Joel Libava
“Joel, how much is a McDonald’s franchise?”
“How much does a McDonald’s franchise cost?”
“Joel, I’m curious. What is the cost to open a McDonald’s”
And so on.
All variations on the questions people ask me about McDonald’s. And I’ve been asked these questions hundreds of times over the year. Ok. Maybe not hundreds. But lots of times. Why is that? Why do people want to know the cost of a McDonald’s franchise?
Because whenever the topic of franchising comes up, McDonald’s is almost always referred to first.
One reason? It’s the most visible franchise in the world.
Secondly, who wouldn’t want to own a business that brings in millions of dollars of revenue each and every year.
With those things in mind, let’s take a look at McDonald’s franchise costs. And more.
How Much Does a McDonald’s Franchise Cost?
First up, the initial upfront investment.
Upfront Costs: McDonald’s claims you’ll need between $1,366,000 and $2,450,000. Yes, you read that right. That’s not a typo, and it’s not the price of a small country. And that’s just to get started! But wait, there’s more!
You’ll need $500,000 in liquid assets.
That’s right, half a million dollars just sitting in your bank account, not tied up in your house, your car, or your extensive collection of Ronald McDonald memorabilia.
Are you still lovin’ it? Let’s break this down further, shall we? Grab a napkin, because this might get messy.
What is McDonald’s franchise fee?
Franchise Fee: Your upfront Franchise Fee is $45,000. That’s just to join the club.
Real Estate: McDonald’s owns 45% of the land and 70% of the buildings.
As a franchisee, you’ll be paying rent, either a fixed amount or a percentage of revenue. Ka-ching! It’s like they’re your landlord and your boss.* Dream combo, right?
*Kidding. You’re the boss. Unlike “Franchisees” of Chik fil A, you actually have equity in the business. They don’t (that’s so wrong).
How Much is a McDonald’s Franchise? Here Are Even More Fees
Equipment, Signage, and Decor: Hope you like those rather large golden arches, because you’re paying for them. And those fancy digital menu boards? The drive-thru speaker system? The industrial-grade fryers? They’re all coming out of your pocket. Your estimated cost for those items (and numerous others) is $600,000 to $800,000. Ouch.
Starting Inventory: Gotta stock those freezers with something, right?
As a new McDonald’s franchise owner, your initial inventory cost could set you back $20,000 to $40,000. That’s a lot of frozen patties and Chicken McNuggets people!
Miscellaneous Opening Expenses: I’m talking about travel, training, and other pre-opening costs. It all adds up.
As a matter of fact, McDonald’s requires you to complete a training program that can last 12-18 months (Hamburger University).
And I hope you like burgers, because you’ll be eating, sleeping, and breathing McDonald’s for over a year.
Additional Working Capital: Because who doesn’t love spending more money?
To that end, you’ll need $100,000 – $250,000 to cover your operating expenses for the first 3 months. You know, those little things like payroll, utilities, and a mountain of napkins and cups.
On Buying An Existing McDonald’s Franchise Location
If you’re thinking of buying an existing franchise instead of starting a new one, don’t expect much of a discount.
Remember, you’d be buying a restaurant owned by an existing McDonald’s franchise owner who has brought in millions of dollars of revenue over the years.
I’m talking about a person who has worked a lot of hard hours and has had to deal with all the headaches included when you’re the owner of a busy, highly visible local food franchise.
Simply stated, the purchase price will be in the millions.
McDonald’s Franchise Costs: Royalties
Before you even think about the potential profits you’ll be bringing in, know this: McDonald’s corporate takes a big bite out of your revenue.
That’s because, on average, their royalty fees can amount to 10-12% of your gross sales. Feeling supersized yet?
On Financing: Ronald McDonald Isn’t Your Personal Banker
Need a loan for your franchise dream? Don’t look to McDonald’s. Why?
Because like almost every franchise in the world, they won’t directly finance your dreams of McDonald’s franchise ownership.
Now, they’ll probably point you to a few financial institutions, but you’re on your own, Mac. And don’t forget, you’ll need a 25% down payment for an existing franchise, or a whopping 40% for a new one. Hope you’ve been saving! Let’s put that in perspective.
For a new franchise costing $2 million, you’d need to cough up around $800,000 of your own money. That’s way more than the average home price in many parts of the country. And unlike a house, you can’t live in a McDonald’s (well, legally anyway). In view of that, let’s move on to another questions I’ve been asked dozens of times.
How Much Do McDonald’s Franchise Owners Make?
My answer on McDonald’s franchise owner profitability may anger you. Why?
Because I’m not going to tell you the profit numbers.
I mean…how could I? I’m not a McDonald’s franchisee.
“But Joel, their FDD may show earnings claims.”
That’s great. And if you’d like to base your buying decision on those numbers, it’s up to you.
But if I was about to invest over $1 million in a big-name franchise opportunity, I’d want to visit and talk to actual McDonald’s franchise owners. Lots of them! Ask them how much they’re making.
Furthermore, I’d ask them every question provided here.
“But, Joel. Other franchise websites may show McDonald’s franchisee earnings.”
I know. And that’s they’re choice. But it’s not how I roll.
Because any figures you see out there are just figures. They’ve averages.
And the chances are slim that you’ll bring in the exact revenue and/or profits in your own McDonald’s franchise. Why?
Because there are too many variables.
For instance, your geographical location.
Then there’s your payroll costs and rent. The economy. Politics. Lots of things can and will affect your profits. So do your research.
10 Tips For Buying a McDonald’s Franchise
Here are some tips on becoming a McDonalds franchisee.
1. Understand The Costs: Be aware of the initial franchise fee, ongoing royalties, and other costs like real estate and equipment.
2. Heavily Research Your Local Market: Analyze the local market and demographics to ensure there’s demand for a McDonald’s in your chosen location.
3. Be Financial Prepared: Ensure you have the necessary capital (you need to already be a millionaire) and a strong financial background, as McDonald’s requires substantial liquid assets.
4. Franchise Business Requirements: Familiarize yourself with all the McDonald’s franchisee requirements. Then, ensure you meet their criteria.
5. Plan On A Long And Difficult Training Program: Be prepared to undergo an extensive training program to understand the business operations thoroughly. And remember training may take an entire year.
6. Location Selection: Work closely with McDonald’s Real estate professionals to ensure you choose a great location that maximizes customer traffic and accessibility.
7. Legal Considerations Of Being A Franchisee: Consult with a good franchise attorney to understand the franchise agreement and any legal obligations you’ll have. And remember, there may not be a franchise company in existence with stronger lawyers than the attorneys who work for McDonalds.
8. Operational Support: You need to take maximum advantage of McDonald’s powerful and proven operational support and resources to help manage your franchise efficiently. In other words, don’t be shy. Leverage their decades of fast food business knowledge
9. Network With Other Franchisees: Connect with lots of other McDonald’s franchisees to gain insights and advice on managing your franchise. Most of them will gladly help.
10. Long-term Commitment: Be prepared for a long-term commitment, as running a successful franchise requires dedication and hard work. As a matter of fact, you’ll probably work harder than you ever have in your life. The food-service business is not an easy business to own and operate.
The Cost of a McDonald’s Franchise: Final Points
If you become a McDonald’s franchise owner, you’ll be part of a globally recognized brand. People know those golden arches from miles away.
The training and support you’ll get will be first-class. After all, they’ve been in this game for decades all.
Remember, there are a myriad of established operating procedures (whether you like them or not) that you’ll be required to follow to the “T.” No need to reinvent the wheel here… or the Big Mac.
And for the potential of success you can have as a franchise owner with this global brand, it’s an astronomical initial investment. Plus, your ongoing costs are significant. One more thing.
Just because you’re a millionaire, it doesn’t mean you’ll be approved to be a McDonald’s franchise owner.
That’s because getting approved is harder than you think. McDonald’s is notoriously picky about their franchisees.
So before you start practicing your “would you like fries with that,” do your homework. Talk to a lot current franchisees. Crunch the numbers.
Then ask yourself if the cost of a McDonald’s franchise will be worth it for you-as it has for thousands of other franchisees before you who asked the same thing.
Note: When you buy through links on this website, we may earn an affiliate commission. In addition, I've started to use AI to help me craft better article titles and headings.
