We all know McDonald’s and how it is pretty much the definition of fast food today due to its popularity around the world but especially in the USA.
The company has been around for over 50 years, and it doesn’t show any signs of stopping operating anytime soon. Instead, it is pretty much the opposite.
Although the business has declined in certain countries and its competitors are winning some races, the big franchise remains attractive and a top option whenever you need some grease through your veins.
Like every other large franchise, McDonald’s started quite low with very little investment, and it was hard for its founders to keep it running during its early years. However, dreams do come true.
The question is: is the franchise worth your time and money when considering aiming for a new investment?
As expected, McDonald’s isn’t exactly a cheap franchise considering the company’s reputation and how it influences the market. However, this doesn’t mean you should discard it.
Instead, try to consider the option and make a well-informed decision based on how much you can afford—and we’re not referring to money only.
When It All Started: Back to the ’50s
The story of this brand involves more than a restaurant and some investment. It entails a huge accomplishment that wouldn’t probably be possible without the main founders: bothers Maurice and Richard McDonald.
That being said, McDonald’s takes us back to 1948 when they opened the first McDonald’s.
They managed a drive-thru barbecue restaurant in previous years and decided to convert it into a burger-and-milkshake joint.
This first restaurant is located in San Bernardino, California, and it was the second venture of the brothers into the food business. The brothers’ first venture into the food industry was a hotdog stand they owned near Santa Anita, which means they had some kind of experience in the niche.
Original McDonald’s was known for its burgers, fries, and shakes. It sold them at half the cost and half the time as other restaurants. This was achieved by changing the way a hamburger shop operates.
The McDonald’s brothers created a self-service counter instead of waiting for staff. They prepared the burgers ahead and heated them under heat lamps to keep them warm.
This is the design that McDonald’s used to be known for, and we all know it’s been “passed down” to other franchises and fast-food restaurants over the years.
Although the business was doing great, it wasn’t until Ray Kroc entered the picture that McDonald’s would come to know how big it could get.
Kroc, a kitchen appliance salesman, was impressed by the McDonald’s brothers’ business model and purchased the rights to start franchising the restaurant. However, the brothers already had a few franchise restaurants licensed in Arizona and California at that time, but this doesn’t mean Kroc would contribute big time.
He founded McDonald’s Corporation in 1955 and opened his first McDonald’s franchised restaurant in Des Plaines, Illinois.
Although Richard McDonald and Maurice McDonald founded the first McDonald’s restaurant and the foodservice business model, it was Kroc who created McDonald’s as we know it today.
He took the restaurant and made it mass-market. Kroc bought the company from its founders in 1961 and managed it himself.
Therefore, the current greatness of the restaurant and brand is to be attributed to this man.
Don’t Miss Anytime: McDonald’s Timeline & How Everything Happened
One of the most striking aspects of McDonald’s corporate history can be argued to be how little it has in modern history.
McDonald’s was a pioneer in the establishment of its business model, and the company’s modern history stands out for the few notable items it offers.
McDonald’s has enjoyed rapid growth for almost 70 years. New restaurants have been opening at an increasing rate, despite losing customers.
But besides the previous information about Kroc and its founders, it is important to know how everything took place and the changes the company has gone through to remain at the top of the industry:
- 1937: The McDonald’s brothers open their first hot dog stand. They also enter the food service industry as a group, which will mark some big founders’ start.
- 1940: The first McDonald’s in the world opens its San Bernardino barbecue restaurant, as previously mentioned.
- 1948: The McDonald’s brothers transform their restaurant into a hamburger/milkshake restaurant and are also credited with creating the modern fast food service model. Later memoirs would attribute the brothers’ process to Henry Ford. They modeled their restaurant after Ford’s assembly lines in Detroit.
- 1953: McDonald’s opens its very first franchise in Phoenix. Although they didn’t focus on McDonald’s in the early years of their company, Richard McDonald and Maurice did open several restaurants in Arizona and California.
- 1954: Ray Kroc visits McDonald’s to see why a small hamburger shop requires so many milkshake machines. He purchases the rights to franchise McDonald’s across the country.
- 1955: Kroc opens the first McDonald’s franchise restaurant.
- 1956: Harry Sonnenborn and Kroc developed a financial model that McDonald’s would own land where its franchisees built their restaurants. This model is still in use today and is often cited as one of the greatest financial decisions made by the company.
- 1959: Kroc names Sonnenborn as the first McDonald’s CEO.
- 1961: Kroc purchases the McDonald’s brothers’ rights for $2.6million, which would be about $24 million as of 2022.
- 1962/63: McDonald’s unveils its two most well-known logos, the golden arches, and Ronald McDonald.
- 1965: McDonald’s opens its first public stock.
- 1967: Kroc moves Sonnenborn out of the picture and assumes the role of CEO. McDonald’s opens the first McDonald’s international restaurant in Canada.
- 1974: Opening of the first Ronald McDonald House.
- 1984: Kroc dies.
- 1990: McDonald’s opened a restaurant at Pushkin Square in Moscow. This is considered a symbol of the end of the Cold War because of its cultural significance.
- 1993: McDonald’s opens its first McCafé in Australia. This is McDonald’s first attempt at running a coffee shop.
Starting in 1996, the brand would enter a period of rapid growth considering how it opened over 20k franchises or restaurants between 1988 and 1996.
Thanks to this, the business can become a large corporation known as a traditional business model and is compared to new companies joining.
In 2000, McDonald’s opened over 11.000 new restaurants in countries other than the USA, expanding its presence worldwide.
New additions include countries in Latin America and Asia and the expansion of their menus that started to offer breakfast and new items or limited-time ones.
Investing in McDonald’s Franchise – Cost & Expenses
We know what people think: McDonald’s is way too expensive, and we agree.
However, you would be surprised by the chances the company gives you if you decide to start a franchise with them.
As of today, the investment surpasses the million dollars in the USA and around the world, which basically means: you DO need lots of money for it.
Due to the brand’s value and how it has only grown over the past few years, it is hard to invest as it is 99% guaranteed success.
This makes the company a good investment if you have the money for it.
That being said, where should we start with prices?
The liquid capital required is set at $500.000, and the investment starts at $1.3 million.
But what about the other stats and needs? You can follow this list:
- Franchise fee: $45.000.
- Royalty: 4%.
What do this price and investment include, and why does it go so high with the final investment (close to $2 million most of the time)? See below:
- The initial franchise fee remains.
- Real estate and building (3 months’ rent): Base rent is set at $229.000 and the percentage rent at 28%.
- Signs, seating, equipment, and décor: $1.5 million.
- Opening inventory: $39.000.
- Miscellaneous opening expenses: 58.195.
- Travel and living expenses while training: $37.100.
- Additional funds for three months: $355k.
When going for the high expectation, the statistics above will actually go over $2.2 million. However, you can purchase an existing restaurant instead of going for a brand-new investment with all the previous fees.
First, you can skip the franchise fee as it already exists, and the same goes for the real estate and building rent.
Prices for the rest are much lower and go down over 50% of the actual expense for a new franchise.
With this in mind, you can end up investing about $500.000 total for the franchise if you come to an agreement with the previous owner and the company.
What Does McDonald’s Franchise Include as a Whole?
Although we went over a breakdown of the prices you will be paying; each franchise sets different standards and resources for its franchisees.
In other words, you get more than just inventory and seating or other necessities that are basic to get started.
The fees and expenses include others like advertising, service fee, and more, which is what you need to consider:
- Service fee: 4% of gross sales.
- Advertising and promotion: about 4% of gross sales.
- Satellite annual fee: between $500 to $2.500.
- Relocation contribution: $50k.
- Point of Sale – Core product: $1.6k license fee (one-time fee) or $650 annual fee.
Other annual fees include localization, employee engagement platforms, restaurant systems management, integrated data movement, store mail, digital global mobile app, and much more.
This means your franchise needs to make quite the money to pay for these expenses and ensure you cover employees’ salaries and your profits.
But leaving aside what this investment includes in terms of more fees, this is what you get from the company:
- As McDonald’s operates Hamburger University, the international training center for their system, training is provided.
- Territory granted: you get a limited grant of authority to use the McDonald’s system in the unique address they give you.
- Financial assistance during the first year and then progressive when needed.
Pros & Cons: Why We Think It May Be a Good Option
After confirming this can be expensive but also cheap when done right, it’s a matter of determining whether you want to join this industry or not.
More than thinking about McDonald’s, you need to consider if you’re ready to take the responsibility of owning a fast-food restaurant, which has proven to be quite hard to manage over the decades.
Now, our actual job is to help you look at every detail when it comes to the entire franchise, so what we can teach you right now is to consider the pros and cons:
- It’s known as the fast-food restaurant that started it all, which means it is reliable and the success rate is quite high.
- They offer to finance both a new franchise or buying an existing one.
- Training, support, and materials are provided for both marketing and technical needs.
- The company’s international marketing model does most of the job after being established.
- Being able to buy an existing franchise is an option that isn’t given by other fast-food chains.
- Despite COVID-19 and additional issues, the franchising company continues expanding.
- Reputation, awareness, and everything around a brand is positive and bring great clients your way.
- It can be cheaper than starting your own business in this industry.
- It can be quite expensive when going for a new franchise (because maybe there’s none for sale near you).
- Ongoing fees are also a problem considering there are over ten different items to pay annually.
- Absentee ownership is not available.
- Royalties can go higher depending on your location or how your franchise is performing.
- You never own a franchise entirely. You need to follow the rules and terms and renew the contract every 20 years. If not, you lose all your rights.
- You can’t work as a part-timer as the owner since this requires time.
So far, we know people will feel a bit scared of the cons, considering how they involve money above anything else. However, we still consider McDonald’s a good alternative based on other franchises in the industry.
This is what we said before: you need to determine if you truly want to be in this business.
It is about knowing if you can afford the investment and ongoing costs, if you are ready for this restaurant and if you want to follow their terms and rules.
Some people DO consider opening their own fast-food restaurant because they can start small, but this depends on your location’s competitors.
Go over the details and the ideas you have once more, and then start making your decision.
Should You Invest? – We Feel There Are Better Options
You can always place a wager on businesses that have been operating for decades, regardless of how expensive they may be. McDonald’s is an example of a profitable bet if you have the funds and want to, somehow, go for the safe option even when it is expensive.
Franchise owners who have proven how the business model work are the ones bringing success rates to the sky. Franchisees making a lot of money will see the company grow naturally, and it all depends on how you planned this journey for yourself.
We’re trying to tell you that this is worth it, but there’s still a problem, which is the fact that it is costly and requires a lot of work.
While we don’t discourage hard work, we would recommend you learn as much as you can before going for the big jump.
We prefer to work on things that make us tired but for the goal of working less in the future and will keep going like this.
There are many business models available, so it is important that you research and take the time to go over them before deciding on a franchise opportunity.
It is smart to first try online alternatives. You might wonder what we recommend. It’s easy: Lead generation.
This digital business model allows you to generate leads right from your home. It doesn’t require additional staff or real estate. This will enable you to save money while still allowing your business to run the way you want.
It’s simple, and even though you might need employees in the future, this is all you need right now:
- You can support local businesses or small businesses by choosing a niche. You can even promote a franchise (yours or from third parties).
- Reach out to them to offer to build a website.
- Once you have closed the deal, you can begin building the website.
- You must rank your site on Google with organic methods and natural options to generate traffic.
- Once your website is up and running, you can begin to convert traffic into leads.
- You get paid per lead, and this just turns like a passive income once you’re ranking high and getting calls.
Passive income doesn’t require you to do the same thing twice. Once you have completed the setup and generated traffic, you can now wait for companies that will pay you.
Training and tools will be required. You will need to invest in training and tools, which is usually much less than any franchises or large options.
Do you not know where to start? This training program is the key to success!
Here’s Our #1 Recommended Online Business Model:
Interested in starting an online business to build passive income? Check out the local lead gen business model. Click here to learn more.