- McDonald’s said in late January that it wanted to add 1,900 stores worldwide.
- Launching a McDonald’s restaurant requires an investment between 1.4 and 2.5 million dollars
- McDonald’s charges a franchise fee of $45,000 and a monthly service fee equal to 4% of gross sales.
After years of declining store counts in the United States, McDonald’s plans to add more restaurants this year.
Although corporate layoffs are expected in April, CEO Chris Kempczinski told staff in early January that his vision for 2023 calls for building innovation and growing restaurants.
Later that month, in the January 31 phone call, the company said it would spend more than $1 billion to open 1,900 stores worldwide. Of these 1,900, more than 400 new stores are planned in the United States and other global markets such as Canada, the United Kingdom and parts of Europe.
Owning a McDonald’s may seem lucrative to a potential franchisee, but it requires a lot of upfront cash compared to fast food competitors like Chick-fil-A and Subway. McDonald’s franchise fee is $45,000. By comparison, at Chick-fil-A it’s $10,000, and fees at Subway start at around $22,300.
But McDonald’s restaurants saw average domestic sales of $4 million in 2021, according to the chain’s 2022 Franchise Disclosure Report. That’s half of what most Chick-fil-A locations pull in. a year.
Initial capital costs for operating a McDonald’s range between $1.4 million and $2.5 million, including franchise fees. For new restaurants, the bulk of those costs cover signage, seating, equipment and decor, according to the disclosure report.
The base rent varies as it depends on the opening date of the restaurant and the acquisition and development costs. Rent for most new McDonald’s restaurants ranges from 10% of total gross sales to $15.75 for new restaurants opened since January 1, 2020.
Additionally, there are numerous monthly and annual fees that franchisees must pay, including:
- A monthly service fee equal to 4% of gross sales.
- Over $11,000 in annual fees for support and maintenance of restaurant software and equipment such as payment processing systems and kiosks.
- Annual fees range from $73.80 for corporate email account support to $2,956 for maintenance of digital software such as the channel’s app.
Franchise start-up costs vary among other major fast food chains.
Subway is much cheaper than McDonald’s. The initial investment for a potential Subway operator ranges from $222,050 to $506,900, according to Subway’s 2022 Franchise Disclosure Report. This represents an increase between $116,000 and $263,000 in 2019.
Many McDonald’s franchisees consider Chick-fil-A their biggest competitor. Total costs to launch a Chick-fil-A franchise restaurant range from $219,055 to $2.9 million, according to the chain’s 2022 Franchise Disclosure Report. Chick-fil-A restaurants, which are only open six days a week, average more than $8 million in sales annually among non-mall locations.
Burger King start-up costs range between $230,000 and $4.2 million, including up to $57,500 in franchise fees.
Wendy’s start-up costs vary depending on whether you pay cash or finance. The cash range is between $1.2 million and $3.7 million, and the range is $556,500 to $1.1 million if you fund, according to the company’s latest franchise disclosure report. chain.
Asked about the value of owning a McDonald’s, representatives for the chain did not return a request for comment.
Earlier this month, the company told Insider that there are “great opportunities” to scale the brand globally.
The growth of units in the United States would be significant. Until last year, McDonald’s had been closing dozens of restaurants each year since at least 2016. According to corporate documents and store count data from Datassential, McDonald’s ended 2021 with 13,429 restaurants nationwide, up from 14. 155 stores in 2016.
But as of mid-December 2022, McDonald’s had 13,666 restaurants in the United States, according to preliminary store count data obtained from market research firm Datassential.
Are you a fast food franchisee with ideas to share? Do you have any advice? Contact this reporter by email at nluna@insider.com or via the encrypted Signal number 714-875-6218.
businessinsider
