How Much Does it Cost to Open a McDonald’s Franchise?

McDonalds

People drive by a McDonald’s store every day. Truth is, it is hard not to drive by a McDonald’s no matter where you are at in the country – or the world for that matter. They are a global institution of fast foodness. But who actually owns the one you see? It is one of the most franchised eateries in the world, currently second only to Chick-fil-A.

That makes McDonald’s one of the many small businesses that are responsible for employing the large majority of the nation’s workforce. But is it possible for you to get a financial bite of the burger yourself and own one? Here are the conditions you will have to meet and the other things you will be required to do.

First, to begin to be considered by the company for a franchise you have to have at least $750,000 in liquid assets. Think cash, but any financial instrument that can quickly be converted into cash will do also.

You may not have ever considered this, but your McDonald’s will have to be built. As with any business, the location is paramount, so the more expensive the property, the more it will cost you. Then there’s the landscaping, cost of those golden arches sign(s), and even the overlooked interior equipment such as the grills, fryers, etc. Estimated costs range from $950,000 to as much as $2 million. You don’t have to have that kind of cash starting up, but you’ll have to find a way to come up with about half and finance the rest. They will help you with the financing part.

Now the vast majority of McDonald’s stores do not have to be built from the ground up, as franchisees opt to buying an existing store, which makes a lot of financial sense. But there is likely to be some renovation costs to incur, including replacing the older kitchen equipment. All totaled, the startup expense for the used version will only require a 25% upfront investment.

If you were expecting to pay a franchise fee, you are right. That is $45,000. On top of that you will also be charged a monthly service fee of 4% of your store’s total gross sales. The service fee does not include the rent for the store, which again is determined by monthly sales figures. On average that ends up to be about 8 percent per store, but for some stores it will be 12% or more.

Now if you’re thinking how a store can earn a profit, the average McDonald’s makes more than $2.5 million a year in sales. Do the math, and after you get past that first year you can make a ton of money.

That’s the money part, which is out of reach for most people. But it’s not all about the money, and McDonald’s will also assess your ability to actually run the store. Having just graduated with a degree in Business Management will not be enough.

As with any business you need to have a business plan. You are expected to know how to construct one because you have previous business ownership or have years of experience managing departments in a corporate environment. That will come with knowing how to handle a large budget and general financial management.

Here’s an interesting tidbit: you will have to do the work of an employee in their Hamburger University School that can last as long as 18 months. That on the job training will likely be at a local McDonalds near you, so learn to smile the next time you encounter some older person taking your order.

Speaking of taking orders, excellent customer service skills are a must. Because you will be dealing with people at a variety of levels – manager, shift workers, and those problematic customers – you need to excel at problem solving and conflict resolution.

What this general list of franchisee requirements is about is that just because you win the lottery, you don’t necessarily qualify to invest in the golden arches. There are thousands of McDonald’s all around the world, and when you consider the millions of people that are served every day without incident (emphasis on “without incident”) you can see how that is possible. Other than the Hamburger University training period you may never actually see the owner in the store. But you can be sure that they are making a boatload of money because they have done what it takes to just have the opportunity to be a McDonald’s franchisee.

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