- This month, McDonald’s announced plans to step up its expansion efforts.
- Launching a McDonald’s restaurant requires an investment between $1.4 million and $2.5 million
- McDonald’s charges a $45,000 franchise fee and a monthly service fee equal to 4% of gross sales.
After years of diminishing store counts in the US, McDonald’s plans to add more restaurants this year.
Though corporate layoffs are projected in April, CEO Chris Kempczinski told staff earlier this month that his 2023 vision calls for scaling innovation and growing restaurants.
Owning a McDonald’s might seem lucrative for a potential franchisee, but it does require a lot of cash compared to fast-food rivals like Chick-fil-A and Subway.
McDonald’s restaurants posted average domestic sales of $4 million in 2021, according to the chain’s franchise disclosure report for 2022. That’s half of what most Chick-fil-A locations pull in a year.
Initial investment costs for running a McDonald’s range from $1.4 million and $2.5 million — including a $45,000 franchise fee. For new restaurants, a bulk of those costs cover signs, seating, equipment, and decor, according to the disclosure report.
The base rent varies as it depends on when the restaurant opened and acquisition and development costs. The rent for most new McDonald’s restaurants ranges from 10% of total gross sales to $15.75% for new restaurants that have opened since January 1, 2020.
Additionally, there are numerous monthly and annual fees franchisees must pay, including:
- A monthly service fee equal to 4% of gross sales.
- More than $11,000 in annual fees for support and maintenance of restaurant software and equipment such as payment processing systems and kiosks.
- Annual fees ranging from $73.80 for corporate email-account support to $2,956 for servicing digital software such as the chain’s app.
Franchise startup costs vary among other top fast-food chains.
Subway is far less expensive 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. That’s up from between $116,000 and $263,000 in 2019.
Many McDonald’s franchisees consider Chick-fil-A their biggest competitor. Total costs to launch a franchised Chick-fil-A restaurant range from $219,055 to $2,912,697, 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.
Startup costs for Burger King range between $230,000 and $4.2 million, including up to $57,500 in franchise fees.
Wendy’s startup costs vary, depending if you pay in cash or finance. The cash range is between $1.2 million to $3.7 million, and the range is $556,500 to $1.1 million if you finance, according to the chain’s latest franchise disclosure report.
When 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 “big opportunities” to scale the brand globally.
Growing units in the US would be significant. Up until last year, McDonald’s has been closing dozens of restaurants each year since at least 2016. According to corporate documents and store-count data by Datassential, McDonald’s ended 2021 with 13,429 domestic restaurants, down from 14,155 stores in 2016.
But by mid-December 2022, McDonald’s had grown to 13,666 US restaurants, according to preliminary store count data obtained from market research firm Datassential.
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