McDonald’s, the biggest name in the fast-food chain industry, and is quite a profitable business opportunity to invest in, but what does it take to be a McDonald’s franchise owner?
How much does a McDonald’s franchise owner make? How much money should you have? What are the pros and cons of this franchise?
Find out answers to all your burning questions related to McDonald’s franchises in this easy-to-read guide!
About McDonald’s
McDonald’s is a well-known international fast-food chain, it was originally founded by two brothers, Maurice and Richard Macdonald, but Ray Kroc saw an opportunity in this business In the year 1955 and thus founded McDonald’s System, Inc.
Consequently, after six years, he bought exclusive rights to the name McDonald’s, and by 1958, this fast-food giant sold its 100 millionth hamburger.
Currently, McDonald’s has more than 38,000 locations in 100 countries and counting.
A McDonald’s franchise is a golden opportunity for an entrepreneur who is willing to invest in an enthusiastic franchise and wants to make a lot of money.
But getting your hands on McDonald’s franchise is not easy; want to find out why? Keep reading!
((https://www.mcdonalds.com/us/en-us/about-us/our-history.html))
Read: McDonald’s Franchise
McDonald’s Franchise Key Investment Figures
| Franchise fee | $45,000 |
| Royalty fee | 4% |
| Marketing fee | 4% |
| Investment (mid-point) | $1,908,000 |
| Minimum liquid capital | $500,000 |
How Much Does A McDonald’s Franchise Owner Make?
McDonald’s serves approximately 69 million customers daily and thus makes a very handsome amount of sales.
Although, the sales of different McDonald’s franchises may vary from each other depending on their location, size, type of business model, operating expenses, etc.
According to data, McDonald’s Franchise Owners make annual net sales of $2.7 million on average, with top franchise owners making net sales of as much as $9 million.
How Much Does McDonald’s Employee Earn?
The salary of a McDonald’s employee may vary depending on their experience level, location, department, skills, designation, etc.
However, according to Indeed, the average hourly pay for a McDonald’s employee ranges from $8.25 per hour for an entry-level position, say of an Order Taker, to $20.22 per hour for a position of Maintenance Technician.
If we see this figure in yearly terms, then the average McDonald’s employee pay ranges from approximately $18,000 per year for the position of Team Trainer to $86,784 per year for the position of Project Manager.
Pros And Cons Of McDonald’s Franchise
Pros Of McDonald’s Franchise
- Offers quality food.
- Highly profitable.
- Huge customer base.
- Global presence.
Cons Of McDonald’s Franchise
- High-cost investment.
- Low profit margin.
- Rigourous training process.
- Strict eligibility criteria.
McDonald’s Franchise Average Revenue & Profit
As mentioned earlier, a McDonald’s Franchise owner makes $2.7 million in revenue every year on average.
However, because of n number of expenses, including operating costs, crew payroll, food costs, etc., franchise owners are left with a meager profit margin of 6% -8% only.
Hence, with a profit margin of 6%, McDonald’s Franchise owner makes yearly profits of $150,000 on average.
McDonald’s Franchise Failure Rate
To find out the McDonald’s franchise failure rate let us have a look at this table below:
System-wide McDonald’s Outlet Summary for 2019-2021
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 13,229 | 13,185 | -44 |
| 2020 | 13,185 | 13,022 | -163 | |
| 2021 | 13,022 | 12,775 | -247 | |
| Company-Owned | 2019 | 683 | 559 | -24 |
| 2020 | 659 | 657 | -2 | |
| 2021 | 657 | 661 | +4 | |
| Total Outlets | 2019 | 13,912 | 13,844 | -68 |
| 2020 | 13,844 | 13,679 | -165 | |
| 2021 | 13,679 | 13,436 | -243 |
As you can see, at the end of 2021, there were a total of 12,775 franchised outlets of McDonald’s.
A total of 163 franchised outlets closed down in 2020 and 247 in 2021.
The closing down can be attributed to the adverse effect of the pandemic or to the unwillingness of the franchises to continue with the renewal.
McDonald’s Franchise Payback Period
To calculate the McDonald’s franchise payback period let us quickly do some calculations:
| AVERAGE INVESTMENT | $1,908,000 |
| AVERAGE REVENUE PER OWNER | $2,700,000 |
| AVERGAGE PROFIT PERCENTAGE | 6% |
| AVERGAGE PROFIT PER YEAR | $150,000 |
| AVERAGE PAYBACK PERIOD | 12 years |
PAYBACK PERIOD = TOTAL INVESTMENT / PROFIT PER YEAR
= 1908000/150,000 = 12.72 = 12 Years based on median
The average investment for a traditional McDonald’s Franchise is $1,908,000.
With an average profit percentage of 6%, the average profit per year is $150,000.
This means that the average payback period for a McDonald’s Franchise is 12 years, and the total investment of $1,908,000 would be recouped within this period.
McDonald’s Might Be The Hardest Franchise To Get
Owning one of the most well-known fast-food brands in the world does not come easy. In order to be eligible for a McDonald’s franchise, you must meet the following criteria:
- Have the ability to put in an initial investment of $1,366,000 to $2,450,000 without any partnership or financing.
- Have minimum liquid capital of $500,000.
- Pay $45,000 as a franchise fee.
- Attend training that lasts for 6-18 months.
Facts About McDonald’s
- In 1975 McDonald’s opened its first drive-through was inspired by the military.
- There are more McDonald’s outlets in the U.S. than hospitals.
- McDonald’s invested in Chipotle in 1998, and by 2006, it owned almost 90% of Chipotle.
- Coca-Cola in McDonald’s tastes different because it is delivered to McDonald’s in steel tanks, whereas at other places, it is delivered in plastic.
- McDonald’s serves approximately 69 million customers daily across the world.
- McDonald’s menus are different across the world and have some items that are suitable to the local taste.
- The largest McDonald’s in the world is situated in Orlando, Florida.
- The Orlando branch lets customers create a custom deluxe sundae dessert.
- They also have stools that allow the customers to watch the employees prepare their food.
- The smallest McDonald’s outlet is in Tokyo.
- McDonald’s didn’t hire female employees initially because the owner thought that would attract displeasing teenage boys.
- Walt Disney and Ray Kroc were colleagues during their training for ambulance drivers for WW1.
- The famous “I’m lovin’ it” ad campaign was launched in 2003 and was McDonald’s first ad campaign.
- With a revenue of a whopping $24 billion, McDonald’s is the 90th largest economy in the world.
- Rachel McAdams worked at McDonald’s.
- There is a floating McDonald’s in Vancouver, Canada, called “McBarge.”
- In every 14.5 Hours, a new McDonald’s opens up.
- The queen of England also owns a McDonald’s.
- McDonald’s in Hong Kong caters to weddings.
- McDonald’s is banned in Bermuda, Macedonia, Montenegro and Kazakhstan.
((https://facts.net/mcdonalds-facts/))
What Is McDonald’s Best Known For?
McDonald’s is well known fast-food giant and is known for its delicious french fries, cheeseburgers, and hamburgers.
Although its menu includes a variety of items such as fish, salads, chicken, etc., its best-selling items are french fries, followed by the Big Mac.
The founder of McDonald’s, Ray Kroc, wanted to start a restaurant that would be known for providing consistently high-quality food, and this is exactly what McDonald’s follows today.
This, along with quality ingredients, affordable prices, and consistent taste, is the reason behind the success and popularity of McDonald’s.
Here’s a list of the most loved items on the McDonald’s menu:
- McGriddles Breakfast Sandwich
- Double Cheeseburger
- Premium Salads
- Chicken McNuggets
- Baked Apple Pie
- Egg McMuffin
- Happy Meal
- Snack Wrap
- Big Mac
- French Fries
Is The McDonald’s Franchise profitable?
Yes, The McDonald’s franchise is very profitable, with franchise owners earning $150,000 a year on average in profit.
However, as compared to the initial investment amount of $1,366,000 to $2,450,000 that the franchises are supposed to put in, the profit seems quite less.
Not to mention, in spite of a good profit range, you, as a franchise owner, would be able to enjoy all of it once the investment amount is recovered, and that can take 8-12 years.
So McDonald’s franchise is profitable, but is it worth it? That’s for you to think.
McDonald’s Franchise Earning Potential
As mentioned earlier, a McDonald’s Franchise owner make $150,000 in net profit on average, which is at par with $2.7 million of median sales.
However, there are outlets that have generated over $9 million in sales, and as such, they must have generated quite a lot of profit.
So, in short, McDonald’s has the potential to make a good profit. And the fact the sales of McDonald’s have increased over the years strengthen this point.
Wrap Up
After looking at the details of McDonald’s franchise closely, here’s what we think:
McDonald’s is definitely a profitable franchise to invest in, with the potential to make more money. However, it might take 8-12 years for you to recoup your initial investment, which is a lot.
Also, in order to be eligible, you cannot take financing help for putting in the initial investment amount, and even if you qualify for this, you would have to attend 6-18 months of training which is all very rigorous.
Now if you have this kind of investment, are willing to undergo a long period of training, and are willing to wait for years before you actually start to keep most of the profit earned in your pocket, then only then should you invest in this franchise.
Frequently Asked Question
How much royalty and marketing fees does McDonald's charge to its franchises?
McDonald’s charges 4% of net sales as their royalty fees and an additional 4% on gross sales plus brand fund fees for their marketing fees.
What is McDonald's franchise fees?
McDonald’s charge a franchise fee of $45,000.
Can I buy McDonald's franchise in partnership?
No, McDonald’s does not allow you to buy its franchise in a partnership or take help from investors.
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.