McDonald’s has an estimated 38,000 restaurants in more than 100 countries, 93% of which are franchise operations. In other words, many entrepreneurs choose to make a living under the shadow of the ubiquitous Golden Arches. McDonald’s (MCD) is a powerful brand, with its 澳洲幸运5官方开奖结果体彩网:franchises earning median annual sales of nearly $4 million. Owning one of 💮them can be profitable for both ꦿthe owner and McDonald’s when properly managed.

Prospective franchise owners are well-advised to get their financial ducks in a row before applying to launch a new McDonald’s franchise or buy an existing restaurant. For a traditional franchise, the total investment to get everything up and running and ready for business can range from $1.47 million to $2.64 million, according to 2024 documents. Settin๊g up satellite shops and locations in small towns🌳 generally costs less.

Initial Costs

The size of a 澳洲幸运5官方开奖结果体彩网:franchisee's invest🤡ment depends on whether 🌟they purchase an existing franchise (most new franchisees take this route) or start a location from scratch.

McDonald's is unique in that it owns 57% of the land on which its restaurants sit and 80% of the buildings. The rest it leases.

Buying an Existing Franchise

The cost of buying an existing franchise is based on the location’s profitability, renovation needs, and sales volume. In short, franchise prices vary. You could pay anywhere from $522,500 at the very minimum to upwards of $2.6 million.

Some existing franchises come on the market as a result of poor performance. For those operations, the price includes McDonald’s planned 澳洲幸运5官方开奖结果体彩网:marketing costs to breathe life back into the location. The amount of competition in an area, including other McDonald’s franchises and 澳洲幸运5官方开奖结果体彩网:competitor rest🍷aurants, also plays a role i⛄n an existing franchise's price.

McDonald’s requires prospective buyers to have 25% of the purchase price of an existing franchise in non-borrowed cash. Buyers can borrow the remaining money of the purchase price from lenders. The new owner must pay down the debt over seven years. In rare cases, McDonald's adjusts prospective owner qualifying standards for franchises in urban and rural areas.

O🌜ther costs to acquire an existing f🌄ranchise include:

• One-time $45,000 franchise fee paid to McDonald's.
• Three months' rent upfront.
• Remodeling costs based on need.
• Open inventory: $14,000 to $39,000.
• Misc. opening expenses: $52,500 to $64,000.
• Travel and living expenses while traveling: $3,000 to $40,000.
• Additional funds for three months: $80,000 to $426,000.
  
  

Pros and Cons of Acquiri𓆏ng an Existing Franchise

An existing franchise is the most popular route, but isn't without risks.

New Franchise

In some cases, McDonald’s approves the opening of new franchises in regions where the company wishes to enter the market, which is alsꩵo considered buying a franchise. Candidates who are approved to open new locations are typically existing franchisees with experience owning and operating a McDonald’s restaurant.

Those approved to launch new McDonald’s franchises can expect to shell out up to $2,642,000 to get the restaurant up and running. New franchise owners must pay 40% of their investment costs in non-borrowed funds but can finance the remaining costs through various financial services firms with which McDonald's has established relationships.

Costs are similar to thജose for an acquired ex෴isting franchise but higher:

• One-time $45,000 franchise fee paid to McDonald's
• Base rent of $0 to $313,000 for the first three months
• Signs, seating, equipment, and decor: $375,000 to $1,715,000
• Open inventory: $14,000 to $39,000
• Miscellaneous opening expenses: $52,500 to $64,000
• Travel and living expenses while traveling: $3,000 to $40,000
• Additional funds for three months: $80,000 to $426,000
  

Ongoing Costs

Franchise owners also pay ongoing fees to McDonald’s. They must pay a monthly royalty fee, which equals 4% or 5% of gross sales, as well as a monthly base rent and/or rent that is a percentage of monthly 澳洲幸运5官方开奖结果体彩网:gross sales. Base rents vary from $0 to $313,000, whereas percentage rates range from 0% to 28%.

There are other expenses, too, beyond operating the restaurant. They include contributing to advertising and marketing funds, which can total around 4% of gross sales, and potentially paying for technology support, training programs, and other support services provided by McDonald’s.

Loans to help buy an existing McDonald’s franchise or build a new one also represent an additional cost. Buyer༺s can shop around to get the best interest rates oꦦn loans. Some lenders specialize in franchise loans and offer repayment terms longer than seven years, depending on how the owner plans to use the money.

Industry analysts suggest that McDonald's franchisees pay about 82% of store revenue to McDonald's each year.

How to Finance a McDonald’s Franchise

Although McDonald's does not provide financing, the company does have financing agreements with several banks. Depending on your initial position as a franchisee, you may need to borrow funds to:

• Acquire a franchise.
• Pay the initial three months' rent in advance—McDonald's buys or leases the land and builds the restaurant.
• Remodel an existing location.
• Purchase equipment.
• Other initial costs.

Keep in mind that you must be prepared to pay 25% down on the 澳洲幸运5官方开奖结果体彩网:acquisition of an existing franchise or 40% down on the costs of a new location.

Is Buying a McDonald’s Franchise Worth It?

The median annual sales of a McDonald's location in 2023 was $3,837,000, with hands-on franchisees left with an estimated earnings before interest, taxes, depr൲eciation, and amortization (EBITDA) of roughly $460,000. The actual take-home pay of a McDonald's owner is less, meaning it would take a franchisee quite a few years to recover their investment.

Owning a McDonald's franchise is not for the faint of heart or wallet. With about 38,000 global locations, the company is one of the strongest, most well-positioned franchise operations of all time. The company has a reputation for 澳洲幸运5官方开奖结果体彩网:serving fast food cheaply. However, the price of admission is steep in dollars and determination💞.

Your initial investment will likely be more than $1 million, possibly more than $2 million, and your willingness to follow what the company calls the McDonald's Way is essential. Entrepreneurs often question the way things are. McDonald's has room for that, but not before you learn and adhere to what's been tried and found true.

The Bottom Line

If you can shoulder the investment costs and live with a rigid corporate structure, the relatively low risk and high-profit potential might make a McDonald's franchise a good move for you.