Franchise: McDonald’s
Franchising Since: 1955
Headquarters: Oak Brook, Ill.
Number of Units: 36,368
About the Franchise
McDonald’s is one of the most identifiable brands in the entire world. Since 1940, it has grown into the largest chain of hamburger fast-food restaurants on the planet, serving some 68 million customers every day in 119 countries.
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McDonald’s also continues to be recognized as a premier franchising company around the world. The power of its franchisees, suppliers and employees working together toward a common goal is what has made McDonald’s the world’s leading quick-service restaurant brand: franchisees bring the spirit of entrepreneurship and commitment to communities; suppliers are dedicated to highest levels of quality and safety; and the company facilitates learning and sharing across McDonald’s more than 36,000 restaurants.
Financial Assistance
Typically, no financing arrangements are offered by McDonald’s. McDonald’s issues an Operator’s Lease for each site owned or leased by McDonald’s. The Operator’s Lease is a standard commercial lease under which the franchisee pays rent to McDonald’s for use of the premises. The Operator’s Lease does not contain any financing terms. Loans to certain franchisees for the purchase of restaurant businesses sold by the McOpCo companies and for other reasons are made by a third party lender, Lake Forest Bank and Trust Company.
Term of Agreement and Renewal
Traditional term is generally 20 years. The Satellite term varies, STO and STR term length is generally 10 years, and the BFL term length is generally three years. The franchisee is given no right to renew or extend the franchise after the term of the contract.
Breakdown of Costs
The following information is compiled from the Franchise Disclosure Document of McDonald’s (2015). The FDD will provide you with in-depth information regarding the costs and expenses you can plan to incur when developing a McDonald’s franchise.
Initial Franchise Fee: $45,000
Franchisees who rebuild or relocate their restaurants will pay the initial franchise fee on the earlier of: (a) the first of the month after the seventh year after the opening of the rebuilt or relocated restaurant; or (b) the end of the previous franchise term.
Real Estate and Building — 3 Months’ Base Rent: $450 to $198,000
McDonald’s acquires real estate and building and franchises the right to operate at the location. Amounts shown as rent are part of the overall economic package of fees described in Item 6 of the FDD. Special site restaurants may be higher.
Real Estate and Building — 3 Months’ Percentage Rent: 0% to 40.50%
Signs, Seating, Equipment and Décor: $691,000 to $1,529,000
Varies due to size of building, location, estimated sales volume, transportation charges, and sales tax. If you request changes to the building, payment for the requested changes may be required before signing the Franchise Agreement. The cost of the basic Store System 6.5 computer platform ranges from $55,000 to $65,000, which includes the POS, In Store Processor, Next Gen Cashless, computer hardware, software, and related equipment.
Opening Inventory: $20,000 to $35,000
Misc. Opening Expenses: $44,902 to $46,045
Travel and Living Expenses While Training: $3,000 to $35,000
McDonald’s operates Hamburger University, the international training center for the McDonald’s System. The content and duration of all operations courses, which are offered at various local sites, are revised and reconsidered from time to time to meet the needs of the franchisees. All courses and learning events are offered at frequent intervals and are designed to give franchisees specific skill sets in the various facets of the conduct of a McDonald’s restaurant. Training also occurs at a McDonald’s restaurant, including hands-on and self-directed learning, and is monitored by a McDonald’s business consultant (or other assigned person). Typically, the training takes place on a part-time basis and spans 9 to 24 months, but a 36-month training time is not uncommon.
Additional Funds — 3 Months: $185,000 to $329,000
You may or may not need capital to support ongoing expenses, such as employee wages, utilities, payroll taxes, legal and accounting fees, travel, advertising, promotion, outside services, linen, operating supplies, small equipment, maintenance and repair, office supplies, cash shortages, insurance, debt service, and non-product purchases, as well as additional opening capital for other variable costs. These figures are estimates and McDonald’s cannot guarantee that you will not have additional expenses starting the business.
TOTAL: $983, 352 to $2,217,045
These figures are estimates in setting up a McDonald’s franchise and operating it for three months. It is possible to exceed costs in any of the areas above.
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