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How Much Does a McDonald’s Franchise Cost?

Last Updated on January 12, 2024
Written by CPA Alec Pow | Content Reviewed by Certified CFA CFA Alexander Popinker

If you’ve ever wondered what it takes to open a McDonald’s franchise, this comprehensive guide will walk you through the entire process and break down the costs. With over 39,000 locations worldwide, McDonald’s is one of the most recognizable brands and lucrative franchise opportunities. But how much does it really cost to open one in 2024? Let’s take an in-depth look.

Opening any franchise requires a substantial upfront investment and ongoing fees. For McDonald’s, the total costs range from $1 million to $2.2 million for the franchise fee, construction, equipment, inventory, working capital, security deposits, franchise training, and more. This makes McDonald’s one of the most expensive food franchises to open. However, the potential profits make it very worthwhile for many franchisees.

Highlights of McDonald’s Franchise Investment Costs

  • Total initial investment ranges from $1 million to $2.2 million
  • Traditional small business financing is not offered. You need a $500K minimum net worth.
  • Real estate and construction costs make up 40-60% of startup costs
  • Ongoing weekly fees equal about 12% of gross sales revenue
  • Owner-operators average a 10-15% profit margin on gross sales
  • Multi-unit ownership is forbidden. McDonald’s requires owner-operators.
  • 3+ years of management experience and extended training is required
  • McDonald’s accepts less than 1% of people who inquire about a franchise

How Much Does a McDonald’s Franchise Cost?

The initial franchise fee alone for a new McDonald’s franchise is $45,000. But as you’ll see, that’s just a drop in the bucket. The final cost of a McDonald’s Franchise is between $1 million and $2.2 million. Here is a detailed breakdown of the major upfront costs involved:

  • Franchise Fee$45,000. This one-time, non-refundable fee gives you the rights to open and operate a McDonald’s location using their name, brand, system, and products. This fee is paid upfront when you sign the franchise agreement.
  • Real Estate$500,000 to $2 million. One of the biggest startup costs is purchasing the land and building or leasing the property for your restaurant. Prime locations in major metro areas can cost over $2 million just for the real estate.
  • Construction$400,000 to $1.5 million. Since you can’t just move into an existing building, a build-out or ground-up construction project is required to meet McDonald’s strict specifications. This includes the kitchen layout, equipment, dining room design, PlayPlaces, double drive-thrus, and exterior branding. Construction costs vary based on location and can exceed $1 million.
  • Equipment and Pre-Opening Costs$250,000 to $700,000. From commercial kitchen equipment to point-of-sale systems, inventory management, security, and more – opening a McDonald’s requires hundreds of thousands in equipment. You’ll also need cash reserves for salaries, utilities, permits, and operating expenses during the pre-opening phase.
  • Initial Inventory$30,000. Before opening for business, you need to stock up on all the food like burgers and french fries, packaging, beverages, and supplies needed to operate for the first few weeks. Inventory costs depend on the size of your restaurant.
  • Working Capital$300,000. This operating capital helps cover ongoing expenses like payroll, rent, supplies, maintenance, and fluctuating business costs during the first 3-6 months until the restaurant generates profits.
  • Security Deposits$3,000 to $15,000. Utility companies, vendors, government agencies, and the corporate office require security deposits for things like electricity, gas, phone/internet, supply orders, and licensing.
  • Business Licenses$30,000. Costs for business licenses, permits, liquor licenses, food service permits, fire inspections, and other legal needs vary by state and municipality.
  • Franchise Training$5,000 to $15,000 per person. The franchisee and designated managers must complete 6-9 months of hands-on training before opening, which includes room, board, tuition, wages, and travel.

As you can see, real estate and construction make up a large share of the initial investment. The cost of land and building varies greatly based on location. High-traffic areas in big cities will be significantly more expensive. Building out a McDonald’s location requires meeting strict specifications for kitchen equipment, dining room layout, PlayPlaces, double drive-thrus, exterior signage and branding, and more. This drives up construction costs.

You might also like our articles about the cost of opening a Chick-Fil-A, Popeye’s, or TopGolf franchise.

McDonald’s does not offer traditional small business financing to new franchisees. You need to provide at least $500,000 of your own capital upfront to get a McDonald’s franchise loan approved. This has long been a barrier to entry for many prospective franchisees.

According to Investopedia, McDonald’s franchisee applicants must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee. The cost of buying an existing franchise is based on the location’s profitability, renovation needs, and sales volume, and can be upwards of $1 million. Other costs to acquire an existing franchise include monthly rent, remodeling costs, open inventory, and miscellaneous opening expenses.

IFPG lists these franchisor prices:

  • McDonald’s franchise fees for 2024: up to $45,000.
  • Total initial investment range: $464,500 to $2,306,500.
  • Liquid cash requirement: $500,000.
  • Ongoing royalty fee: 4%.
  • Ad royalty fee: $4%+.

FranchiseHelp notes that to open a McDonald’s franchise requires a total investment of $1-$2.2 million, with liquid capital available of $750,000. They also list these prices:

  • Franchise fee: $45,000.
  • Royalty: 4%.

Based on the McDonald’s Official Website, generally, McDonald’s requires a minimum of $500,000 of non-borrowed personal resources to consider an applicant for a franchise. The total cost varies from restaurant to restaurant, and the minimum amount for a down payment will vary. You can find more in their franchise disclosure document.

Ongoing McDonald’s Franchise Fees Owners Must Pay

Once your McDonald’s  Fast-food franchise is finally up and running, you must pay ongoing royalties, fees, and other costs to the corporate office. Here are the main recurring expenses:

  • Service Fee – 4% of monthly gross sales. This helps cover your share of the company’s overhead costs for administrative services, corporate salaries, brand marketing, research and development, training, and other support services.
  • Rent – either a monthly base rent, percentage rent of 5-8% of monthly sales, or both. On top of your mortgage or lease payment, you must pay additional rent to McDonald’s corporate.
  • Advertising Fee – 4% of monthly gross sales. This pays for your share of McDonald’s national and regional marketing campaigns across TV, radio, print, digital, billboards, etc.
  • Royalty Fee – 4% of monthly gross sales. This fee is for the ongoing rights to use the McDonald’s name, logo, recipes, products, etc.
  • Remodeling – every 7 years, costs $500k-$1M+. McDonald’s requires franchisees to remodel their entire location when new interior and exterior designs are rolled out. This keeps locations modern.
  • Training – required for new managers at Hamburger University, plus ongoing training materials. Managers must train through McDonald’s certified program.
  • Insurance – can be 1-3% of gross sales. Franchisees must carry minimum policies approved by McDonald’s for general liability, workers comp, property, data breach, and other coverages.

In total, franchisees pay back around 12% of their gross sales to McDonald’s corporate every month between the service, advertising, royalty, and rent fees. Remodeling hits every 6-7 years for another $500,000+ major investment. Insurance, supplies, maintenance, and other costs add up too.

Strict Requirements to Qualify for a New McDonald’s Franchise

McDonald’s has very strict requirements for new franchisees. They reject far more candidates than they approve. Only the top 1% of applicants get the green light. You must meet these criteria:

  • Minimum Net Worth – $500,000 not including your home equity. This ensures you have the means to cover startup costs and operating losses.
  • Liquid Assets – $300,000 minimum in cash or assets easily convertible to cash. Liquidity is essential for covering initial outlays.
  • Business Experience – At least 3 years of prior restaurant or retail management experience is required. Previous experience as a McDonald’s shift manager or corporate manager is ideal.
  • Credit Score – 640 minimum FICO credit score. You must maintain good personal credit. Past bankruptcies or tax liens will disqualify you.
  • Financial History – No history of multiple past-due bills, significant business debt, or poor money management. Your finances will be thoroughly reviewed.
  • Time Commitment – You must actively manage the restaurant full-time. McDonald’s only accepts single-unit owner-operators, not passive investors.
  • Age – You must be at least 21 years old to qualify.
  • Background Check – McDonald’s conducts a thorough background check, including criminal history, credit, litigation, bankruptcy, tax compliance, and character references.
  • Training Completion – You must complete their 6-9 month hands-on management training program before opening. No exceptions.

McDonald’s is extremely selective in who they approve as franchisees. They want seasoned managers with the net worth, liquidity, credit, and experience to successfully operate the business full time. Candidates who don’t meet the financial requirements or lack relevant management experience will not pass the screening process.

How Profitable is a McDonald’s Franchise?

Open a McDonalds FranchiseThe big question for any franchise investor – how much money can you make owning a McDonald’s? Profitability depends heavily on your location, local economic conditions, regional costs, and competition. But here are some averages:

  • Average annual sales range from $2.5 million to $3 million per location. Top-tier restaurants can exceed $3.5 million.
  • Profit margins range from 6% to 14% of gross sales. The national average is around 10-12% for the typical franchisee.
  • Average annual net profits are $150,000 to $300,000+ per location after all expenses, royalties, and fees.
  • High-volume McDonald’s in prime locations like Walmart supercenters, malls, tourist areas, etc. can generate over $5 million in annual sales.
  • A top-tier location doing $5 million in annual sales with a 14% margin could produce $700,000+ in profit for the franchisee. But this is less common.

As you can see, average units bring in $150k to $300k in annual profit for the owner-operator after accounting for all the ongoing expenses and royalties paid back to corporate. High-volume units in prime real estate locations can earn upwards of half a million dollars or more for the franchisee. But you have to factor in your huge startup costs and long hours.

Is Buying a McDonald’s Franchise Worth the Investment in 2024?

Given the steep initial investment exceeding $1 million and ongoing weekly fees equal to 12% of gross sales, is buying a McDonald’s franchise still a wise investment? For many entrepreneurs, the answer is yes – if you have the capital and drive to run restaurant full time. Here are some of the top benefits that make McDonald’s an appealing franchise:

  • Brand Recognition – You instantly get massive brand awareness. McDonald’s is a globally recognized household name that drives customers to your door.
  • Proven Playbook – Franchisees follow a proven system for menus, marketing, operations, supply chain, technologies, hiring, training, and more.
  • Real Estate – McDonald’s corporate real estate team helps select and acquire prime, high-traffic locations.
  • Unrivaled Training – You’ll complete rigorous hands-on training at Hamburger University before opening your restaurant.
  • Marketing Machine – McDonald’s provides national and regional marketing campaigns across all major media.
  • Purchasing Power – Equipment, inventory, and supplies are purchased globally at significantly lower costs.
  • Ongoing Support – You’ll have access to support teams for operations, IT, marketing, HR, legal, real estate, and other business functions.

If you check all the financial requirement boxes and can handle being a full-time owner-operator, a McDonald’s franchise can be very lucrative. It’s far from easy, but owning this iconic brand still appeals strongly to many prospective franchisees across the globe.

Final Words

McDonald’s is currently available in more than 100 countries. If you have the net worth and stamina to own and operate a McDonald’s restaurant, the franchise ownership opportunity can be life-changing. But go into it with your eyes wide open.

While the profits can be substantial, so are the startup costs, hours, risks, and expenses. If you’re ready to serve up those golden arches in your town, now you know exactly what’s required.

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