as a burger empire but a real estate one with a rentier's income.
So, even if you accumulate the capital to open a McDonald's franchise, you will still be under the franchisor's thumb.