McDonald’s franchise

Hassle-free business loans to start your McDonald’s franchise.

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 the US, 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.

McDonald’s business details

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:

US stores: Approximately 22,000
Required Investor net worth: $500,000
Required investor liquid cash: $500,000
Min. investment: $1,300,000
Max. investment: +$2,400,000
Standard franchise term: 10 years

Can I start a McDonald’s franchise?

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.

How much does a McDonald’s franchise cost?

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:

Royalty fee: 4% of gross revenues
Brand marketing and promotion fee: 4% of gross revenues
Location rent: Unlike most other franchises, McDonald’s owns the land and buildings at its locations and franchisees pay rent that can be based on a percentage of sales or as a fixed amount. Percentage rents are 31.75% of sales. Fixed rents are typically $100,000 to $225,000 per month.

Estimated key costs to open a McDonald’s franchise (new business):

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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Are McDonald’s franchises profitable?

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.

What is the failure rate for a McDonald’s franchise?

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, a record 1,750 US restaurants changed hands in 2021 and the number of US outlets continues to shrink even as the company grows in international markets. However, some sources give a failure rate of less than 0.5%, which is very low.

Why should you start a McDonalds franchise?

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.

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What are the franchise territory policies for McDonald’s?

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.

What franchise resources does McDonald’s offer?

McDonald’s support for franchisees includes:

Training: McDonald’s operates Hamburger University (HU), their international training center for restaurant owners. It takes approximately two years to complete all training plans, going from Shift Leader to Restaurant Leader. At the opening of the restaurant, a franchise business partner spends time with the franchisee to provide managerial assistance and refinement of previous training and instruction. Franchisees must complete the training program successfully before signing the Franchise Agreement or paying any money to McDonald’s. There are no further mandatory training requirements for franchisees.
Marketing support: McDonald’s helps its franchisees with national and local advertising and marketing support.
Third-party financing: McDonald’s provides no direct financial support for investors seeking franchise funding, but they have relationships with various third-party lenders. Alternatively, you could work with the many independent funders who provide business loans to franchise operators.
Technology and innovation: The company offers initial technology support and access to proprietary software. Franchisees must purchase all items of the computer system and any computer upgrades through McDonald’s.

What is the process for starting a McDonald’s franchise?

It starts with an application. Begin the process here.

Secure franchise funding with Swoop

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 the US. Just tell us what you need and leave the rest to us.

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Written by

Chris Godfrey

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 Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.

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Swoop requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

Franchise funding: https://swoopfunding.com/us/blog/funding-your-franchise-a-guide-for-franchisees/

Profitability: https://www.investopedia.com/articles/insights/072516/cost-buying-mcdonalds-franchise-mcd.asp

McDonald’s franchise application: https://www.mcdonalds.com/us/en-us/us-franchising.html

Territory: https://www.franchisedirect.com/foodfranchises/mcdonalds-franchise-07030/ufoc/

Failure rate: https://www.restaurantbusinessonline.com/financing/lot-mcdonalds-franchisees-left-system-last-year

Set-up costs: https://www.investopedia.com/articles/insights/072516/cost-buying-mcdonalds-franchise-mcd.asp

Burgers every year: https://muddyrivernews.com/opinion/daily-dirt-mcdonalds-sells-6-48-million-burgers-every-day/20230503080106/

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