Is it profitable to own a McDonald’s franchise? How much is McDonald’s Franchise profit per year? Many have asked such questions since it is one of the largest fast-food chains worldwide, serving over 69 million customers daily in over 100 countries.
From a burger stand, McDonald’s started as a franchise in 1953. Over decades in the franchising world, many franchisees have been generating profit. If you buy from existing franchises rather than a new one would cost one million dollars or more.
However, if you plan to launch a new franchise from this company is a different story. And the starting investment is no joke for this famous and well-established brand in the food business industry.
You may ask these questions:
- How much will it cost to open your franchise?
- How much profit can you earn if you invest in a McDonald's franchise?
- So the big question is: is it prudent to invest in McDonald's franchise?
How much will it cost you to open your own franchise?
According to Item 19 of McDonald’s FDD, the cost to buy a McDonald’s franchise ranges from $1 to $2.2 million. This total investment is much higher than most people think.
The franchise fee that is advertised is $45,000. And that is what most people think that the total amount to buy a McDonald’s franchise.
So here are the things you need to know when buying this franchise business.
1. You will need to have liquid capital of at least $750,000. Also, you need to prove that you know how to manage a business.
2. When you launch your own franchise, you will be managing between 50-125 employees. The staff needed will also depend on the size of your store.
3. A franchise owner will require you to participate actively in all aspects of the business. And selling your business to someone else is not allowed.
4. Remember you need to pay the following:
- rent or buy a location,
- a royalty fee of 4% of your gross sales,
- a promotion and advertisement fee of 4% of your gross sales
The fee can be even higher if you conduct independent marketing campaigns. There are other additional fees you need to mind as well, such as:
- employee salaries,
- monthly rent,
- software,
- and licensing.
Besides, the cost to pay for base rent will depend on the total amount spent by McDonald’s on the acquisition and development of the property.
So if you think that operating a McDonald’s restaurant is just simple and straightforward, then you are in for a huge surprise. This well-known restaurant is indeed not that easy to start.
How much is a McDonald’s franchise profit?
This is a question that anybody who wants to invest in this business is dying to know.
The total profit you will make from the McDonald’s franchise is not constant. It varies from unit to unit depending on several factors. And it includes how long your unit has been operational as well as the location where your business is located.
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 reality may come as a shock to many, especially those who have thought that McDonald’s franchises are very profitable to own.
Over the last few years, McDonald’s Corporation has been facing financial challenges. It 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 their franchisees are not happy with the way the corporation is being run. Sources also indicate that in addition to the financial woes 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’s is not the dominant company that it used to be way back in the 1980s and 1990s.
If you consider investing in a franchise business, perhaps a brand with a higher profit margin and better lifestyle. Conduct your own research to see which option will best suit you.
Let’s go back to the question: Is McDonald’s franchise profitable to own?
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.