What A McDonald's Franchise Costs
For anyone keen on enjoying the business opportunity presented by obtaining a franchise from the McDonald’s group, there are two options available and each has varying financial implications. The first option allows the investor to buy an already existing restaurant. This could be a restaurant run by McDonald’s or by another operator. Alternatively, a new investor could start a new restaurant. Depending on the option taken, the cost for McDonald’s franchise can vary considerably.
Where an investor acquires an already existing restaurant, McDonald’s requires that the purchaser makes a down payment equivalent to 25% of the restaurant’s cost. For those purchasing new restaurants, a down payment of 40% is required. These two requirements and the fact that premise costs will vary from one location to another makes the actual cost of obtaining franchises vary considerably.
While the down payment percentages required should give a general guidance on the cost of a McDonald’s franchise, the company provides more specific requirements of the financial requirements for franchise seekers. McDonald’s requires that those seeking franchises be able to raise a minimum of $300,000 which is estimated to be adequate to get the new restaurant going. In addition to being able to raise this minimum, people with the ability to raise more funds are preferred because the company considers them capable of running several restaurants.
The accepted sources of funds for a McDonald’s franchise are also made very clear by the company. The minimum amounts required are only acceptable if they are raised from personal sources and not funds borrowed from banks or other financial institutions. The accepted personal sources of finance include cash in hand, securities and debentures. Funds obtained from real estate equity are also acceptable so long as they have not been obtained with a personal residence as collateral.
Where an investor makes the required down payment from the sources approved by the company, McDonald’s allows the potential investor to obtain additional funding from lending institutions. While the company does not provide lending services, it is in a position to assist investors enjoy competitive rates from the lenders.
In addition to the start-up requirements, there are two additional costs that the investor will have to meet on a regular basis. The first of these is rent. Despite the acquisition arrangement, McDonald’s remains the landlord and charges a monthly rent. In charging rent, the company gives the investor two options. A base rent could be charged or, alternatively, the rent is calculated as a percentage of sales generated. In addition to the rent, new franchise owners are required to pay a monthly service fee. This fee is equivalent to 4% of the restaurant’s sales and is payable throughout the period of the franchise.
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