How Much It Cost To Buy A Mcdonalds Franchise
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How Much It Cost To Buy A Mcdonalds Franchise
That said, buying a McDonald's franchise might not be for everyone. Depending on your budget (costs millions to become a frachisee), location and priorities, it may not be for you. (If you're not sure what you might want to buy, we have a quick survey here that can help you find a good franchise fit.)
Okay, we're probably going to lose a few people here. The franchise fee of $45,000 doesn't sound too bad, but when you add in location, equipment and more, the initial investment in a McDonald's costs at least $1 million and as much as $2.2 million.
You'll need to make an initial down payment of 40 percent of the total cost when you purchase a new restaurant, or 25 percent for an existing one. That's a lot of dough, and it's why McDonald's requires franchisees to have a minimum of $500,000 in non-borrowed, liquid resources.
That seven-figure price tag is no joke, but it's comparable to or even more affordable than similarly successful burger franchises. For example, a Sonic Drive-In costs $1 million to $2.4 million and a Culver's costs $1.8 million to $4.3 million.
With more than 37,000 restaurants worldwide, McDonald's remains a popular and potentially lucrative option for some individuals looking to break into the fast-food industry. However, with falling franchise profits and high out of pocket costs, starting a McDonald's franchise is not easy.
Other costs include the $45,000 franchise fee, as well as construction and equipment related expenses. In total, McDonald's estimates that the average total startup investment ranges from $1,013,000 to $2,185,000, with franchisees netting an estimated annual profit of roughly $150,000.
For this reason, the estimated cost of a franchise is listed as a range in franchise disclosure reports. The chart below visualizes the lowest and highest range of what a given franchise might cost. (We ranked the results by the highest estimate.)
A new entrepreneur often struggles with the decision between following the tried-and-true formula offered by a franchise or following her dreams and creating something unique. Beyond the realm of fantasy, initial franchise fees add a significant percentage to the already substantial costs of opening a new business. At the time of publication, McDonald's initial franchise fee amounts to $45,000. This is in addition to the start-up expenses incurred by any new business owner and does not include tangible expenses such as equipment, supplies or rent. It does, however, provide the new owner with several intangible benefits that significantly reduce the risks associated with opening a restaurant.
Not only does your initial franchise fee buy you access to all of McDonald's recipes, but it gives you access to the company's successful business plan. Think of your franchise fee as insurance. Instead of worrying about how much garlic to use, you can relax knowing that your burgers will be exactly what your customers are looking for. In addition, McDonald's corporate takes the guesswork out of your location, your decor and image and your procedures. Instead of paying a team of consultants to help you plan and design a start-up, your franchise fee pays for a package with proven results.
A study reported in Small Business Trends found that a significant portion of small businesses fail because their owners lack the experience and knowledge to create something that can compete with existing businesses. McDonald's enhances the competitiveness of its franchisees by providing extensive training. Each potential franchise owner attends an intensive nine-month training program, the cost of which is partially offset by your initial franchise fee. None of your living or travel expenses come out of your fees, but some of the actual costs of training do. Your fees also pay for ongoing corporate support.
Bloomberg's Leslie Patton compiled a list of many of these costs that have recently hit franchisees as McDonald's t