Is a McDonald’s Franchise Profitable to Own?


Is a McDonald’s Franchise Profitable to Own?

 

Is opening a McDonald’s franchise profitable? How much will it cost you to open your own franchise?  

Per the Item 19 in McDonald’s franchise disclosure document, the total investment to buy a McDonald’s franchise ranges from $1 million to about $2.2 million. This is higher than most people think. The franchise fee that is advertised is $45,000. Most people think that it is the total amount they need to buy a McDonald franchise.

 

If you want to buy a McDonald’s franchise, then you need to have liquid capital of at least $750,000. Also, you need to prove that you know how to manage a business. This is because when you open your own franchise,you will be managing between 50-125 employees depending on the size of your store.  If you thought that operating a McDonald’s restaurant is simple and straightforward, then you are in for a huge surprise. Operating a McDonald’s restaurant is not as easy as many people think. McDonald’s will require you to actively participate in all aspects of the business and you will not be allowed to sell your business to someone else. In addition to the fee that you will be charged to buy a location, you will also pay a royalty fee of 4% of your gross sales, and a promotion and advertisement fee of 4% of your gross sales. This fee can be even higher if you conduct independent marketing campaigns. There are additional fees like employee salaries, monthly rent, software and licensing. The amount of money that you will pay for base rent will depend on the total amount of money that McDonald’s has spent on the acquisition and development of the property.

 

How much profit can you earn if you invest in a McDonald’s franchise?

This is a question that anybody who wants to invest in this business is dying to know. The amount of profit that you will make from McDonald franchise is not constant. It varies from unit to unit depending on several factors including how long your unit has been operational as well as the location where your business is located. Janney Capital Markets estimates that if your restaurant grosses 2.7 million dollars, after you deduct all your expenses including advertising, taxes, payroll, supplies, maintenance, utilities, rent and insurance you will net around $150,000. This may come as a shock to many, especially to those who thought that McDonald’s franchises are very profitable.  Over the last few years, McDonald’s Corporation has been facing financial challenges that have led to the closure of many stores not only in the US but also in other countries. A survey conducted recently revealed that the majority of McDonald’s franchisees are not happy with the way the corporation is being run. Sources also indicate that in addition to the financial woes that the company is facing, its rich culture is fading fast.

 

So the big question is: is it prudent to invest in McDonald’s franchise?

From the way things are going, it is clear that McDonald is not the dominant company that it used to be way back in the 1980s and 1990s. If you are considering investing in a franchise business, perhaps you should consider a brand with a higher profit margin and better lifestyle. Conduct your own research to see which option will best suit you. The one thing that is certain about becoming a McDonald’s franchisee is that you won’t become profitable for a while. If you want to make good money, you need to open multiple locations.

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