The big daddy of the franchise world, McDonald’s are the fast food chain that started it all and are one of the most successful restaurant businesses in the world. With an almost saturation presence on main streets and highways across Canada, it’s hard to go wrong with a McDonald’s franchise in your pocket – as long as those pockets run deep. Expect to pay anywhere from $1.3 to $2.4 million or more to get your new burger business cooking.
Launched in 1940 in San Bernadino, California, the McDonald’s Corporation is now headquartered in Chicago, Illinois and has offered franchises since 1955. Famous for pioneering the fast food concept with their mission of ‘order to delivery in three minutes or less’, McDonald’s has more than 39,000 restaurants globally and sells more than 2.3 billion burgers every year.
McDonald’s Restaurants at a glance:
You can if you have at least half a million dollars in liquid cash and the same again in net worth. The company also expects you to have at least 25% to 40% of the initial start-up costs in unborrowed funds. The most common way to acquire a McDonald’s is to buy an existing business, although the company will also allow new locations based on the number of existing fast food restaurants in the area and estimates of potential sales. Either way, the costs to join this franchise are still very high. There is also no option to run a McDonald’s as a passive investment – at least in the early years. The corporation expects their franchisees to be heavily involved in the business and on the shop floor almost every day.
If you can meet the steep financial and time requirements and you like the idea of owning a restaurant with massive customer attraction and relatively low financial risk, a McDonald’s franchise may be for you.
Opening a new McDonald’s franchise is not for the faint hearted. Expect to pay over $1million and up to $2,400,000 or more to get started and then send up to 82% of your franchise’s ongoing revenues back to the company in the shape of product purchases, fees, rent and other costs. Additionally, if you borrow funds to get your franchise started, you must pay the debt back within seven years. The one-time franchise fee is $45,000.
After opening, you are required to pay an array of ongoing fees and charges. They include:
| Key Costs Guide | Low | High |
|---|---|---|
| Franchise fee | $45,000 | $45,000 |
| Three month’s rent upfront | $313,000 | $700,000 |
| Interior build-out | $340,000 | $1,600,000 |
| Exterior signage | $1,000 | $20,000 |
| Miscellaneous operating expenses | $48,000 | $60,000 |
| Opening inventory | $10,000 | $40,000 |
| Travel and living expenses during training | $3,000 | $38,000 |
| Additional funds for three months | $80,000 | $355,000 |
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Yes. Median annual sales of a McDonald’s location in 2020 was $2,908,000, delivering an average profit margin of 10% and an estimated annual profit of $290,800 per location. With the typical investment of $1,800,000, it would take a franchisee 8.5 years to recover their investment. According to Glassdoor, an owner of a McDonald’s franchise makes between $92,000 and $171,000 annually.
It is difficult to obtain a true failure rate for McDonald’s franchises, as there appears to be a continual stream of new operators ready to take over struggling outlets. However, some sources give a failure rate of less than 0.5%, which is very low.
Guaranteed brand presence, major corporate support, low risk of failure and billions of products sold every year position McDonald’s as a solid performer in a very crowded market. Although start-up and operating costs are high and a major share of revenues ends up back with the company, there is still scope for good income for investors.
McDonald’s franchisees receive no designated territory. Their franchise agreement does not contain any right to exclude the location or development of future McDonald’s restaurants nearby. Franchisees may face competition from other McDonald’s franchisees, from outlets that McDonald’s directly owns, or from other channels of distribution or competitive brands that the company controls.
McDonald’s support for franchisees includes:
It starts with an application. Begin the process today.
Starting a new franchise can be an exciting opportunity, but it’s easy to get lost in a maze of business loan applications that can make funding your new McDonald’s restaurant like too much hard work. Instead, cut out the hassle and cut to the chase. Swoop has the best lenders for the best franchises across Canada. Just tell us what you need and leave the rest to us.
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Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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