Earn More Money, Investing, Real EstateDecember 14, 2020January 18, 2021

How Much Can A McDonalds Franchise Earn?

McDonald’s is one of the fast-food giants of the world. Therefore, it’s safe to say that most, if not everyone know what McDonald’s is. Taking it a step further, it would probably be safe to say that almost everyone has tried McDonald’s at least once in their lifetime. I, for one, have never met anyone who both does not know and/or has eaten at McDonald’s before. With that in mind, it’s safe to say that owning a McDonald’s franchise can possibly be a good investment. However, like any good investment, there will always be a cost.

This cost can be money, time, resources, etc. Therefore, there is only one thing to do, write an article about it. Through this article, we will discuss a few things. First, how to acquire a McDonald’s franchise. This means we will be going over key factors such as fees and any requirements. After we’ve discussed this, we will talk about the potential amount that a McDonald’s franchise earns. From this number, we can determine how much the franchisee (you) will be able to take home per year.

How To Acquire A McDonald’s Franchise

When it comes to acquiring a McDonald’s franchise, you will typically have two options. First is applying to get a new franchise. The second is purchasing an already existing franchise. Both of these are good ideas. However, both have their benefits and disadvantages. One major advantage of purchasing an existing McDonald’s franchise is that you may not need to relocate. However, if the only available locations are ones that are far away from you. The possibility of relocating is definitely still on the table.

The next thing you need to purchase a McDonald’s franchise is unencumbered capital. As you may have expected, McDonald’s requires a sizable amount of down payment in order to be qualified to purchase a location. The exact amount can vary. However, McDonald’s franchises generally require approximately 25% – 40% down payment on the location. This does not include any ongoing fees you may incur. Therefore, if a location costs $2,000,000, you will need to shell out $800,000 as a down payment.

Of course, most people do not have this money. Therefore, many people either borrow money, have multiple franchise partners, or take out loans. However, if you’re looking to get a McDonald’s location, it is best to have most, if not all of the down payment ready without too many strings attached. That’ll help ensure that you don’t fall into harsher financial troubles while trying to make a profit from your restaurant.

Are There Any Requirements?

As you may have assumed, purchasing, owning, and operating has many requirements. However, we will take a look at the McDonald’s website where they outline some of the requirements you need in order to own a franchise. The first requirement is training. It generally goes without saying that owning a McDonald’s franchise is no easy task.

Owning one takes plenty of training and experience. Therefore, if you have experience running restaurants beforehand, you’ll have a better chance of getting approved for your franchise. McDonald’s does not just let anyone who has money own their franchises. They want to make sure that every franchise will be successful. Therefore, aspects like experience and personal skills will play into whether or not you’ll be approved.

As you can see from the picture above, McDonald’s only chooses those who have both the flexibility and qualifications to run their establishment. Therefore, if you randomly save up $1,000,000 but don’t have the necessary qualifications, you will most like get overtaken by someone else. However, you as a potential business owner should typically not be considering an investment like McDonald’s if you don’t know what it means to run a restaurant. Many people who’ve worked in the industry for a multitude of years have growing aspirations to become a franchisee. This would most likely be a benefit because as you gain experience/move up the ranks, you’ll gain the knowledge to run both a restaurant and a business.

Above is a picture that illustrates the training you’ll need to go through. Of course, these are all done instore over the course of 1 – 2 years. The training includes team leader/crew development, systems management, and many other aspects that’ll help you run your own restaurant. Even if you have a decade of hospitality experience under your belt, the above training is absolutely necessary.

Lastly

The last aspect that I want to mention is that you don’t need to have the full amount for the franchise available immediately. For example, the outstanding sum after you pay the down payment. While McDonald’s does not offer to finance, it does have ties with national lenders such as banks.

What Are The Fees?

When owning a McDonald’s franchise, you can expect many fees. From staffing costs to resources, you’ll have to deal with it all. However, all of that should be paid for through the money your establishment brings in. However, before going into purchasing an establishment, you should know the fees. Besides the hefty initial fee, there will be a few recurring charges. First is 4% of your gross sales. This goes towards advertisement and marketing.

Next is rent. However, the amount you pay in rent is not a set amount. As a franchisee, you will be paying rent based on your gross sales as well. This means that if your business is doing well, you will have to pay more than the McDonald’s down the street which is earning less in sales. Due to this structure, many people look to other franchises as you can still earn a lot of money at the fraction of the rent cost.

How Much Money Can You Make?

Onto the last part and that is how much money can you make? We’ll as you can assume, running a McDonald’s franchise costs a lot of money. While they do earn a lot in sales, much of this money is gone due to fees, supplies, marketing, staff, and other expenses. This, in turn, will bring down the amount of money you take home at the end of the day. While all of this may be true, You can still earn a considerable amount from a McDonald’s franchise. The general condenses from sources such as Mashed and Fox Business say that you can expect approximately $150,000 per year. While this is a lot of money, many people expected this to be more. With an income like that, you can expect me to make your initial investment back in over 5 years. However, you will most likely earn it all back before the 10-year mark.

It is important to note that this number is not set in stone. You can make more than the stated $150,000 depending on your location. Furthermore, if you already own a successful McDonald’s franchise, it’ll be easier for you to acquire another establishment. This can greatly increase your income per year due to the multitude of large revenue streams. However, that will also require additional investment. To put it into perspective, there are many franchisees own multiple stores. When you think about it from a business standpoint, giving the establishment to someone you know is reliable is far more effective than taking a chance.

Shameed Chris Khan

Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.