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You're done with the rat race and ready to start living your dream, owning your very own McDonald's franchise.
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You're done with the rat race and ready to start living your dream, owning your very own McDonald's franchise.
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Not only will you be your own boss, dishing out Happy Meals and Big Macs to all the Mickey D fans, but you'll have all the fries you could want right within reach.
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What could go wrong?
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Well, for one thing, opening a McDonald's franchise costs money.
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A lot of money.
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McDonald's is one of the biggest chains in the world, with over 37,000 stores across 100 countries serving a shocking 69 million customers a day.
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Not only are they the biggest name in most fast food countries, but they can be found anywhere people are passing by- in malls, train stations, airports, and office buildings.
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They are even the second biggest private employer in the world, with over a million and a half people wearing that distinctive uniform.
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They have a brand and an image to preserve, and that means joining the family isn't going to be easy.
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From the start, McDonald's wants to make sure you're going to be able to carry the costs of a franchise.
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With a franchise, you own the restaurant
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and can make your own decisions as long as you abide by some basic regulations for representing the larger corporation.
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So you won't be answering to a boss on the reg, but they want to make sure you'll represent them well.
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That means no one who's going to go bankrupt in a few months, which is why the door has a pretty big entry fee.
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Before McDonald's will even consider you for a franchise, they're going to want to do a deep dive into your personal finances.
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If you have less than half a million dollars of personal resources, you probably shouldn't even apply.
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Although there are limited opportunities if you have a good argument for an alternative, There's a good reason why McDonald's wants to know your resources before you start.
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They want to make sure you can afford the down payment.
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And that's where your first big choice comes in.
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Do you want to build the new McDonald's from scratch?
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This will take more resources, including retrofitting an existing building with all the usual McDonald's treats and tricks you love, and the costs will vary.
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Turning a former Burger King into a McDonald's will take less resources than turning a bank
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or a shoe store into a fast food restaurant, but the company will generally want 40% of the total cost paid up front before they break ground.
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But if resources are a little tight, there's another option.
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Do you have an old McDonald's in your neighborhood?
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Did those old arches haunt your memory?
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Calling back to when you could get your McNugget fix in a five minute walk?
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If you take over an existing restaurant that's still functioning or recently closed, you can get a discount on the down payment.
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Only 25%.
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Is that a good buy?
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It depends on why the restaurant closed.
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If it fell prey to a recession, go ahead.
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If it went viral for that iconic Hashbrown Rat video on social media, it might be more trouble than it's worth.
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But the payments don't stop there.
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McDonald's has to get something out of the deal, so once you sign the contract and open your restaurant, you'll be paying them going forward in two ways.
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You'll be responsible for a 4% service fee based on your restaurant's sales performance, as well as rent.
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Rent is judged as a flat percentage of your sales, and these two fees usually don't change over the course of your contract, so make sure it's all baked into all your plans.
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At least once that's taken care of, you're cleared for takeoff, right?
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Not quite.
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Running a McDonald's franchise is a lucrative business.
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The average gross profit in the United States is around 1.8 million, which means there are a lot of people ready to get their McMuffin fix every morning.
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But with great profits come great responsibility, and running a McDonald's franchise comes with a whole lot of hidden costs
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that can take even the most successful franchise owner by surprise.
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And it starts before you open your doors.
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The startup cost of a McDonald's franchise is high, averaging just under a million on the low end and over two million on the high end.
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This depends on what kind of facility you're taking over, what size the restaurant is, and how much you have to build from scratch.
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McDonald's likes things standardized, so even an already equipped restaurant will have to make sure everything about it fits the parent company's standards, and that includes its franchisees.
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Do you wish you could go back to school?
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McDonald's will make that dream come true, but you won't be attending frat parties before Before the Golden
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Arches will trust you with the keys to one of their franchises, they're going to put you through training.
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All franchisees are required to complete a formal training program
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that takes about 12-18 months part-time before they're allowed to sign the contract.
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And you're not the only thing that will want to whip into shape.
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Before a new McDonald's will open, the company will want to make sure every part of the building is up to par.
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That includes the kitchen equipment, which has to be configured specifically for the company, the signs outside, and even the landscaping.
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After all, no one's going to want to go to a McDonald's that has shabby grass, right?
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Well maybe, who looks at the grass when they're on a McNuggets run?
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But there's one area of construction where McDonald's is more particular than ever.
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The kitchen is a well-oiled McDonald's machine.
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The company only sells a limited number of items on its tight menu, usually old favorites.
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New items come and go, but they don't always stay, as anyone who loved those short-lived fish tenders knows all too well.
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But with a limited roster, the kitchen is designed to cook them to perfection in short order.
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That's why McDonald's will want to make sure any franchisee has the proper grill that cooks those burgers at the right temperature, a fryer that can handle the capacity of all those fries and nuggets,
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and a drink machine that'll keep pumping out the coke for thirsty diners.
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But at least there's one thing we know about McDonald's- everything stays the same, right?
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Wrong!
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And that's where the biggest hidden costs of owning a McDonald's franchise come in.
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Because like any company, McDonald's is constantly experimenting.
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Sometimes they're introducing a new sandwich or flavored nugget.
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Sometimes they're completely overhauling their beverage program.
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Sometimes they're experimenting with faster digital-era ways to order, and when they hit upon an invention they like, they want it to be reflected across the line so when people go into a McDonald's anywhere,
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they can expect the newest and best.
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And that means it's time to upgrade across the board.
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And guess who pays those upgrade fees?
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This has happened many times over the years, with one of the most significant upgrades being the introduction of the McCafe espresso machines.
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This was McDonald's attempt to compete with high-end coffee shops like Starbucks.
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Suddenly, you didn't have to settle for a standard hot cup of McDonald's coffee with your McMuffin.
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You could have a refreshing iced coffee or a frothy sweet drink, and all it cost was a whopping $13,000 for each franchise
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owner to bring in one of the most advanced coffee-making machines around.
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Even smaller charges can add up.
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Remember when McDonald's introduced those tasty little muffins?
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Those required their own equipment, which cost each franchise owner over $4,000.
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But even changes that don't seem to require new equipment can add up.
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Every McDonald's fan around celebrated when All-Day Breakfast was announced.
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Finally, those dreams of having a sandwich made of McNuggets between hash brown patties could come true.
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But while all equipment for both breakfast and lunch was already there, having them coexist meant some changes.
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All-Day Breakfast menus meant more capacity was needed to prepare both at the same time, and that took some retrofitting of existing kitchens.
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Luckily, franchisees only put in about $500 to those changes, but some older and smaller McDonald's wound up shelling out over 5,000.
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Those were some costly hash browns.
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But the biggest costs come upgrade time or when things get digital.
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Remember walking into your local McDonald's and thinking it suddenly looked futuristic?
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The old paperboard menus were replaced with fancy digital menus
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that changed automatically and would even switch over the second it turned from breakfast to lunch.
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Well those didn't come cheap, and usually came as part of a larger interior makeover to make the restaurant look more modern.
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This fancy new menu came with a massive price tag of over half a million dollars, a major investment for even the most successful McDonald's franchise.
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And then there's those notorious ice cream machines.
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You know how you can never seem to get McDonald's ice cream when you walk in?
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The machine is always broken.
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The machines require a nightly cleaning cycle, and if they break down, they can only be repaired by a technician sent by corporate, so the costs of those machines can add up quickly.
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And recent events have made some of those upgrades more urgent.
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With the pandemic of 2020 making many people minimize physical contact and prefer contactless payment methods, many McDonald's introduced the Create Your Own Taste kiosks.
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These digital tools not only let people order and customize their food independently, they meant you could get your food without ever having to interact with a worker until your bag came out.
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The kiosks got rave reviews, except for those who had to get their grandkids to order for them.
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But these high-tech devices didn't come with a light price tag, costing a whopping $130,000 per franchise.
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Which raises the question, is this still a sustainable business model?
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The costs can add up quickly for franchises, and while restaurants are technically not Not required to make upgrades when the company offers them, that's a double-edged sword.
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Older restaurants usually find upgrades are more expensive, but their restaurants are also the most likely to be deemed no longer up to par by the parent company.
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And if McDonald's feels the store isn't representing them well, they can decline to renew their franchise and essentially force them out of business, often handing it over to a new franchisee.
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But for many, the hefty price tag of getting in the door is worth it.
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McDonald's has a reputation for being an expensive franchise to open, but studies indicate that But it's not out of line with some of the other top fast food joints.
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Taco Bell and KFC all have similar high rates and require similar specialty equipment.
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The outlier?
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Subway.
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But the famous sandwich shop often works out of smaller spaces and doesn't offer as big a variety of food as McDonald's.
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No deep fryer needed to make subs...yet.
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And despite the high price tag, it's not impossible to make a profit.
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So how much of McDonald's franchisees' gross profits winds up going back to the company?
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The average franchisee pays between 8.5-12% in rent and other fees every month, and that doesn't account for upgrades, which are unpredictable and can show up at any time.
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But most McDonald's around the country are franchises, and the company shows no sign of slowing down.
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That means that if you have the resources and open up a franchise, some savvy business sense is likely to leave you with a pocket full of money for all those McNuggets you want.
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For more of the secrets of the fast food world, check out This Fast Food Item Has Over 1500 Calories, Worst Fast Food Items You Can Order.
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watch What Will We Eat In The Future for a look ahead!
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