Franchise Deep Dive: McDonald’s Franchise Costs, Fees, Profit and Data

LAST UPDATED: 1/2024

FRANCHISE WEBSITE: https://www.mcdonalds.com/us/en-us/us-franchising.html 

NUMBER OF LOCATIONS: 40,800+

REPORTED COST TO GET IN: $1.5–$2.5 million

REPORTED ROI (Item 19): $680,000–$13,625,000 (2022 FDD)

McDonald’s is arguably the most famous fast-food chain in the world. It began back in 1954 when a man named Ray Kroc discovered a small burger restaurant in California. 

Kroc wanted to build a restaurant system that would be famous for providing food of consistently high quality and uniform methods of preparation. He wanted a brand that served burgers, fries and beverages that tasted the same in Alaska as they did in Alabama.

Today, the chain serves those products to over 69 million people every day.

How Many McDonald’s Locations Are There? 

McDonald’s has over 40,800 locations in over 100 countries. Approximately 93% Of McDonald’s restaurants worldwide are owned and operated by independent local business owners.

By the end of 2027, the franchise plans to expand to 50,000 restaurants around the world. If achieved, this period of restaurant expansion will be the fastest unit growth in the history of McDonald’s. 

In 2023, McDonald’s introduced a spinoff restaurant chain, CosMc’s, As part of a limited test, the first CosMc’s location opened in Bolingbrook, Illinois. The restaurant focuses on beverage creations with a small lineup of food, including a select few McDonald’s favorites. By the end of 2024, the brand plans to open approximately 10 CosMc’s pilot locations across the Dallas-Fort Worth and San Antonio metro areas. 

What Is the Business Model?

While McDonald’s is a widely recognized global brand, the vast majority of restaurants — more than 80% worldwide and nearly 90% in the U.S. — are owned and operated by approximately 5,00 independent, small- and mid-sized franchisees. 

McDonald’s has the following types of franchise structures

• Conventional franchise: McDonald’s either owns the land or leases it for the long term under the conventional franchise model. Under the agreement, the franchisee pays for other items such as seating, equipment and décor.
• Development license or affiliate: Under this type of franchise agreement, the franchisee also provides capital for real estate. Typically, under the agreement, McDonald’s does not invest capital and earns a royalty plus an initial fee.

Additionally, McDonald’s offers four types of franchises:

• Traditional Restaurant: This type of franchise is located in freestanding buildings, storefronts, food courts, and other locations. The franchisee operates a full-menu restaurant, offering the public a high standard of quality and uniformity in food and service.
• Satellite Locations: This model is operated in places such as retail stores, strip centers, airports, universities, hospitals, and other diverse locations. These locations serve a scaled-down menu of a traditional McDonald’s Restaurant and, in some cases, may also serve non-McDonald’s trademarked products.
• STO and STR Locations: ‘Small Town Oil’ locations are located in gas stations or convenience stores and operate a full-menu McDonald’s restaurant within the shared space. ‘Small Town Retail’ are locations that anchor a small retail center in rural communities.
• BFL Franchises: ‘Business Facilities Lease’ franchises grant franchises with leases that include the business facilities.

One notable difference between the McDonald’s business model and many other franchise systems is that McDonald’s itself acquires the real estate and building for its locations, then franchises the right to operate the location with the franchisee paying rent to McDonald’s. In a large percentage of other cases, the franchisees of a system are responsible for acquiring the real estate, as well as the construction of the building or any necessary renovations. 

How Much Can McDonald’s Franchise Owners Make?

McDonald’s franchises typically turn a profit, but the degree of profitability for a given McDonald’s hinges on area-specific factors like demographics, location and operational efficiency. Since many McDonald’s locations exist within other businesses, like a McDonald’s inside a theme park, for example, profitability remains heavily dependent on location.

In January 2022, McDonald’s U.S. franchise restaurants reached record average cash flows as sales soared at locations around the world. CFO Kevin Ozan reported that U.S. franchisees reached an average of more than $500,000 per unit. This represents a growth of 50% over the previous three years and an increase of $125,000 since 2021. 

According to Item 19 on the 2022 FDD, insights for traditional franchised locations include: 

• Of the approximately 11,746 domestic traditional franchised McDonald’s restaurants opened at least 1 year as of December 31, 2021
  • approximately 78% had annual sales volumes in excess of $2,600,000
  • approximately 71% had annual sales volumes in excess of $2,800,000; and
  • approximately 63% had annual sales volumes in excess of $3,000,000.
• The average annual sales volume of domestic traditional franchised McDonald’s restaurants open at least 1 year as of December 31, 2021 was $3,347,000 during 2021.
• The highest and lowest annual sales volume in 2021 for these domestic traditional franchised McDonald’s restaurants was $13,625,000 and $680,000, respectively.
• The median annual sales volume of domestic traditional McDonald’s restaurants open at least 1 year as of December 31, 2021, was $3,328,000 during 2021.

How Much Does It Cost To Open a McDonald’s?

The estimated financial range for the initial set up and first three months of operation for a new McDonald’s restaurant ranges between $1.5 and $2.5 million. McDonald’s also has a liquid cash requirement of at least $500,000 and a royalty fee is 5%. 

McDonald’s offers two types of restaurant purchases: new or existing. For new restaurants, the down payment is 40% of the total cost. For existing restaurants, the down payment is 25% of the total cost. And the down payment cannot come from borrowed funds. 

What Is the Franchise Fee for McDonald’s?

The franchise fee to open a McDonald’s restaurant is $45,000. 

Who Is the Leadership of McDonald’s?

• Chris Kempczinski – President and CEO
• Skye Anderson – President, Global Business Services
• Joe Erlinger – President, McDonald’s USA
• Jill McDonald – President, International Operated Markets
• Jo Sempels – President, International Developmental Licensed Markets
• Jon Banner – Executive Vice President, Global Chief Impact Officer
• Ian Borden – Executive Vice President, Global Chief Financial Officer
• Heidi Capozzi – Executive Vice President, Global Chief People Officer
• Morgan Flatley – Executive Vice President, Global Chief Marketing Officer and New Business Ventures
• Marion Gross – Executive Vice President, Global Chief Supply Chain Officer
• Desiree Ralls-Morrison – Executive Vice President, Global Chief Legal Officer and Corporate Secretary
• Brian Rice – Executive Vice President, Global Chief Information Officer
• Manu Steijaert – Executive Vice President, Global Chief Customer Officer

What Helpful Articles Can I Read To Learn More?

• Start a McDonald’s Franchise in 2024
• The Cost of Buying a McDonald’s Franchise
• How Profitable is Owning a McDonald’s Franchise?
• McDonald's Franchise Creates 'CosMc's' Spinoff Fast Food Concept
• McDonald's to Hike Royalty Fees for New Franchisees, Marking First Increase in 30 Years

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