Introduction: McDonald's
Fast food has become a part of most people’s regular diet. Everybody has eaten from fast-food restaurants at some point in their lifetime, be it a 5-year-old kid, or an 85-year-old grandma. The sheer variety and growing competition amongst fast-food chains have raised the level of consumption so much so, that people would rather prefer to eat outside than at home. Fast food in America is so popular, borderline worrisome, that about 37% of Americans consume a meal from these eateries every single day. Let that sink in.
There are several major fast-food chains that usually dominate the market shares. This could include Subway, KFC, Hardees and so on. But the biggest and the most globally known fast food restaurant is undoubtedly Mcdonald’s. From its renowned Big Mac and the Quarter Pounder, McD is eaten in every region on the world map. You could even travel to a random country, ask a local about McDonald’s, and more likely than not, they’ll know about it. (Might even give you directions to the nearest one)
Matter of the fact is, no matter when or why you step inside a McDonald’s you’re probably going to come out with a smile on your face. However, can the same be said if you’re the owner?
Costs Of Franchising A McDonald's Restaurant
Owning one of the countless branches of the fast-food behemoth can be a tricky job for most people. It can be a dream for some people, and a chore for others. Just like any other business, running a McDee requires a lot of grit with the ability to make clever choices to make your store more profitable. There are currently about 38,000 branches of the restaurants worldwide in over 100 countries. Even developing countries have multiple franchises in cities, and developed countries like the U.S seem to have a McDonald’s down every street.
All these franchises almost always have a few opportunities to run them at a given time, but it isn’t easy. To even think about buying a franchise, you’ll need to be in the ‘dos comas’ club. Meaning, you can’t proceed to own a store without first being a millionaire. You’ll need to accumulate all that capital in your initial investment to start running things, specifically around 1-2 million dollars. This sort of money will give you enough leg space to operate processes and dealings smoothly.
When looking to acquire a branch, you will ultimately have two options to go with: either choose an existing branch or signing a contract on constructing a new one. Opting to build a new branch would initially be a whole lot cheaper than buying one that’s already operational, but it will need a lot of work, and if things go wrong, the costs could easily skyrocket. In addition to that, it will also take a long time for you to start making revenue from it, so you’ll need to keep that in mind. Our suggestion would be to go for one that already works, so you can start getting your investment back as soon as possible.
There are many expenditures that will come your way, most of them being food and paper costs, and employee salaries. There will be some variable costs as well that you’ll be able to minimize if you manage your branch well, such as how efficiently you’re marketing your products, or if you’ve maintained the infrastructure properly or not. All these tangibles account for costs that you could save up on through good managerial skills, but the other set of expenditures like legal licensing and rent will need to be paid through and through no matter how well you run your franchise.
Profits Of Owning A McDonald's Franchise
The profitability of a McDonald’s franchise largely depends on the location you’ve chosen to go for. If you’re not going for a flagship franchise, then you’ll need to be in a developed country like the USA, U.K or Australia for example. You’ll then need to sort out your location within the city, whether the branch resides in the downtown district, or in a faraway suburb.
Once you’ve figured out a decent location, you’ll receive a yearly profit of about a 100 to 150 thousand dollars at max. And don’t expect to kick your feet up and automatically get paid, because reports from various ex-franchisees have said that they had to work their socks off, some even claiming to have worked up to 80 hours a week. Yes, you’ll be getting paid a hefty amount annually from your franchise, but would it be worth the extra grind, and the initial investment of a million dollars?
That scenario is just about the best there could be. Some branches have even reported an average profit of about 60 thousand dollars per year, which, for the hours you’ll be putting in, is barely minimum wage. But even that scenario seems decent in front of how things are in other countries. Many branches have shut down or plan to do so in India, where they’ve just been operating under an annual loss the whole time.
Conclusion
If you plan to acquire a franchise in the future, we suggest doing proper research on the demographics around your region, and how busy it is. You should also be prepared to handle a tough work schedule day-in-day-out and also keep aside a million or two for your initial investment. You could take a different route, and hire an assistant to do all your work for you, but all that will decrease your profits significantly too.
So if free Big Macs, a decent annual return, and the bragging rights of owning a McDonald’s franchise sound enticing enough to you, then go ahead and make that bold step!
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