This incident is not disclosed in the McDonalds FDD Franchise Disclosure Document (nor is it required to be disclosed):
In early 2009, authorities reported a 27-year old woman in the State of Florida called 9-1-1 not once, not twice, but three times after McDonalds' employees told her they ran out of Chicken McNuggets. Although the woman was cited for abusing the 911 emergency network, the incident shows just how deeply ingrained the Mighty Mac is in our national psyche. With over 30,000 locations and fifty-plus years in the burger business, the McDonalds brand continues as the most recognized and successful franchise in the world. It is also said to be the world's largest restaurant company.
The McDonalds Franchise Fee
Not surprisingly, before considering anything else many would-be owners ask themselves questions like: How much does a McDonalds franchise cost? How can I buy a McDonalds franchise? How much does a McDonalds franchise owner make? What are McDonalds franchise profit margins? They hear McDonalds franchise earnings and profits are substantial and the cost to buy a McDonalds franchise is $45,000 - an investment that's within their franchise affordability range.
As with most things in life, a little information is a dangerous thing. While it's true McDonalds charges a $45,000 franchise fee, this is only the initial fee for licensing rights - the upfront fee charged to join the network and access the McDonalds System. There's a LOT more financial commitment and cost involved to buy a McDonalds franchise after that.
All the need-to-know info is disclosed in precise detail in the mammoth 375-page McDonalds FDD Franchise Disclosure Document. This FDD is very difficult to obtain but can be ordered using the PayPal link below. On top of the investment, there are other franchise qualifications to being a McDonalds franchise owner besides just having the money. Things like community involvement, education, work history, business sense, common sense, etc.
Different McDonalds Franchise Ownership Options
According to McDonalds, there are two different options to buy a franchise and enter the McDonalds system. McDonalds franchises for sale are apparently available under either option.
The first, and most frequently used method to buy a McDonalds franchise for sale is by buying an existing restaurant. Even here there are different ways to go. One is to buy a McDonalds restaurant that's operated directly by McDonalds corporate and is up for sale - a company-owned restaurant sold as a turnkey franchise. As mentioned below, McDonalds announced plans to sell off twenty-one percent (21%) of its 7,000 company-owned restaurants as franchises over a three-year period. So that's a lot of McDonalds franchises for sale - 1,470 to choose from - all with an established customer base, financial track record, etc.
Still under the most frequently used method to buy a McDonalds franchise (an existing restaurant) the second path is to buy an existing McDonalds for sale that's being sold by a McDonalds franchise owner/operator. Perhaps the owner is retiring, downsizing the number of McDonalds franchises he or she owns, or just wants to cash out and go on a permanent vacation. A list of the McDonalds franchise owners is an exhibit to the FDD. You can buy the entire McDonalds FDD or just the list of franchise owners (sold separately). See below for PayPal details.
Besides buying an existing restaurant, the other, (and according to McDonalds) infrequently used method is by obtaining licensing rights for a brand new McDonalds restaurant.
This is an infrequently used way because (a) most of the prime and secondary locations are already developed; and (b) with a new restaurant, McDonalds usually buys the land, builds the restaurant shell and leases the property to the franchise owner-operator over the twenty-year term of the McDonalds franchise agreement. Given this sizable investment, and the fact that McDonalds is investing in more lucrative, international markets these days, like China and Russia, getting a new U.S. McDonalds franchise doesn't seem very likely.
Let's consider these options in reverse order, since McDonalds provides few financial details on the first, most frequently used method of buying an existing McDonalds restaurant.
Buying A New McDonalds Franchise
For franchise licensing rights to a standard new McDonalds, the company charges its standard $45,000 initial fee.
If the franchise is for a McDonalds located in a gas station or convenience store (called a McDonalds STO), the franchise fee is reduced to $22,500.
There are also McDonalds franchises located in retail stores, like Walmart as well as in hospitals, universities, airports, etc. These are called Satellites. For Satellites, the McDonalds franchise fee ranges from $0 to $500.
The other cost categories associated with establishing a new McDonalds franchise include real estate, signage, seats, equipment an decor, opening inventory, training and working capital. These are broken out individually in Item 7 of the McDonalds FDD.
For a Satellite McDonalds, the total is $118,375 to $928,400. For a McDonalds located at a gas station or convenience store, the total is $680,750 to $1.2 million. And the standard, new McDonalds restaurant clocks in with an investment total of $1 million to $1.88 million.
So, a new McDonalds franchise, depending on the model selected, can range from a low of $118,375 to a high of $1.9 million.
Per McDonalds, the factors impacting new restaurant costs are: size of the McDonalds restaurant facility, area of the country, pre-opening expenses, inventory, selection of kitchen equipment, signage, style of decor and landscaping.
A detailed breakdown of the initial investment costs into different categories (including a working capital component) for each of the three McDonalds franchise models is provided in Item 7 of the 383-Page McDonalds FDD Franchise Disclosure Document for 2010.
Of the total investment for a new McDonalds franchise, an owner/operator must pay forty percent (40%) of the entire cost from liquid, personal assets and may finance the remainder from traditional lending sources.
Buying An Existing McDonalds For Sale
What about the most frequently used method of buying a McDonalds franchise for sale - by purchasing an existing restaurant from a current McDonalds franchise owner or one that's company-owned by McDonalds and sold as a turnkey franchise? Unfortunately, details about how much this McDonalds franchise costs are not specified, other than the following statement:
"The purchase price of an existing restaurant varies and is dependent upon a number of factors including sales volume, profitablity, occupancy costs, reinvestment or improvement needs, competition and location."
To get a better handle on this statement, when "turnkey"(existing, for sale) franchises are sold in any industry (McDonalds included) most of the purchase price reflects the value of the business as a going concern with goodwill, a business generating (in the case of McDonalds) $X Million in sales and $Y six-figures in profits.
A typical McDonalds restaurant that's been operating for at least one year generated $2.3 million in annual sales in 2008, with profits in the low six-figure range. Based on my experience, I estimate the sales price of an existing McDonalds franchise (or company-owned restaurants sold as turnkey franchises) to be in the $2 million to $6 million range, plus or minus, depending on their sales, profit margins, historical trend, etc.
For existing turnkey franchises, twenty-five percent (25%) of the purchase price must come from liquid, personal assets and the balance can be financed from traditional lending sources. So, if you are buying an existing McDonalds restaurant for $4 million, for example, you will need $1 million in liquid personal assets and the ability to raise another $3 million to cover the total purchase price.
McDonalds Sales, Profits and Expenses - Item 19 of McDonalds FDD
With all this investment, what does a McDonalds owner earn? What are McDonalds franchise owner profits? The franchise earnings question is something most franchise companies don't answer, and usually for a reason - their earnings picture doesn't look very . . . appetizing. McDonalds, on the the other hand, gives detailed financial information in its 383-page FDD Franchise Disclosure Document because it has a good story to share.
According to the McDonalds FDD Item 19, the average sales volume of traditional restaurants in the U.S. open at least one year was $2.37 million in 2009. The highest sales volume for a U.S. McDonalds in 200 was $9.3 million (the "star" performer). The lowest performing restaurant clocked in at $387,000.
Item 19 of the McDonalds FDD goes on to list proforma financial results for restaurants that hit three different sales levels - $2 million, $2.2 million and $2.4 million, showing cost of sales, gross profit and operating profit at each level. Operating profits are in the mid six figures at each sales level.
Unlike other franchise companies with similar investment levels, McDonalds steps up to the plate and provides detailed franchise earnings information in Item 19 of its FDD. Other franchise companies, in comparison, "elect" to say nothing in Item 19, reminding one of the famous line in "The Treasure of the Sierra Madre," John Huston's 1948 classic movie: "Where are our badges? We don't need no badges. . . We don't have to show you no stinking badges."
A word to the wise: insist on seeing their stinking badges. Jumping into a big, black financial hole never makes any sense, except to unscrupulous companies that are not as forthcoming as McDonalds when it comes to providing franchise earnings information.
Does McDonalds Allow Investors?
Per McDonalds, it franchises restaurants to individuals who personally operate their restaurants and are involved in day to day operations. McDonalds does not franchise to partnerships and does not allow investors.
McDonalds On The Move
In late 2007, McDonalds announced plans to sell off 21% of its 7,000 company-owned restaurants as turnkey franchises over a three-year period.
The announcement begins a strategic plan of reducing its restaurant ownership so McDonalds can funnel more resources into fast-growing markets such as China, Russia and India. McDonalds CFO said on a per-restaurant basis, Russia is the company's most profitable market.
This means there are a lot more existing McDonalds franchises for sale - both by McDonalds corporate as part of its diversification strategy well as by existing McDonalds franchise owners.
Ready to get out your checkbook? Even if you are, there's a lot more franchise qualifications for obtaining a McDonalds than just having the investment capital.
Applying For A McDonalds Franchise - Tips From A Franchise Expert
Before applying for a McDonalds franchise, I recommend you proceed with the following three steps:
Step One - learn as much about the franchise program as you possibly can. The best way to do this is by a careful review of the entire 383-page McDonalds FDD Franchise Disclosure Document, which you can obtain at best pricing on the net through our firm (see PayPal link below).
Step Two - using what you learned from the McDonalds FDD, print out (but don't send to McDonalds yet) the McDonalds Franchise Application form. Important: just download the McDonalds Franchise Application PDF file , then fill it in manually. Don't file the online application form with McDonalds. If you do, you'll be missing an important opportunity (see step 3). Next, proceed to step three, below.
If you are looking for the McDonalds franchise application for a specific country, contact us for details using our Franchise Attorney contact page.
Step Three - before submitting your franchise application, send your draft to me by email so I can review your application and help you fine-tune the information and narratives, based on my three decades of franchise industry experience with companies including McDonalds. That way, your franchise application will be submitted in the best possible way. This strategy will give you the best chance of standing out and competing against the many thousands of other McDonalds franchise applications.
You only get one chance to make a good first impression. A review and fine-tuning of your McDonalds franchise application by a franchise expert can go a long way towards making the best possible first impression.
Getting The 2010 McDonalds FDD - Franchise Disclosure Document - - - - - a 383-page Treasure Trove of Information
The McDonalds FDD - a 383-page Treasure Trove of Information
The 2010 McDonalds Franchise Disclosure Document is a treasure trove of detailed information and is very difficult to obtain. Weighing in at 383-pages, it provides detail and answers to questions about the McDonalds franchise program. To order your copy of the entire McDonalds FDD click on the PayPal link below for best pricing on the net.
After payment is received, we email you the entire FDD as three separate PDF files. We recommend you have (or establish) a free Gmail email account as this will accept very large PDF files, like the McDonalds FDD files. Email accounts like Yahoo and Hotmail will not accept these large PDF files. Sending the McDonalds FDD is not automatic after you pay with PayPal. We have to receive notice of your payment, then our office will email the document. So if it takes a little time, please bear with us.
The 383-page McDonalds FDD is a treasure trove of information about the franchise program - the three different investment models (regular McDonalds, McDonalds Satellites and McDonalds STO), the franhise relationship, the McDonalds investment and working capital needs for each of three investment models, the intensive franchise training program, cost of sales, gross profit and operating profit of McDonalds franchises, etc.
The FDD also contains 3 years of audited financial statements on the franchise entity offering McDonalds franchises and a 161-page list of McDonalds franchise owners - their names, store addresses and phone numbers - as provided by McDonalds. Also attached as an exhibit to the FDD is the actual 14-page McDonalds franchise agreement.
Want to buy just the McDonalds franchise agreement? The McDonalds franchise contract can be purchased separately and is a true work of art - significantly smaller (and fairer) than most other franchise agreements used in the franchise fast food industry.
Our $180 price for the entire 383-page McDonalds FDD is also reasonable - less than fifty-cents a page and $40 to $50 less than what you will pay for the FDD using anyone else, including other FDD providers.
Want to purchase just the 161-page list of McDonalds franchise owners? Click the PayPal link below for best pricing on the net. The list is compiled by state and emailed to you as a PDF file.
Want to order just particular Items of the FDD? Like Item 19 Financial Performance Representations or Item 7 Estimated Initial Investment or one of the exhibits to the FDD - like the actual 14-page McDonalds franchise agreement (makes one wonder why other franchise companies require 50-page or 100-page franchise agreements when McDonalds gets by with only a 14-page franchise agreement), click on the PayPal link below to order individual items of the McDonalds FDD.
Want to order info on other franchise companies?
Want to purchase existing franchise disclosure documents on other companies? Or just the franchise owner lists for companies like Burger King, KFC, Arby's etc? This is one of the best ways for you to begin your franchise due diligence. It's also the best way to get an inside track on which existing franchises are for sale and the best of the bunch. Click on the email link at the bottom of the page and let us know what you need and we will respond.
Order The McDonalds FDD Here - Click On The PayPal Link
Order just the List of McDonalds Franchise Owners - Click on the PayPal Link Below
Order Single Items of the McDonalds FDD - click the PayPal Link below
They Prayed and God Answered - With A McDonalds Franchise
Parishioners at Brentwood Baptist Church in Houston, Texas are singing the Lord's praises right along with various McDonald's slogans. The church is the first in the nation to have a McDonalds hamburger franchise on its grounds.
The Rev. Joe Ratliff, Brentwood's Pastor, came up with the idea for the McDonalds at Brentwood. He took his brainstorm to Ernest Redmond, a Deacon at the church and owner of four McDonalds restaurants.
The two developed a business plan showing the closest McDonalds was three to five miles from the church, the traffic patterns in the community as well as the foot traffic at church. Every Sunday thousands of people flock to the church's three services. During the week, 700 to 1,000 people are present each night for Bible study, Boy Scout meetings, choir rehearsals, and other church functions. There is also a high school and an elementary school elementary school just two blocks from the church.
The business plan was presented to McDonalds corporate, and in May 1999, the church was given the go-ahead to build the franchise. The new restaurant and drive-through window was then allotted 3,000 square feet on the Church’s Learning Center's grounds.
A limited partnership between Redmond and the church was created. Redmond eased the approval process by using his existing McDonalds franchise license, and agreed to oversee management of the business. Men of the cloth and McDonalds – the Lord does provide.
McDonalds In China
Not impacted by the current recession, McDonalds sales and profits continue to rise in the U.S. and in international markets. While other companies are laying off employees in droves, in April, 2009 McDonalds announced hiring 10,000 new employees. The bad news is all the hiring is taking place in China, an international market McDonalds targeted in the 1980's as yet another component of its strategic franchise vision.
McDonalds Entry Into China
The first McDonalds restaurant opened in Shenzhen, China in 1990. With it, China became the 53rd country to have a McDonalds outlet within its borders. Buoyed by the success of its Shenzhen restaurant, the second - a Mega-McDonalds with 28,000 square feet - opened in Beijing in April, 1992. It attracted 40,000 customers on opening day. McDonalds growth in China continued steadily and pervasively.
In 2004, the Mighty Mac launched McKids in China, selling clothes, toys, games, DVD's and books throughout it's chain that had grown to 600 restaurants serving loyal Chinese residents. As of 2008 that number mushroomed to 960 McDonalds restaurants and over 60,000 employees, making China the largest growth market for McDonalds. The McDonalds strategic vision in China continues to focus on core menu extensions, convenience and value.
Strategic Partnerships
McDonalds formed a strategic partnership with Sinopec, gaining access to China's national gas stations network. Sinopec operates 300,000 gas station locations. While McDonalds won't establish restaurants at all of these, they will pick the best strategic locations.
McDonalds in China Update. China continues to be a big numbers game and is the fastest-growing market globally for McDonalds which operates 8,482 restaurants in the entire Asia Pac region. With 175 new outlets planned for China in 2010, and another 200 in 2011, the goal is to double the current number (1,146 restaurants) to 2,000 in the world's third-largest economy by 2013.
Cost of McDonalds in China. McDonalds has almost exclusively operated company-owned restaurants since entering China two decades ago. The Mighty Mac expanded it's franchise program in April, 2010 by posting information on its China website inviting new franchise applications. Interested parties must have at least 2 million yuan (US $293,000) to cover franchise fees, equipment and other expenses. New McDonalds franchises are being granted in East China's Jiangsu Province.
McDonalds In Other Parts of Asia
McDonalds in Malaysia. In early 2010, McDonalds announced plans to open 30 more restaurants in Malaysia within three years. As of 2010, the Mighty Mac had 194 restaurants there, with 21 managed by 10 franchise owners.
McDonalds in Korea. McDonalds plans to boost investment in Asia by at least 20% in 2010, moving into big beef eating markets such as South Korea as consumer spending recovers. McDonalds operates 227 restaurants in South Korea currently. With 48 million people who love to eat beef and have an average household income of $30,000, the Big Mac plans to invest $15 million there and double that in 2011.
McDonalds Franchise Articles
For an informative franchise article about the rise of the McDonalds franchise chain, go to our franchising articles page - History of Franchising - McDonalds, KFC etc. It includes details about the original owners, the McDonald brothers, and how they applied Henry Ford's assembly line production techniques to the burger business. Just by chance, they happened to meet Ray Kroc, a multimixer milkshake salesman, who provided the strategic vision to grow the business via franchising, something the McDonald brothers were not interested in considering or pursuing. Trusted with this responsibility, Kroc went on to build the McDonalds franchise empire to what it is today. There's also information about another McDonalds franchise strategic vision - the McDonalds McCafe concept. Started and refined overseas, the McCafe concept is now storming the U.S. market. McDonalds is successfully slugging it out with Starbucks, landing body blows and capturing critical market share. McDonalds sales and profits grow, while Starbucks closes many hundreds of U.S. locations.
Check back for moe franchise updates and other details about a McDonalds franchise investment.
Locating A McDonalds Franchise
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The McDonalds Franchise Training Program
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Managing A McDonalds Franchise
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"Enlarge the place of thy tent, and stretch forth the curtains: spare not, lengthen thy cords and strengthen thy stakes" Isaiah 54:2
Copyright 2010, Franchise Foundations, a San Francisco professional law corporation. The information you obtain at this franchise website is not, nor is it intended to be, franchise legal advice. You should always consult a franchise attorney - franchise lawyer for individual advice regarding your own situation and franchise disclosure documents. Use experienced FranchiseLawyers and FranchiseAttorneys for advice with your franchise legal documents and needs. Use an experienced MBA Franchise Expert for help with franchise consulting issues.
Last Franchise Website Update: April 8, 2010 Singapore
