Understanding McDonald’s franchise cost and profit in the U.S. can be a lucrative business opportunity for aspiring entrepreneurs. This blog post will cover the history of the franchise, the investment required, profit margins, different franchise formats, requirements, challenges, and the application process. By the end of this guide, you’ll have a clear understanding of what it takes to become a franchisee in the United States.
1. History of McDonald’s Franchise
Founded in 1940, the American fast-food chain has since become the world’s largest restaurant chain by revenue.
1930s: The MacDonald family moved from Manchester, New Hampshire, to Hollywood, California, in the 1930s, where Richard and Maurice MacDonald (“Dick”, “Mac”) and their brothers operated movie studios. He began working as a mover and handyman In 1937, their father, Patrick McDonald, opened The Airdrome, a grocery store on Huntington Drive (Route 66) near the Monrovia Airport in Monrovia, Los Angeles County
1940s: The brothers open their first restaurant on May 15, 1940, in San Bernardino, California. Originally, a car hop drive-in system was used to serve customers. The early menu involved barbecue, and the brothers’ first name for their business was “McDonald’s Famous Barbecue”. By 1948, the brothers realized that most of their profits came from hamburger sales. They closed their successful car hop drive-in in favor of a casual setup with a simple menu that consisted of hamburgers, cheeseburgers, mashed potatoes, coffee, ice cream, soft drinks and apple cider. only tears
1950s: In April 1952 the brothers decided that a completely new building was needed for greater efficiency and greater efficiency They worked with architect Stanley Clark Meston to design a new building, with red and white ceramic tiles , stainless steel, shiny curtains metal glass And, there were neon lights and this design included the iconic “golden arch”.
In late 1953, the brothers began seeking franchisees. Their first franchisee, Neil Fox, opened a restaurant in Phoenix, Arizona, in May 1953. The second franchisee, Roger Williams and Burdette “Bud” Landon, opened a restaurant in Downey, California, in August 1953.
In 1954, Ray Kroc, a seller of Multimixer milkshake machines, learned about the brothers’ restaurant and saw its potential. He suggested franchising their restaurants throughout the United States. Kroc took on the responsibility of establishing new franchises and eventually bought the company from the brothers, transforming it into a global franchise.
1960s: In 1956, Ray Kroc met Harry J. Sonneborn, who proposed proudly owning the real estate upon which destiny franchises would be built. This brought about the formation of Franchise Realty Corp, which held the real estate and passed those expenses directly to franchisees with a markup. This “Sonneborn version” persists today and is a great economic strategy for the employer.
By 1960, the eating places were grossing $fifty six million annually. The boom in U.S. Vehicle use and suburbanization contributed heavily to the corporation’s success. In 1961, Kroc bought the founding brothers’ pastimes inside the employer, positioning it for an IPO. Kroc and Sonneborn later disagreed over enlargement, leading to Sonneborn’s resignation in 1967.
In 1968, Herman Petty have become the first African American to franchise a restaurant. The corporation’s achievement within the 1960s became additionally due to skillful advertising and responding to customer call for, introducing objects like the Filet-O-Fish in 1962 and the Big Mac in 1967.
1970s: In 1970, the employer opened its first restaurant outdoor of North America in San José, Costa Rica. The first European restaurant opened in Zaandam, Netherlands, in 1971, accompanied through the first Asian eating place in Tokyo, Japan, and the primary German restaurant in Munich. Despite preliminary skepticism, the organisation expanded correctly into New Zealand in 1976.
In 1972, the National Black McDonald’s Operators Association (NBMOA) was founded, representing Black franchisees in the organisation. The first eating place in Southeast Asia opened in Singapore in 1979.
1980s: In 1983, the company opened its first restaurant in Mexico. The company ran a notable promotion during the 1984 Olympics, which led to significant losses due to the U.S. winning an unexpectedly high number of medals.
1990s: The first Express locations opened in 1991, offering a smaller-scale prototype. The first restaurant in Mainland China opened in Shenzhen in 1990. The Extra Value Meal was introduced in 1993. The decade also saw incidents like the Taiwan bombings in 1992 and the Sydney River murders in 1992. The company opened its first outlet in Bolivia in 1997 but closed all locations in the country by 2002 due to cultural rejection.
2000s: More than 11,000 locations were opened outside the United States after the 1990s. In 2000, a restaurant in Dearborn, Michigan, became the first in Michigan and the only one east of the Mississippi River to offer halal food for Muslim customers.
2010s: In January 2012, the company announced that revenue for 2011 reached an all-time high of $27 billion, with plans to update 2,400 restaurants and open 1,300 new ones worldwide. However, the middle of the decade saw declining profits, leading the company to offer a limited selection of its breakfast menu all day starting in 2015. This move initially faced resistance from franchisees but ultimately boosted earnings.
2020s: On March 8, 2022, the company suspended operations at all 850 of its locations in Russia in response to the Russian invasion of Ukraine. The brand relaunched on June 12, 2022, as ‘Vkusno & tochka’ (Tasty and that’s it) by local franchisee Alexander Govor.
2. Investment Required for McDonald’s Franchise Cost and Profit
Starting a franchise requires a significant investment. The total investment can range from $1 million to $2.3 million, depending on the location and size of the restaurant.
Investment Breakdown:
- Total Investment: $1 million – $2.3 million
- Franchise Fee: $45,000
- Equipment and Supplies: $1 million – $1.6 million
- Real Estate and Construction: $500,000 – $1 million
Additional Benefits:
- Brand recognition and established customer base
- Comprehensive training and support
- Marketing and advertising support
3. Profit Margin and Profitability Analysis of McDonald’s Franchise
Franchises are known for their profitability. The average annual revenue for a franchise in the U.S. is around $2.8 million. Franchisees can expect to break even within 2-3 years, depending on the location and management efficiency.
Profitability Factors:
- Location: Franchises in busy, densely populated areas tend to generate more revenue.
- Size and Employees: Larger restaurants with more employees can impact profitability.
Ongoing Fees:
- Royalty Fee: 4% of gross sales
- Marketing Fee: 4% of gross sales
Operating Costs:
- Labor, food and beverage costs, and other overhead expenses
Average Profit: The average franchise owner makes around $150,000 per year.
4. McDonald’s Franchise Formats
The company offers multiple franchise formats, including traditional restaurants, satellite locations and kiosks. Each format has specific features and requirements.
Traditional Restaurants: These are typical full-service establishments offering complete meals and dining experiences. They are usually located in high-traffic areas and require significant real estate investment.
Satellite Locations: These small malls are often found in places like airports, malls and universities. They serve a smaller menu and require less money than traditional restaurants. The satellite stations are designed to address areas with high foot traffic that require urgent service.
Kiosks: These are the smallest and are usually found in places like malls and transit centers. The kiosk offers a very limited menu and is designed for quick, on-the-go service. They require minimal investment and are ideal for areas where space is tight.
Drive-Thru Only: Some locations focus exclusively on trailers, catering to customers who want the convenience of ordering from their cars. These places require less space and money than traditional restaurants but still serve complete meals.
5. Requirements for McDonald’s Franchise
To open a franchise, you need to meet certain financial and personal requirements. These include having a minimum of $500,000 in non-borrowed personal resources, a strong business background, and a commitment to the brand.
Eligibility Criteria:
- Minimum investment of $500,000 in non-borrowed personal resources
- Willingness to undergo the training program
- Sound mind and good character with no criminal history
- Significant business experience
- Capability to grow with the brand
- Ability to manage finances well
- Acceptable credit history
- Ability to effectively manage an organization that recruits, trains, and motivates restaurant employees
- Provision of necessary infrastructure for setting up the restaurant, such as furniture, kitchen equipment, etc.
6. Challenges Involved in McDonald’s Franchise
Starting a franchise comes with its challenges, such as high operational costs, competition, and maintaining quality standards. Franchisees must be prepared to handle these challenges to ensure the success of their business.
7. How to Apply for McDonald’s Franchise
The company accepts franchise applications from all over the world. However, approval is granted to only those who meet the required criteria. The process of opening a franchise in the USA is as follows:
- Submit The Application Form: Your journey to become a franchise owner starts with application submission. The online application form is available on the official website. Fill out your details and submit the application for review. You will receive an application receipt in your email. Apply now
- Attend Meeting: After successfully submitting the application form, the franchise team will review the application and will contact you based on your eligibility. The assessment includes a phone interview and background and credit check. If the application meets all the company’s requirements, you’ll be invited for a panel interview, where you’ll be provided further information about the franchise process and details of the agreement.
- Sign The Agreement & Pay Franchise Fee: Your application will move further after it passes financial/asset verification. Once you understand all the terms and read the agreement, sign the papers, and you will officially be handed over a franchise. The next step is paying the franchise fee and making the necessary investments for setting up the outlet.
- Start Training: After you have been handed over the keys to your new franchise, you and your staff members will have to undergo a training program. The franchisor runs Hamburger University (HU), the international training center for the system. The training program offers 12-18 months of training in a restaurant, self-directed, part-time training for 20 hours per week, seminars, conferences, and one-on-one training sessions.
8. Summary
Starting a McDonald’s franchise can be a rewarding business venture. With the right investment, dedication, and support from the company, you can build a successful franchise. If you’re interested in becoming a franchisee, take the first step today by reaching out for more information.
Contact Details:
- Email: franchising@us.mcd.com
- Phone: +1-800-244-6227 (Available 9 AM – 5 PM CST)
FAQ:
Q: How much is a McDonald’s franchise? A: The cost to open a new McDonald’s franchise ranges from approximately $1.3 million to $2.4 million. This includes the initial franchise fee, construction, equipment, and other startup costs.
Q: How much are McDonald’s franchises? A: McDonald’s franchises typically require an investment between $1.3 million and $2.4 million. This range covers various expenses such as the franchise fee, real estate, and equipment.
Q: How much does a McDonald’s franchise cost? A: The total cost to start a McDonald’s franchise can vary, but it generally falls between $1.3 million and $2.4 million. This includes the $45,000 franchise fee, as well as costs for construction, equipment, and initial inventory.
Q: How much does it cost to franchise a McDonald’s? A: Franchising a McDonald’s involves an initial investment of $1.3 million to $2.4 million. This amount covers the franchise fee, real estate, construction, equipment, and other startup expenses.
Q: How much to franchise McDonald’s? A: To franchise a McDonald’s, you need to invest between $1.3 million and $2.4 million. This includes the initial franchise fee of $45,000, along with other costs such as construction and equipment
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute professional advice. The author and publisher make no representations or warranties regarding the accuracy, completeness, or reliability of the content. Business decisions should be made after conducting thorough research and consulting with qualified professionals. Mention of specific companies, products, or services does not imply endorsement. Financial estimates are based on available data and are subject to change. The author and publisher are not responsible for any actions taken based on the content of this blog. Readers are encouraged to independently verify information before making any business or financial decisions.
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