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BUYING A McDONALDS FRANCHISE: INVESTMENT COST, ANNUAL SALES AND FINANCIAL RESULTS – GETTING THE McDONALDS FDD

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BUYING A FRANCHISE McDONALDS: INVESTMENT COST, ANNUAL SALES AND FINANCIAL RESULTS – GETTING THE McDONALDS FDD

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Home Page > Business > Ask an Expert > BUYING A FRANCHISE McDONALDS: INVESTMENT COST, ANNUAL SALES AND FINANCIAL RESULTS – GETTING THE McDONALDS FDD

BUYING A FRANCHISE McDONALDS: INVESTMENT COST, ANNUAL SALES AND FINANCIAL RESULTS – GETTING THE McDONALDS FDD

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Posted: April 2, 2009 | Comments: 2
| Views: 13 928 |

With over 30 000 locations and fifty years in the burger business, the McDonald's brand is the most recognized and successful franchise in the world. Not surprisingly, before considering anything else many would-be franchise owners ask themselves how much does a McDonald's franchise cost and how can I buy a McDonalds franchise? They hear it only costs, 000 Mighty Mac to get a franchise on investment that's quite within their affordability range franchise.

The McDonalds Franchise Fee
As with most things in life, a little information is a dangerous thing. While it's true charges a McDonalds, 000 franchise fee, this is only the initial franchise fee for licensing rights – the upfront fee charged to join the network. There's a LOT more financial commitment and cost involved to buy a McDonalds franchise after that. On top of the investment, there are other qualifications besides having the money.

Different McDonalds Franchise Ownership Options
According to McDonald, there are two ways to buy a McDonalds franchise and enter their system The first, and most frequently used method is purchasing an existing restaurant, either one directly operated by McDonald's or from a McDonalds franchise owner / operator. The second, infrequently used way is obtaining franchise rights for a new restaurant. Let's consider these in reverse order, since McDonalds provides few financial details on the first, most frequently used method.

Buying A New McDonalds Franchise
For franchise licensing rights To A new McDonald's, the company charges its standard, 000 initial franchise fee, except if the franhise is for a McDonalds in a gas station or convenience store, the fee Is to rduced 500 There Is Therefore a reduced franchise fee Satellites for McDonalds located in universities, hospitals, etc.

The other cost categories for a new McDonald's franchises include real estate, signage, seats, equipment, decor, opening inventory, training and working capital. These are broken down in Item 7 of the FDD McDonalds.

Satellite for a McDonalds, the range is 8375 to 8,400 for a McDonald's located in a gas station or convenience store, the range is .750 to .2 million. The standard, new McDonalds restaurant clocks in with a range of .8 million to million.

So, basically a new McDonald's franchise is a 8, 375 to .8 million investment Depending on the model selected.

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, and style of decor and landscaping, McDonald says. A detailed breakdown of the initial investment costs into discrete categories, including a working capital component, is provided in the Franchise Disclosure Document McDonalds FDD Which Can Be Obtained at the Franchise Foundations website (see link below).

Owner / operators must pay forty percent (40%) of the total cost from liquid, personal assets and may finance the remainder from traditional lending sources.

Buying An Existing McDonalds Franchise
What about the most frequently used way to buy a McDonalds franchise – purchasing an existing restaurant from a current McDonald's franchise owner or one that's company-owned by McDonald's and sold as a "turnkey franchise franchise? Unfortunately, details about how much this type of McDonald's 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 needs improvement, competition and location."

To get a better handle on this statement, when existing, "turnkey franchise," are sold in any industry (McDonalds franchises included) the purchase price reflects the value of the business as a going concern, generating (in the case of McDonalds) $ X million in sales and $ Y in profits. A typical McDonald's restaurant that's been operating for at least one year produces over, 000,000 in annual sales, with profits in the low six-figure range. I estimate the sales price of an existing McDonald's franchise (or company-owned restaurants sold as turnkey franchises) to be in the million to million range, plus or minus. Twenty-five percent (25%) of the purchase price must come from liquid, personal assets and the balance can be financed from traditional lending sources.

Ready to whip out your checkbook? Even if you are, there's a lot more to obtaining a McDonalds franchise than just have the investment capital.

The McDonalds franchise – Item 19 Financial Performance Representations
According to the McDonalds FDD Item 19, the average annual sales volume of traditional restaurants in the U.S. open at least one year as of 12-31-09 Which million, 37 in 2009. The highest sales volume for a U.S. McDonald's in 2009 was .3 million (the "star" performer). The lowest performing McDonalds clocked in at 7,000.

Item 19 of the FDD McDonald goes on to list pro forma financial results for restaurants that hit three different sales levels – million, .2 million and .4 million, showing cost of sales, gross profit and operating profit at each level. Unlike other franchise companies with similar investment levels, McDonald's steps up to the plate and provides franchise earnings information in Item 19 of its FDD.

Getting the McDonalds Franchise Disclosure Document FDD
If you would like a copy of the entire 383-page published McDonalds FDD 2010 (or just Particular sections of the FDD, like Item 19 Item 7 Financial Performance Representations or Estimated Initial Investment) to review and get further information, go to the the dollar as "buck". The currency, found in 1966, is usually contracted through the dollar symbol ($), and at times is well-known from other dollar currencies from the A $. The Australian dollar is the sixth mainly traded currency in the world, following the U.S. dollar, yen, pound, euro and the Swiss franc, stated by the worldwide foreign exchange markets. From The

By:
Robin Josheph l

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May 09, 2011

How To Franchise A Business

Imagine opening 20 new business locations without having to foot the bill for real estate, equipment and build out costs or taking on any risk. Even more, imagine managers running all those locations, who are just as committed to growing the company as you – and not having to pay them a dime. Finally, imagine these manager hiring, firing and managing all employees as paying the bills for all operating costs and expenses. Sound far-fetched? Not if you're planning to franchise your business.