After the brothers who founded McDonald’s faced trials and tribulations, it appears that sticktoitiveness is a prerequisite for anyone else looking to be in charge of those golden arches, even in just one location. Franchise owners often find the costs of running a McDonald’s to be astronomical, and they just as often make less than one might assume. According to GlassDoor, McDonald’s franchise owners earn anywhere between $76,000 and $142,000 per year.
That might sound decent, but the financial barrier to entry for potential franchise owners is high. The initial cost can be between $1.47 million and $2.64 million, according to Investopedia. This is determined by factors like the location — is it in a busy area with lots of foot traffic? Existing locations are generally cheaper than an entirely new spot, but if that location hasn’t been doing well, franchise owners must shell out for renovations and marketing to get customers back in.
Initial payments can amount to 25% to 40% of the location’s cost (per Fox Business), and new owners must pay this with their own non-borrowed money. They’re expected to have $500,000 in available funds, and they also must factor in a $45,000 franchising fee and three months’ worth of rent too. Those are the up-front costs; from there, rent can run as high as hundreds of thousands of dollars, depending on size and location. There’s an additional royalty fee of 4% to 5% of monthly gross sales, and owners also must pony up for every little thing the restaurant needs, from signs to the food itself.
McDonald’s owes its legacy to franchise owners
McDonald’s has been a franchise operation since almost day one. The difference between chain and franchise restaurants is that, with the former, all locations are run by one company; with the latter, franchisees can purchase locations from the parent company. The McDonald brothers founded drive-in restaurants in the 1940s. By 1948, they’d developed the “Speedee Service System” for the brand’s burgers, franchising that idea out into an initial 10 restaurants.
Then, a paper cup salesman from Chicago named Ray Kroc visited one of the McDonald brothers’ Speedee Service System restaurants and loved the idea. He developed the concept of franchising the McDonald’s name and business and opened the first franchise location of McDonald’s in Des Plaines, Illinois in 1954. Today, there are 38,000 McDonald’s locations worldwide serving 68 million customers daily, and the brand is valued at $222 million. It’s easy to understand why an entrepreneur might want to grab a piece of that success and this iconic brand, and many do: 95% of the chain’s fast-food restaurants are franchise operations.
The average McDonald’s location does make about $2.7 million each year in sales, which sounds great, until you tally up those costs. That’s how those owners eager to take part in this chain’s legacy end up with about $460,000 a year, which after taxes lands in that $76,000-to-$142,000 range. If you still dream of owning a franchise, you might want to start saving those pennies and learn money-saving hacks for your next McDonald’s meal.
