Have a Big Wallet When Buying a McDonald’s Franchise

Given the fact that McDonald’s makes billions each year, there’s a natural inclination for those looking to tap into a solid investment to consider the fast food giant as an option. When it comes to using funds to invest in McDonald’s, the two basic ways are to buy stock or put money into a franchise. In the latter case, the lure is the fact that the average restaurant brings in approximately $2.5 million in sales each year.

However, getting to become a McDonald’s franchisee requires a large investment of money, with the company requiring each candidate to have $750,000 in liquid assets. That amount is just for a single restaurant, with franchisees expected to use cash or other liquidity to pay for 40 percent of all startup costs. The remainder can be borrowed.

Those costs can be steep, from close to $1 million to just about $2.2 million. A small non-restaurant item like landscaping needs to be addressed along with areas like signage and kitchen equipment. The larger amount is usually due to the size of a restaurant, though geography can also factor into the final cost. That geography plays a role in the rent costs that are also borne by the franchisee, ranging anywhere from 8.5 to 12 percent of sales.

Even after all that, franchisees still have to pay monthly fees that have a base of $45,000, with added fees based on four percent of sales. Those numbers are much the same for franchisees of Wendy’s and KFC.