McDonald's Franchise Review: Costs and Information

In the world of fast food burgers, there are more and more brands coming out every day. Each claims it does something better, faster, or bigger. Some offer a healthier option. Others take pride in offering up the greasiest, fattiest, cholesterol-filled patty they can come up with. And while some people may prefer these burgers, and some of these brands may be experiencing extreme periods of growth, there is still only 'One True King' of the fast food burger, and it's not the one with a crown in its logo.

McDonald's Is Still The King

McDonald's is still the archetype and golden-arched embodiment for quick service dining and franchising. All quick service restaurants, whether they like it or not, are in some ways compared to McDonald’s. That makes it a target, not only by its competitors but by government bodies and even by its own customers. When you’re at the top of the mountain, everyone is going to try to push you off. While McDonald’s has seen some rough days recently, it still wears the crown, and it does not appear that it's going to lose its spot atop the mountain any time soon.

McDonald's History

It all goes back to the founder. In 1954, Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of the Multimixer, a milkshake maker. When the 52-year-old heard that a "McDonald's" hamburger stand in California was running eight Multimixers at a time, he paid them a visit and pitched the idea of opening up several restaurants to the owners, Dick and Mac McDonald, hoping to sell eight of his Multimixers to each one.

Instead, they struck a different kind of deal and Ray Kroc opened the first McDonald’s restaurant in 1955. In 1965, McDonald's went public, and today is the leading global foodservice retailer with more than 37,000 restaurants located in 119 countries.

Background and Benefits

Who doesn’t know the McDonald’s menu by heart and every jingle ever written? The business model works, and with national and international advertising, McDonald’s Corporation manages to serve 68 million people around the world every day. But while owning a McDonald's restaurant is a tremendous opportunity, the company is seeking only individuals with significant business experience who have successfully owned or managed multiple business units and have significant financial resources.

McDonald's Corporation claims they are about growing business, making money, and having fun, and only the serious entrepreneur need apply.

How Much does a McDonald's Franchise Cost?

It takes a lot of potatoes to make these fries, so come prepared. You will need a minimum of $750,000 in liquid assets to be considered for a McDonald’s franchise. Most Owner/Operators enter the system by purchasing an existing restaurant directly from McDonald’s or from a McDonald's Owner/Operator. A small number of new operators choose to purchase a new facility, but that requires an initial down payment of 40% as opposed to 25% for an existing restaurant. Intensive training addresses all aspects of operating a McDonald's restaurant. While McDonald’s does not offer financing, McDonald’s Owner/Operators have access to the company’s established lender relationships with some of the lowest lending rates in the industry.

What We Like

McDonald’s provides hands-on training and the materials you need to become a success. With world-class training, world-class service, world-class support, and unsurpassed name recognition, McDonald’s is a sure winner for franchisees seeking a serious “all-in” franchising opportunity with guaranteed community presence and predictable profits. All this, and they still serve a shake so thick you need a spoon.

Pros

• Special incentive programs: For example, McDonald's is a MinorityFran participant.
• World class training: McDonald's is recognized as a premier franchising company around the world. Training is required prior to becoming an owner/operator.

Cons

• Cost: McDonald's does not provide financing or assistance other than the special incentives for minorities.
• No absenteeism allowed: McDonald's franchises are open only to individuals who are directly involved in the day-to-day operations of the restaurants.
• Beginning to see a slight decline: In 2012 monthly sales dropped for the first time in nine years. In 2014, quarterly sales dropped for the first time in 17 years. In 2015, McDonald’s planned to close 184 restaurants in the U.S., which was 59 more than it planned to open, leading to the first time since 1970 that there was a decrease in the number of McDonald’s opened in the United States.

McDonald's Franchise Fast Facts

Business Established: 1955
Franchising Since: 1955
Total Investment: $990,000 to $2,250,000
Liquidity: $750,000
Franchise Fee: $45,000
Royalty: 12.5%
Term: 20 Years