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  • There's no question about it, McDonald's is the most successful restaurant in the history of the world.

  • The company isn't worth millions, but billionsnearly 150 billion USDand that number keeps climbing every day.

  • Back in the 1950s, the man who would eventually turn McDonalds into an international powerhouse, Ray Kroc, had a lot of big ideas for the restaurant.

  • But perhaps his biggest idea can be summed up in a single word.

  • "Franchise, franchise, franchise, franchise, franchise."

  • The food at McDonald's has always sold like hotcakes but once the restaurant started franchising, the world began eating up the brand.

  • So, it's not surprising that for decades, entrepreneurs have been flocking to the golden arches with dreams of opening their own McDonald's.

  • But being a franchise owner isn't as easy, or profitable, as you might think.

  • For starters, buying into a McDonald's franchise is expensive, and if prospective franchisees want to get a piece of the pie, they'll have to bring some heavy coin to the table.

  • According to Business Insider, the initial investment is between 1 million USD and 2.2 million USD.

  • That price tag is pretty broad, but McDonald's notes that these costs are based on the restaurant's location and size.

  • Long story short, it's going to cost a lot more to buy a McDonald's franchise in San Francisco than it is in Saginaw, Michigan.

  • Before you take the plunge with Mickey D's and start your own franchise, keep in mind that 40 percent of that initial investment must be cash or nonborrowed assets.

  • Whether it's McDonald's or other fast food restaurants, franchise owners can do pretty well, at least, once they get past their initial investment hurdle.

  • According to Business Insider, the average McDonald's restaurant takes in around 2.7 million USD a year in sales.

  • That may not be quite as high as other well-known eateries, such as Chick-fil-A or Panera Bread, but it's still pretty good.

  • Of course, some McDonald's franchise owners are going to make more than others, but most franchisees pull in an estimated yearly profit of roughly 150,000 USD.

  • However, after 2.7 million USD in sales, a profit of 150,000 USD isn't even 6 percent.

  • Once you deduct the price of supplies, food, payroll, and about a dozen other costs handed down by the corporation, that's what an average franchise owner is left with.

  • The franchise system has been a major reason for Ronald and his company to celebrate since the 1950s, and it's actually how McDonald's makes a significant portion of its profit.

  • Plus, franchise owners have historically brought a lot more than money to the table by contributing some of the company's most important innovations.

  • "The Big Mac, the Filet-O-Fish, even the drive-through concept were all developed by franchisees working within the McDonald's framework."

  • So while McDonald's franchise owners can make a six-figure salary through their restaurant, the McDonald's corporation is making much, much more.

  • It all starts with the 45,000 USD franchise fee that owners pay.

  • Then, there's the never-ending monthly service fee that takes 4 percent of a location's gross sales.

  • After that, franchisees pay a rental fee each month, which works out to be an average of around 10.7 percent of sales.

  • So basically, McDonald's franchise owners are forking over 15 percent of their sales every month to the Mickey D's machine.

  • This system is extremely profitable for the Golden Arches.

  • So much so that only around 5 percent of the McDonald's locations on the planet are owned by the company.

  • The rest are franchise operations that are paid for upfront by the franchise owner.

  • According to Reader's Digest, McDonald's raked in 27.4 billion dollars in revenue in 2014, and how that breaks down is pretty telling.

  • 9.2 billion USD of the revenue was from franchised locations and 18.2 billion USD was attributed to company-owned locations.

  • On the surface, it sounds like the company-owned locations are the real money-makers, but that's simply not the case.

  • The cost of running a business, especially a restaurant, can really cut into its profits.

  • At the end of the day, McDonald's only keeps around 16 percent of the revenue its company-owned stores make, but it keeps 82 percent of the revenue franchisees pay out to it.

  • That all adds up to megabucks for Mickey D's.

  • So, while owning a franchise should put plenty of food on your table, the McDonald's corporation will take a huge bite out of your bottom line.

  • "It's like they don't care if you make money as long as they make money."

  • "What kind of corporation does that?"

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There's no question about it, McDonald's is the most successful restaurant in the history of the world.

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How Much Mcdonald's Franchise Owners Really Make Per Year

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    Seraya posted on 2020/05/18
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