5 Things You Should Know Before You Buy a McDonald's Franchise
McDonald's is at the top of the Entrepreneur Franchise 500 list, but that doesn't mean it's best for you.
McDonald's was the second-ranked company on the 2017 Franchise 500 list, but this year, it took the top spot. It's easy to understand why it continues to score high on our list. Not only are you investing in an established billion-dollar brand, but you are also buying into a culture that supports you and wants you to succeed.
That said, buying a McDonald's franchise might not be for everyone. Depending on your budget (costs millions to become a frachisee), location and priorities, it may not be for you. (If you're not sure what you might want to buy, we have a quick survey here that can help you find a good franchise fit.)
However, if you know you're interested in McDonald's, here's a quick guide to what goes into buying a franchise, including how much it costs and how much training you'll need.
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Okay, we're probably going to lose a few people here. The franchise fee of $45,000 doesn't sound too bad, but when you add in location, equipment and more, the initial investment in a McDonald's costs at least $1 million and as much as $2.2 million.
You'll need to make an initial down payment of 40 percent of the total cost when you purchase a new restaurant, or 25 percent for an existing one. That's a lot of dough, and it's why McDonald's requires franchisees to have a minimum of $500,000 in non-borrowed, liquid resources.
Once you have established the franchise, you will have to pay a service fee (4 percent of monthly sales) and rent.
That seven-figure price tag is no joke, but it's comparable to or even more affordable than similarly successful burger franchises. For example, a Sonic Drive-In costs $1 million to $2.4 million and a Culver's costs $1.8 million to $4.3 million.
In addition to the time you'll spend getting your franchise ready to open, you'll need to spend some time getting yourself ready to run it. Most companies want franchisees to undergo two types of training: classroom training -- either at a training facility or company headquarters -- and on-location training.
McDonald's offer a lot more training than other franchises. The Golden Arches wants franchisees to get at least 75 hours of classroom training, and then provide six to 24 months of training on the job. It also offers additional training at a local McDonald's restaurant.
You might think that tracking the trend for a place like McDonald's, which opened its first restaurant in 1940 (and started franchising in 1955), is unnecessary. We beg to differ. It's important to look at the number of units for any business.
In 2008, there were 31,967 locations across the globe. By the start of 2017, there were 37,011 units, representing a 15.8 percent growth in nearly 10 years. There isn't some big jump in there that skews the average, either. From 2016 to 2017, McDonald's added 507 units, and it's added 1,328 units in the past three years.
Much of this growth has come outside of the U.S., but the number of American franchises hasn't plateaued. As of 2017, there were 13,109 American franchises, which represents a 10-year high.
Location can be a tricky piece of criteria for any potential franchisee. If a company is too small, it might not be ready to franchise to your area, but if it is too big, it might have already done so. That's before you think about the actual architecture, landscaping and other needs to build a McDonald's.
Luckily, McDonald's is still expanding in the U.S., from Maine to Alaska and Hawaii to Florida. You can use this handy map to contact McDonald's representatives who can help figure out a location for you in your region.
Other than a sign with golden arches and a color scheme, what exactly are you getting when you become a McDonald's franchisee? What does the burger brand offer you that will help make sure your investment doesn't go to waste?
Well, some of it is obvious and some of it might not be. Ongoing support includes a newsletter, invitations to meetings and conventions, a toll-free line, a grand opening, online support, security and safety procedures, field operations, site selection, proprietary software and a franchisee intranet platform.
Plus, you get marketing support with co-op advertising, ad templates, national media, regional advertising, social media, a loyalty program and app.