Just about anyone in the world recognizes the iconic golden arches that signal a nearby McDonald’s.
The fast-food institution has certainly set the standard for branding and marketing in the industry, building a loyal customer base around the globe in the process. Whether you love their menu items or the comfort of knowing you can find one nearly anywhere you go, it’s safe to say McDonald’s is one of the most well-known franchises around.
If you’re interested in opening a McDonald’s franchise of your own, this guide is here to help. Keep reading for everything you need to know about joining the McDonald’s franchise.
McDonald’s has been franchising since their opening in 1955. Since then, McDonald’s has opened over 30,000 restaurants worldwide and is a regular powerhouse in the fast-food industry. They recently ranked in the top 5 highest-grossing chains within the U.S. in 2018, according to QSR Magazine. There’s little surprise why this chain is on everybody’s shortlist when seeking to buy into a restaurant franchise.
McDonald’s, however, isn’t for everybody. To learn why, check out the following pros and cons list of this franchise.
There’s no doubt—McDonald’s has tons of attractive features going for them, including:
- Extensive franchisee support
- Access to their supplier network
- Access to their award-winning advertising team
- Backed by a beloved brand
- Worldwide opportunities (this franchise isn’t limited to a geographical area within the United States)
- Commitment to diversity—McDonald’s website posts that they hold the “single largest group of minority and women operators in [the] industry”
- Multi-unit opportunities available to experienced franchise operators
Despite there glowing advantages, McDonald’s also has cons to consider:
- Extremely high out-of-pocket costs
- Must have high capital liquidity
- Does not offer any financing—they do, however, have relationships with national lending institutions and their operators “enjoy the lowest lending rates in the industry”
- Cannot select your own location
How Much Is a McDonald’s Franchise?
When backed by a multi-billion-dollar brand, you’re probably wondering how much a McDonald’s franchise costs.
The initial McDonald’s franchise fee is $45,000. Additionally, you must pay a monthly service fee of 4% of your gross sales. The franchisor also charges “a base percentage rent that is a percentage of monthly sales.” They do not, however, specify an exact figure or range regarding rent fees on their website.
You can expect a total startup investment range of about $1 million to $2.2 million. The final cost will depend on the restaurant size, location, cost of equipment, and interior furnishings. For McDonald’s, this investment range is unsurprising. Franchisees, after all, are backed by a hugely successful brand.
The real challenge is that 40% of the startup costs for a new restaurant must come from non-borrowed resources. For the rest of your franchise financing, you can turn to traditional lenders. That means you must have a large sum of liquid capital of your own in order to buy a McDonald’s franchise. The capital requirement is 15% less if you buy an existing restaurant. Still, securing 25% of the startup costs from non-borrowed resources can be challenging for most entrepreneurs.
So, to answer the question of how much is it to franchise a McDonald’s? A lot.
The good news is that the initial McDonald’s franchise fee is comparable to their competitors (although on the higher end):
- Taco Bell: $45,000
- Chipotle: $20,000
- Wendy’s: $40,000
- Dunkin’: $40,000
Now that we’ve gone over the fees associated with opening a McDonald’s franchise, let’s look into the steps you’ll actually need to take to apply, be approved, and open your own location.
How to Open a McDonald’s Franchise in 7 Steps
Ready to start the application process? Keep reading for just how to open a McDonald’s franchise of your own.
Step 1: Meet the Financial Requirements
The first step for this franchise is to have the necessary capital. The high financial barrier to entry is a quick eliminator when applying to join this franchise. While McDonald’s states that they do offer special cases, such as opening a McDonald’s in a rural area, that’s more often the exception than the norm.
Before you submit your application, be sure to have a large reserve of liquid capital from non-borrowed resources. Remember, you must have 40% of the startup costs for a new restaurant or 25% for an existing restaurant.
Step 2: Submit an Application
Once you know you can handle the McDonald’s franchise cost, it’s time to submit an application. You can head to their website and apply online. The application process asks several questions, so be sure to dedicate some time to complete it thoroughly. It will be, after all, your first point of contact with the franchisor.
The form will ask the following:
- Basic information (name, contact information, address)
- Legal information
- Past employment information
- Past business/franchise experience
- Total assets
- Total debt
- Net worth
- Capital liquidity
- Total non-borrowed funds available for investing
- Your time commitment (full-time, part-time, passive investor)
- Whether you’re open to relocating
- Your geographic preference (rural, small town, suburban, urban, cities)
- Preferred territorial region
Step 3: Pass the Interview
If your application captures the franchisor’s interest, they will schedule a phone interview with you. In this preliminary interview, they’re getting a sense of your character and your personality. Also, they’ll be diving more into your prior business experience.
If the phone interview succeeds, you’ll be invited to a one-on-one interview at your nearest McDonald’s headquarters. This interview will further explore your viability as a franchisee candidate. If you pass, McDonald’s will approve your application and you can begin training to open your restaurant.
Set yourself up for success by preparing with mock interviews and speaking exercises. Becoming a McDonald’s franchisee is a competitive process. Excelling in your interview is your opportunity to shine above the competition. However, remember you are interviewing the franchisor as much as they are interviewing you. While the idea of owning a McDonald’s franchise may sound great, you want to make sure it’s actually the right fit for you.
Step 4: Review the Franchise Agreement
If all goes well in your interview, the franchisor will likely next share their franchise agreement with you, including the franchise disclosure document (FDD). It’s important both you and your business attorney review this document carefully, as it will lay out both your and the franchisor’s responsibilities, including all the fees you’ll be responsible for, how long the contract is for, if it’s possible to renew and what that will cost, what ongoing resources the franchisor will provide, how much say they’ll have in your business decisions, and more.
You should also take this time to speak with current and former McDonald’s franchisees to get firsthand accounts of what their experiences were. This can help you decide if this is the best restaurant franchise opportunity for you.
Step 5: Complete Franchisee Training
All franchisees must complete the McDonald’s franchise training program before they can purchase a restaurant. The training duration ranges from 12 to 18 months. Fortunately, this training can be completed on a part-time basis, if you have other commitments.
McDonald’s is praised for putting theory into practice. Their franchisees aren’t studying what it takes to operate a business—they’re doing it. That’s why part of your training will include working on the floor at a local McDonald’s restaurant. You will build hands-on experience, learning and observing from the managers and staff.
Other training includes attending seminars, conferences, and one-on-one training sessions. You’ll also need to attend five-day operator training courses in Illinois. Keep in mind that if you are not local, the franchisor will likely require you to travel to Illinois.
Step 6: Build or Buy Your Franchise Location
You have the option to build a new location or buy an existing McDonald’s restaurant. As we mentioned, building a new location requires you to cover 40% of the startup costs and buying an existing restaurant only requires 25%.
When a location becomes available, the franchisor will review their pool of applicants and appoint who is the most qualified candidate to run that location. Qualifications they will consider include experience, performance during the training program, and proximity to the available location.
If they choose you, congratulations! You’re now the proud owner of a McDonald’s restaurant. It’s time for the exciting part—your grand opening.
Step 7: Prepare for Your Grand Opening
You’ve completed the application process. You excelled at the training program. It’s now time to kickstart your new McDonald’s franchise with a bang. Before you do that, however, there are a few tasks you need to check off your list, such as:
- Obtain necessary permits for running a restaurant
- Stock up on food and supplies
- Hire employees
- Download and integrate HR software
- Hire employees
- Set up your POS system
- Hire leads and managers (if you intend to step back from the day-to-day-operations)
If you’ve been to any McDonald’s location, you’re familiar with the morning and evening rushes. Ensure that your staff is properly trained and your facilities are maintained and immaculate.
You’ve jumped over many hurdles to make it to this point. After finishing this last stretch, you’re finally prepared for your successful grand opening. With the cult following that McDonald’s has, you can be sure there will be customers eagerly awaiting your opening day.
Ideal McDonald’s Franchisee Candidate
Becoming a McDonald’s franchisee is a competitive process. Even if your application is approved, you are still in competition with your fellow trainees for when a new location becomes available. If you want to stand out amongst your competition, here are some characteristics you’ll want to meet.
Significant Business Experience
McDonald’s holds a high bar, both financially and experience-wise, for their franchisees. If you intend to open your own McDonald’s franchise, you should have several years of management experience.
This experience, however, isn’t limited to the restaurant industry. If you’ve previously owned businesses or held leadership positions, this experience will definitely help you stand out.
A thorough understanding of business financial statements will serve you well during the application process. Also, you must have a handle on your personal finances. The franchisor will run your credit report, and you’ll want it to be in the best shape possible to show that you know how to responsibly handle your finances.
Exceptional Customer Service
As with any service-based industry, customer service is critical. The quality of service a customer receives will make or break the business’s reputation. The customer can receive amazing food but if they receive poor service, it can potentially ruin their entire experience.
If you intend to be a part of the day-to-day operations, your customer service skills must be top-notch. It will be required not only for handling customer grievances but also for being a model example for your employees.
Having a background in customer service, moreover, will equip you with valuable communication and problem-solving skills. This will help you when communicating with all parties—from customers and staff to the franchisor.
Availability for Training
After your application is approved, you will move into the training phase. Your training may take up to 18 months, so you must have the availability to complete it. The training, fortunately, is flexible with your schedule. Franchisees can complete some of the training at their own pace on a part-time or full-time basis.
If McDonald’s looks great on paper but you’re discouraged by the financial commitment, here are two other food franchise opportunities to consider:
Like McDonald’s, Chick-fil-A is a widely recognized brand. Not only do their customers adore their chicken and waffle fries, many are also impressed with this franchise’s level of customer service. This is because Chick-fil-A requires their operators to undergo a multi-week training program. Chick-fil-A operators know their stuff and it reflects in the quality of their food, service, and staff.
The widest difference between Chick-fil-A and McDonald’s are the startup costs. McDonald’s requires their franchisees to cover up to 40% of the startup costs. Chick-fil-A, however, will cover up to 99%. Plus, their initial franchise fee is only $10,000 compared to the $45,000 that McDonald’s charges. If you’re interested, check out our guide on opening a Chick-fil-A franchise.
You’ve probably heard their slogan: America runs on Dunkin’. And for many Americans, this statement rings true. Dunkin’ has been serving their loyal “Dunkie’s” with delicious doughnuts and hot coffee since their founding in 1950.
Dunkin’s total investment is fairly similar to McDonald’s requirements. Their initial franchise ranges from $40,000 to $90,000, depending on your location. And the total initial investment can climb up to $1.5 million. If you think you have what it takes to become a Dunkin’ franchise owner, we’ve created a guide on everything you need to know about opening a Dunkin’ Donuts franchise.
McDonald’s brand is known worldwide. Their reputation has thrived during the years, so there’s little surprise why entrepreneurs flock to this franchise opportunity.
You have learned, however, that owning a McDonald’s franchise is challenging. The franchisor demands extensive business management experience. Also, McDonald’s franchise costs are very high for those who cannot secure enough liquid capital from non-borrowed resources.
But if you have the necessary experience, liquid capital, and the drive, then you are well on your way to opening a McDonald’s franchise of your own.
- QSRMagazine.com. “The QSR 50“
Christine Aebischer is an editor at JustBusiness and Fundera.
Previously, Christine was an editor at the financial planning startup LearnVest and its parent company, Northwestern Mutual. There she wrote and edited on topics such as debt, budgeting, insurance, taxes, investing, and retirement. She has written for print and online on topics ranging from personal finance to luxury real estate.