An early McDonald's Photo

In Brief:

  • McDonald’s is one of the largest restaurant franchises in the world, and according to Forbes, one of the most valuable global brands in 2019.
  • The fast-food chain became an overnight sensation, and today has over 37,000 locations worldwide.
  •  Potential franchisees can look forward to a strong support system, major brand recognition, and an opportunity to give back to their communities.

McDonald’s Financial Summary

    • Initial Franchise Fee: $45,000
    • Startup Costs: $1,263,000 – $2,235,000
    • Royalty Fee: 4.0%
    • Revenue Range: $557,000 – $12,457,000

The Story Behind the Business

McDonald's Sign
Photo: Mike Mozart via Flickr/Creative Commons

McDonald’s is one of the best known fast food franchises in the entire world. In fact, it’s hard to find someone that doesn’t recognize the company’s signature golden arches. With locations in about 120 countries, serving 68 million customers each day,  it’s difficult to imagine the fast food chain starting from the ground up. Yet, that’s exactly how it all began.

The McDonald’s story begins with Ray Kroc, who, at the age of 52, created a seemingly overnight success. Jumping between different industries at a young age, Kroc went from being an ambulance driver to a piano player, paper cup salesman, and a multimixer salesman. It wasn’t until 1954, when visiting San Bernardino, California, that he happened upon the restaurant of Dick and Mac McDonald. The restaurant did not provide unlimited food options, focusing instead on burgers, fries, and beverages. This method allowed for the McDonald’s brothers to guarantee good quality and fast service.

Kroc saw the small restaurant as an opportunity to franchise and, in collaboration with the brothers, founded the McDonald’s System, Inc., the original McDonald’s franchise. Kroc later bought the exclusive rights to the restaurant’s name and production system.

The franchise grew quickly due to a simple vision that Kroc put forth to prospective franchisees. An impressive salesman, Kroc told franchisees that they would be working for themselves, not for the company, if they bought a McDonald’s location.

Today, McDonald’s has continued with Kroc’s franchising goals, consistently looking for new opportunities to grow. A top franchising company around the world, more than 90% of the restaurants are US owned and run by franchisees, according to the McDonald’s website.

Providing supportive training programs to all franchisees, McDonald’s features many success stories on its website. Franchisees like John Ebert and James Poore both worked in other industries before they decided to purchase a McDonald’s franchise. After they made this decision, however, they both began to develop their own success stories, reaping the most benefit and profit from the opportunity as possible.

Why Franchisees are “Lovin” McDonald’s

1. Fantastic Training Program

McDonald’s operates Hamburger University (HU), the international training center for the McDonald’s system. With up-to-date courses and manuals, HU ensures that all franchisees will leave the program with full knowledge of the McDonald’s operational system. All franchisees must complete the minimum core training in order to run their franchise location; this is only completed once the franchisee completes the Restaurant Department Management (RDM) curriculum.

The RDM curriculum is deployed through the company’s Learning Management System (LMS), which allows franchisees to track their progress through the course online. Franchisees are also assigned a coach that assists them in any matters related to the completion of the training.

2. A Great Support System

McDonald’s believes in being involved in a business for yourself, but not by yourself. They provide franchisees with the necessary tools to start and succeed in your business. This includes local and national support for all areas of operation, training, advertising, marketing, human resources, real estate, construction, purchasing, and equipment. Help is never far away and corporate responsiveness is key, which is why McDonald’s maintains regional offices throughout the U.S. Kroc emphasized the philosophy that McDonald’s foundation is a “three-legged stool”: one leg is the franchisees, the second is the suppliers, and the third, the employees.

3. Growing Success Stories

Ray Kroc’s overnight success story is inspiring, however, he describes as 30 years in the business being one “long, long night.” Franchises flourish because of the hard work and dedication of their franchisees. When owners and operators devote their full time and passion into their restaurant, they see prosperity over time. Since McDonald’s founding, franchisees have created some of the fast-food chain’s most famous menu items, like the Filet-O-Fish, Big Mac, and Egg McMuffin. Franchisees continue to be an innovative and crucial part of the McDonald’s team, proving that the franchise’s core principles – quality, service, cleanliness, and value – are effective.

4. Major Brand Recognition

McDonald’s has become a household name. It is known all over the world and Kroc’s legacy lives on through how the franchisees promote the brand. Customers know McDonald’s is the choice fast food restaurant for great tasting, affordable meals, as well as fantastic customer service.

5. Serving Smiles and Your Community

Kroc and McDonald’s serves smiles every day with their food and humanitarian actions. Since 1974, the Ronald McDonald House provides comfortable housing for families traveling far for medical care. The Ronald McDonald Care Mobile travels to communities where families and kids need medical, dental, and health care resources the most. Black & Positively Golden is their newest movement that promotes Black Excellence through education, empowerment, and entrepreneurship programs. As a franchisee, you will be making a tremendous difference in other people’s lives.

FDD Summary

Initial Franchise Fee: $22,500 – $45,000

According to Item 5 of the McDonald’s FDD, all franchisees must pay a $45,000 initial franchise fee when opening a restaurant. The fee can potentially be refunded if the construction of the location is not complete within one year of the Franchise Agreement signing. However, under other circumstances, the initial franchise fee is nonrefundable.

Monthly Royalty Fees: 4.0%

The royalty fee, or service fee, is to be paid on the 10th day of every month. This is a percentage out of the gross sales, which means all revenues from your sales based upon all business conducted at or from the restaurant, minus sales or use tax.

Estimated Initial Investment Costs: $448,000 – $2,235,000

Name of Fee Low High
Initial Franchise Fee $22,500 $45,000
Real Estate and Building (3 months rent) $60,000 $210,000
Signs, Seating, Equipment, and Decor $310,000 $1,500,000
Opening Inventory $10,000 $35,000
Miscellaneous Opening Expenses $45,000 $55,000
Travel and Living Expenses while training $3,000 $35,000
Additional Funds (3 months) $80,000 $355,000
Total $448,000 $2,235,000

Revenue Range: $557,000 – $12,457,000

This range is based on the achieved sales, profits, or earnings of some McDonald’s restaurant. However, this is only an estimate of how much an individual franchisee may make, but results may differ. There is no guarantee you will sell or earn this much.

McDonald’s offers entrepreneurs the opportunity to make significant capital in an industry that is in a constant state of growth. The startup costs may be high, but the potential revenue gain makes it completely worth it. Plus, McDonald’s will work with you to help you obtain your desired results. You as a franchisee will play a crucial role in the overall success of the McDonald’s brand.

Disclaimer: The above information was derived from the year 2019 FDD of McDonald’s. This data may not reflect the most current information. AskMrFranchise and affiliates are not responsible for any act or failure to act in reliance upon this report, article, data, and/or information. None of the information mentioned above should be used to substitute or replace consultation with legal or other professionals.

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