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The McDonalds Franchise: A Firm Financial Commitment

Written by: Serrgio Wilson

Article Overview: This gives gives a brief overview of the financial obligations of buying the most widely known brand in the world McDonalds

The McDonalds Franchise: A Firm Financial Commitment

The golden arches, the fries, the burgers and Ray Kroc are what most people think of when they think of McDonalds. The name is a brand that’s known around the world. So many people flock to McDonalds everyday for food by themselves or with their families. So many potential Entrepreneurs want to put their name and their money in this seemingly guaranteed franchise. However many don’t know the process and most don’t realize the amount of work and money that’s involved in getting the golden arches up and running. This is why I will provide information on McDonalds franchise opportunity and all that it requires from day 1 of interest to the grand opening of a site.

Entrepreneur.com makes a list every year of the top franchises in America. To be put on this list the franchise has to fulfill several requirements from cost of franchise to future ROI. In this list they like to highlight the top 10 and since it’s inception McDonalds has held in the list. Currently it’s ranked #2 only to Subway, this might come as a surprise but studies are showing that many Americans are beginning to alter their eating habits to a more health conscious diet. In doing this many American’s are trying to sway away from the grease of fast foods.

However McDonalds holds a firm second place. Now that we know where this brand stands you might want to know the process of becoming a franchisee. First of all, as a heads, up the process is quite lengthy and very selective. So many people want the name because of the perceived notion that with McDonald’s you can’t go wrong. First they want prospective franchises to have business experience and a substantial sum of liquid capital. Once your able to fulfill those requirements then you must proceed through a variety of steps that include suitability, site approval and lastly McDonald University. This is where you will learn all about the company and where you will learn how every job is done in relation to a restaurant. Once all that is done then you can get to the hard part, the money.

Since McDonalds knows that with their name the franchisee will make a considerable amount of money in the future they make you pay a hefty cost upfront. One must have at least $250K of liquid cash. Once they have that then they will need to have access to upwards of 1.5 million dollars in order to get the entire operation going. Once everything is financed and your restaurant is open and going you will then have to pay a recurring royalty fee of anywhere between 10-15%.

The cost is quite large upfront for McDonalds but once your restaurant is up and going studies show that franchisees earn upwards of $250K and more in earnings. To make that even better studies also show that 8 in 10 franchisees own more than one location. Furthermore McDonalds is a great franchise to have but the major setback is that it can cost an enormous amount of money.

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Article Tags: financial commitment, financial obligations, mcdonalds, mcdonalds franchise
Referred by: http://jaykubassek.com



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
A good screening process for new hires - Another good screening method is the one McDonalds uses for its new employees. Applicants are subjected to two interviews (i.e. the first one by an assistant manager and the second by the store manager) and they have a "Crew Trainer" work with them for his/her first 3 shifts, each one being only 3 hours in duration. And at the end of the training period, an evaluation is done on the new hire and if he/she passes, there's a 6 month probation period before he/she is considered an "official" employee with full benefits (e.g. granted an employee card that allows them to get 50% off their meals at any McDonalds store location). And during the probation period, new hires are evaluated multiple times by various senior staff members (to ensure there's no biased performance reviews).


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