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McDonald's Franchise Cost & Fees

Date of Incorporation: 1955

Franchising Since: 1955

Headquarters: Oak Brook, Illinois

 

Business Description: McDonald’s develops, operates, franchises, and services a system of restaurants that prepare, assemble, package, and sell a limited menu of value-priced foods under the “McDonald's System.” McDonald's restaurants offer the public a high standard of quality and uniformity in food, service, and decor. McDonald's restaurants are located in freestanding buildings, storefronts, food courts, and other locations that are appropriate to McDonald's image.

 

Franchise Offer: McDonald’s offers four types of franchises:

  1. Traditional restaurant: franchise offered is located in freestanding buildings, store fronts, 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. The term of a traditional restaurant is generally 20 years.
  2. Satellite locations: The franchisee is granted the right to operate the franchise in a retail store, strip center, airport, universities, hospitals, and other diverse locations. These restaurants serve a scaled-down menu of a traditional McDonald’s Restaurant and in some cases may also serve non-McDonald’s trademarked products. The term of the franchise depends on the location.
  3. STO and STR locations: ‘Small Town Oil’ locations are situated in fuel stations/convenience stores, and operate a full-menu McDonald’s restaurant within the shared space. ‘Small Town Retail’ locations that anchor a small retail center in rural communities.
  4. BFL franchises: ‘Business Facilities Lease’ franchises grant franchises with leases that include the business facilities. Under a BFL, the franchisee has a conditional option to purchase certain restaurant assets after the first year and extend the franchise for up to 20 years after the beginning of the term.

 

Financial Assistance: Typically, no financing arrangements are offered by McDonald's. McDonald's issues an Operator's Lease for each site owned or leased by McDonald's. The Operator's Lease is a standard commercial lease under which the franchisee pays rent to McDonald's for use of the premises. The Operator's Lease does not contain any financing terms. Loans to certain franchisees for the purchase of restaurant businesses sold by the McOpCo companies and for other reasons are made by a third party lender, Lake Forest Bank and Trust Company.

 

Training and Assistance: McDonald's operates Hamburger University, the international training center for the McDonald's System. The content and duration of all operations courses, which are offered at various local sites, are revised and reconsidered from time to time to meet the needs of the franchisees. All courses and learning events are offered at frequent intervals and are designed to give franchisees specific skill sets in the various facets of the conduct of a McDonald's restaurant. Training also occurs at a McDonald's restaurant, including hands-on and self-directed learning, and is monitored by a McDonald's business consultant (or other assigned person). Typically, the training takes place on a part-time basis and spans 9 to 24 months, but a 36-month training time is not uncommon. There are no further mandatory training requirements for franchisees beyond the initial training. However, annual meetings, conventions, various workshops, and other training sessions may be conducted on an ongoing basis within each region, and McDonald’s may require franchisees to pay for the costs associated with that ongoing training. Additionally, optional courses may be offered to franchisees or their employees for a fee.

 

Territory: McDonald’s franchises contain a limited grant of authority to use the McDonald’s System in the operation of the specific restaurant developed by McDonald’s at that address. Franchisees will not receive an exclusive territory. Franchisees may face competition from other franchisees, from outlets that McDonald’s owns, or from other channels of distribution or competitive brands that McDonald’s controls. The Franchise Agreement does not contain any exclusive grant, exclusive area, exclusive territorial rights, protected territory, or any right to exclude, control, or impose conditions on the location or development of future McDonald's restaurants at any time.

 

Term of Agreement and Renewal: Traditional term is generally 20 years. The Satellite term varies, STO and STR term length is generally 10 years, and the BFL term length is generally three years. The franchisee is given no right to renew or extend the franchise after the term of the contract.

 

Obligations and Restrictions: The franchisee is required to provide full time and best efforts to and personal on-premises supervision of, the day-to-day operation of the McDonald’s restaurant business.

 

Total Number of Units: 34,925 units

 

Investment Tables:

Initial Investment:

 Name of Fee Low High
 Initial Franchise Fee  $45,000  $45,000
 Real Estate and Building – 3 months’ rent

 Base Rent:

$450

Percentage Rent:

0%

 Base Rent:

$310,000

Percentage Rent:

42.5%

 Signs, Seating, Equipment, and Décor  $722.600  $1,385,500
 Opening Inventory  $14,000  $31,000
 Miscellaneous Opening Expenses  $60,300  $61,600
 Travel and Living Expenses while Training  $3,000  $26,450
 Additional Funds – 3 months  $186,000  $322,000
 ESTIMATED TOTAL  $1,031,350  $2,182,050

 

STO and STR Locations

 Name of Fee Low High
 Initial Franchise Fee
 $22,500  $22,500
 Real Estate and Building – 3 months’ rent

 Base Rent:

$1,725

Percentage Rent:

4%

 Base Rent:

$60,000

Percentage Rent:

17.5%

 Signs, Seating, Equipment, and Décor  $561,400  $849,500
 Opening Inventory  $12,000  $25,000
 Miscellaneous Opening Expenses  $60,300  $61,600
 Travel and Living Expenses while Training  $3,000  $26,450
 Additional Funds – 3 months  $151,000  $202.000
 ESTIMATED TOTAL  $811,925  $1,247,050

 

Satellite Location

 Name of Fee Low High
 Initial Franchise Fee
 $0  $500
 Real Estate and Building – 3 months’ rent

 Base Rent:

$1,425

Percentage Rent:

4.25%

 Base Rent:

$47,075

Percentage Rent:

22.75%

 Signs, Seating, Equipment, and Décor  $50,000  $408,650
 Opening Inventory  $9,000  $20,000
 Miscellaneous Opening Expenses  $60,300  $61,600
 Travel and Living Expenses while Training  $3,000  $26,450
 Additional Funds – 3 months  $52,000  $75,000
 ESTIMATED TOTAL  $175,725  $640,275

  

Ongoing Fees:

Name of Fee Amount
Service Fee 4% of Gross Sales
Rent Varies
Advertising and Promotion Not less than 4% Gross Sales
Audit/ Inspection Fee Cost of Audit
Satellite Annual Fee $500 to $2,500
Satellite Rent Varies
STO Rent Varies
BFL Rent Varies
Relocation Contribution $50,000
New POS Integration Fee $1,000 integration fee (one-time fee); $200 annual integration fee.
Restaurant File Maintenance (RFM) Fee $150
R2 D2 Software Maintenance Fee $125
New POS Software Fee $1,600 license fee (one-time fee); $400 annual software maintenance fee.
Next Gen Cashless Fee $216 license fee (one-time fee); $154 annual maintenance fee.
Microsoft Subscription License $449
Restaurant System Management (RSM) $250
Restaurant Integrated Data Movement (RIDM) $75
e*Restaurant Fee $54
Identity Management Fee $75
Store Mail (email account) Fee $79.80
Technology Fee $1,200 annual fee.

 Date of FDD: 2013

 

The above information has been compiled from the FDD of McDonald’s.
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