For years, McDonald’s has been in the franchising business. The multi-million-dollar company has relied on franchisees for the business’s success. With franchising being the primary way of operating, McDonald’s ranks as a leading global food retail service franchise having over 36,000 restaurants in more than 100 countries.
If you’re in the United States and you’re looking to buy a McDonald’s franchise, you’re about to start a lucrative business – if you have a great business plan. Besides, you’ll most likely purchase an existing franchise restaurant – which isn’t bad – it saves you money. But keep in mind that a McDonald’s franchise cost will set you back a considerable amount of money.
Most new franchisees enter into McDonald’s franchising system by purchasing an existing restaurant directly from McDonald’s or an existing franchise owner. Only a few new operators enter the system by buying a new restaurant, and here are some relevant questions to ask if you’re looking to buy into McDonald’s franchise business:
What Are the Benefits of Franchising?
Reduced risk on investment is the most significant advantage of buying a McDonald’s franchise, and that’s because franchises usually start up faster, which means they rake in profits even at the early stages of operation. The franchisor has built a name, a working model, and principles by which you must run the business to make a profit.
Besides, when you lose, the franchisor loses too. Many small businesses fail due to weak management and unrealistic business plans, and that’s where you get an edge when you purchase a franchise rather than start your business from scratch.
You’ll also get great deals on supplies because the franchisor can purchase goods in bulk for the entire chain of franchisees and pass the savings on the bulk purchase to you, thereby lowering your operational cost and increasing your profit margin.
How Does McDonald’s Franchise Work?
If you want to own a McDonald’s, an effective way to do so is by purchasing a franchise. If you’re selected to become a franchisee, you’re required to pay an initial franchise fee of $45,000 and 40 percent of the total cost of starting up your McDonald’s restaurant. Remember that the franchise fee is the only upfront fee you’ll pay.
After making payment, you’ll undergo thorough nine-month training to understand McDonald’s way of doing business. Upon completing your training, you’ll be familiar with their service, value, standards for quality, method of operation, inventory control techniques, and specifications for menu items.
Meanwhile, you must agree to run your McDonald’s franchise business from a single location – usually for twenty years – while sticking to their guidelines for layout, signage, décor, and everything else that stands McDonald’s out.
What’s the Company’s Business Model?
McDonald’s makes money – lots of it – by leveraging fast food and its products to franchisees who have to lease properties owned by McDonald’s. The company has stayed true to the franchise business model due to its advantage – a stable revenue stream. Besides, the business model allows for near-accurate profit prediction.
Why Is There High Demand for McDonald’s Franchise?
McDonald’s is notoriously strict with its franchisee selection criteria. But considering that franchisees are responsible for paying rent, ordering supplies, and paying staff salaries, why not own your restaurant rather than buy a franchise? The bait is that McDonald’s provides her franchisees with an almost guaranteed money-making scheme with impressive profit margin potential.
How Much Will a McDonald’s Franchise Business Cost?
The United States is home to over 13,000 McDonald’s restaurants, and franchisees operate at least 85 percent of those restaurants. Purchasing a McDonald’s franchise is a big step that requires a substantial investment.
The company requires that prospective franchisees have at least $500,000 in liquid assets to be eligible. Know that meeting the criteria for selection doesn’t guarantee your selection to be a franchisee – and if selected – you must be able to pay the franchisor a $45,000 fee.
Buying a McDonald’s franchise in the USA requires a sizable amount of money. According to McDonald’s, the initial investment needed to buy one of its sought-after franchises ranges between $1,008,000 and $2,214,080. The location and size of the restaurant and the choice of equipment, landscaping, and style of décor prescribed by McDonald’s will determine how much to franchise McDonald’s.
What Are the Steps to Starting a McDonald’s Franchise?
Here’s a three-step look at how to buy McDonald’s franchise:
The Application Phase
The application process focuses on your financial readiness, and it begins with an online application. The initial form is not much different than a standard job application – until the part that asks whether you’ve owned a business before. If you progress past the first stage, the next stage is the screening for financial capacity – and it can get rigorous.
You’ll have to provide valid documentation of your finances and assets to back up your claim of being financially ready to operate a McDonald’s franchise. On validating your financial documents, McDonald’s will call you for an interview – which typically happens at the firm’s corporate headquarters in Chicago.
The Training Program
Following a successful financial screening phase and interview, the firm will pair you with a McDonald’s owner in the region you selected, and this is to get a close-up look at how a typical McDonald’s restaurant operates.
Buying a Restaurant
After completing your training program, you will become eligible to purchase a restaurant. In many cases, the earliest opportunities to buy a restaurant may not surface in locations close to you, and that’s because potential franchisees have to wait until a current owner lists his business for sale.
Meanwhile, McDonald’s will constantly remind you that you might need to move when you get the chance to buy a McDonald’s NNN for sale during the application process.
What Are the Other Requirements to Purchase a McDonald’s?
- Great management skills
- Financial management skills
- Developing a feasible business plan
- Significant business experience
- Impressive credit history
Are there Ongoing Fees to Pay?
During the time you’re in business with McDonald’s, you as the franchisee will pay the following fees to McDonald’s:
Service Fee
It’s a monthly fee based on your restaurant’s sales performance, usually four percent of monthly sales.
Rent
McDonald’s owns every property sold to franchisees. So, you’re required to pay a monthly base rent or a percentage of your monthly sales as rent.
Bottom Line
Starting a business – especially a food-related one – can be nerve-wracking, considering the state of the economy and the numerous food brands out there. But if you’re determined to venture into the food business, buying a McDonald’s franchise business is a wise option. Besides the reduced risk on your investment, you get the opportunity to work with a renowned brand and make money while at it.
Featured Image by Kelvin Stuttard on Pixabay
