How to Buy a McDonald's Franchise and Succeed
To customers, a McDonald's restaurant may be just another cheap restaurant on the fast-food strip, but to franchise owners, it's often a multimillion-dollar investment. Buying a franchise takes time, money and dedication. Making your restaurant successful will take years of commitment and thousands of hours of work.
Fortunately, McDonald's works just as hard at ensuring its potential franchise owners will be successful. If you don't have what it takes, it's unlikely the company will make you an offer.
Applying to become a franchisee is easy. You can do it online at McDonalds.com. Being approved is the hard part.
The first thing you'll need to buy a new franchise is cash — lots of cash. While the minimum down payment can vary, it's usually at least $500,000. The total cost of buying a franchise is usually $1 million to $2 million, including the $45,000 franchise fee.
Before you can discuss buying a franchise, you'll have to prove that you have the down payment first, in non-borrowed funds. You can't pool your money with friends and family, as the company doesn't sell franchises to partnerships. If the company is interested in you as a candidate, you will be invited to enroll in their franchisee training program, a part-time program that takes 12 to 18 months.
If you pass the training program, you may then be offered an opportunity to buy an existing franchise. The process is very competitive so there are no guarantees that you will be invited to bid. Only one thing is practically certain: McDonald's won't offer you a new franchise (a new restaurant in a new location) unless you already own at least one franchise.
Buying an existing restaurant is how new McDonald's owner/operators get started. You can buy one directly from McDonald's when they are available, but usually, it will be directly from a franchise owner. The cost will depend on the restaurant's sales, profitability and costs as well as its location and competition.
In most cases, you will be competing with other applicants for these franchises, including people who already own other franchises. You will negotiate directly with the franchise owner, but McDonald's must approve the deal before it's finalized.
You will need to put down at least 24% of the cost as a down payment, and financing for the remaining amount cannot be longer than seven years. Financing is typically done through a finance company partnered with McDonald's, which should give you great interest rates.
McDonald's is perhaps the most successful and most popular franchise opportunity in history. In 2019, it was once again ranked first in Entrepreneur's list of the top 500 franchises. It's been at the top of the list more than any other company except Subway, which has slid down to #125 this year. However, success wasn't always a sure thing.
Back in 1999, it looked like McDonald's was losing its appeal to customers and franchise owners alike. Its menu seemed dated and unhealthy compared to other restaurants. However, the company has continued to respond, modifying its menu and, most recently, adapting new technologies like self-serve kiosks to keep customers, investors and franchise owners coming back for more.
Buying a McDonald's franchise is certainly not a guarantee for success. Like any other business opportunity, there is always a risk of failure. However, the company is highly motivated to do what it can to ensure its owner/operators succeed, and their screening process is a major part of this.
Take a look at the franchise success stories McDonald's publishes on its website, and you'll see one common denominator: They were all primed for success before they signed up as owner/operators. The company features three owner success stories in 2019:
- John Ebert was a CPA for a public accounting firm before he started.
- James Poor was a marketing director in the banking industry before he started.
- Celeste Quintana owned two successful clothing stores before she started.
The conclusion you can draw from this is that if you want to succeed with a McDonald's franchise, do your best to develop your business skills, gain business experience and establish a track record of success that will not only generate the money you will need to invest in a franchise but will make you the type of business leader the company will want to have as one of its own.