McDonald's is QSR's Top Fast-Food Franchise For Sale. Here's Why.

With an estimated 25% of total U.S. franchise establishments across all industries, fast food is the most common franchising segment. The segment encompasses plenty of different brands with their own unique offerings and business models. 

So, which is the best one to buy? That really depends on what you’re looking for in a business. But according to QSR Magazine’s 2023 Top 50 Fast-Food Chains report, it’s McDonald’s.  

The QSR report notes that McDonald's is undergoing a significant transformation known as "Accelerating the Arches," focusing on modernization, core menu items, and digital, delivery, and drive-thru services. Despite challenges like losing stores in Russia, their systemwide sales grew by almost $20 billion since the start of COVID, with a 25% increase in U.S. comparable sales in 2022. They gained six net locations in 2023, marking the first domestic growth in eight years. 

McDonald's has also been introducing product enhancements like softer buns and gooier cheese for popular items, and testing new ventures like the meatless McPlant sandwich and chicken Big Mac. However, they faced macroeconomic pressures, leading to reports of layoffs as part of organizational restructuring to streamline operations and invest in growth. 

Here are a few things to know when it comes to owning a McDonald’s franchise. 

A Global Presence 

McDonald's operates over 40,800 locations in 100+ countries, with approximately 93% of its restaurants owned and operated by independent local business owners. The franchise aims to expand to 50,000 restaurants globally by the end of 2027, which would mark its fastest unit growth in history. 

In 2023, McDonald's launched a spinoff chain called CosMc's, starting with a pilot location in Bolingbrook, Illinois. This new concept is focused on beverage creations alongside a limited selection of McDonald's favorites. By the end of 2024, McDonald's plans to open about 10 CosMc's pilot locations in the Dallas-Fort Worth and San Antonio metro areas.

The Business Model

McDonald's offers two main franchise structures: conventional franchise and development license or affiliate, each with different financial arrangements. Additionally, McDonald's provides four types of franchises: Traditional Restaurant, Satellite Locations, Small Town Oil and Small Town Retail Locations, and Business Facilities Lease franchises, catering to various types of locations and business models. 

One notable distinction of McDonald's is that it typically acquires real estate and buildings for its locations, leasing them to franchisees, which differs from many other franchise systems where franchisees are responsible for acquiring real estate and building structures.

The Numbers

Opening a McDonald's restaurant entails an estimated financial range of $1.5 to $2.5 million for initial setup and the first three months of operation, along with a liquid cash requirement of at least $500,000 and a 5% royalty fee. McDonald's offers two types of restaurant purchases: new or existing. The down payments—40% for new restaurants and 25% for existing ones—cannot be sourced from borrowed funds. Additionally, the franchise fee to open a McDonald's restaurant is $45,000.

Profitability for McDonald's franchises varies depending on area-specific factors such as demographics, location, and operational efficiency. Since many McDonald's locations operate within other businesses (superstores, gas stations, and even theme parks), profitability is heavily influenced by the location.

While the financial investment is substantial, the potential for profitability remains high, especially given McDonald's focus on modernization and expansion. As the fast-food space continues to evolve, McDonald's remains a top player in the industry. 

We can help you find the right franchise for you at the right price point with your best interests at heart at the 1851 Growth Club. Reach out today to start building your franchise legacy!

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