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Step by Step Guide to McDonalds Franchise Opportunity

 

McDonalds Franchise

With more than 38,500 locations across the world, serving 69 million people every day, McDonald’s golden arches are among the most recognisable corporate logos in the world. With branches in almost every town and city of the UK, their popularity can’t be denied, but it may surprise you to know that a large majority of their restaurants are franchises, so in this guide we’re going to look at McDonald’s franchise opportunities to try to find out things like what the McDonalds franchise profit is, how much does a McDonald’s franchise make, and most importantly, what does a McDonald’s franchise cost in the UK.

The background

McDonald’s began its franchise operations in 1955, and in the past 15 years, they’ve almost tripled the amount of Franchised restaurants, as well as grown the cash flow and top line sales within the restaurants.

Could You be a Franchisee?

Passion. Personality. A love of people. McDonald’s Franchisees come from a diverse range of personal and professional backgrounds, but there are a few qualities they all share;

  • Significant Business Experience: Individuals who have demonstrated successful ownership or management of multiple business units or have managed multiple departments.
  • Rapid Growth: Individuals who possess the capability to grow rapidly with McDonald’s.
  • Business Plan: The ability to develop and execute a business plan.
  • Manage Finances Well: Ability to manage finances including a thorough understanding of business financial statements.
  • Good Management Skills: Commitment to personally manage the day-to-day operations of the restaurant business.
  • Training: Willingness to complete an extensive, comprehensive, world-class training program at Hamburger University, and to spend 9-18 months working at a restaurant near your home, to become proficient in all aspects of operating a McDonald’s restaurant business.
  • Exceptional Customer Experience: The capability to effectively manage an organization that recruits, trains, and motivates restaurant employees who deliver exceptional customer experience.
  • Good Credit History: You must have an acceptable credit history.

 

The Application Process – This can take from 3 to 6 months

First Interview
This is the chance to get to know each other better and discover why you think you’d be a great Franchisee and a good fit for McDonald’s.
You’ll also have the opportunity to ask them a few questions too.

Restaurant Experience
This stage of the process will see you spend five days in a restaurant. It’s a fantastic chance for you to see how restaurants operate and start thinking about how you mcdonalds resturantsmight run yours. You’ll get to see the operating systems, and have the chance to engage with an established team.

Second Interview
They’ll further explore your suitability to be a Franchisee in this interview with the McDonald’s Regional VP and Head of Franchising. You’ll also be asked about your experience at the 5 day restaurant experience and have the chance to ask questions

Panel Interview
A panel interview will be held following a successful second interview.
At this stage, you’ll have a final interview with three senior Vice Presidents from the company.

Next step – Full-time training
Following a successful panel interview you’re now ready to start training. All franchisees must complete a training programme before they take control of their restaurant. Across the course of the programme, they build their knowledge, gain the experience and learn the skills you need to be a McDonald’s franchise owner.
The training combines theory and practice, giving you both practical restaurant experience and classroom learning for a minimum of 26 weeks, followed by a business immersion and handover process.

All franchisees must complete a training programme before they take control of their restaurant. The training allows you to understand roles in the restaurant from crew member to restaurant manager. You’ll have access to a consultant, guiding you through the processes and supporting you through the training.

All Franchisees are supported by a network of Consultants averaging over 20 years’ experience in the McDonald’s system.

The Restaurant Offer
During your training you may be presented with an offer to purchase the right to run a restaurant. If you accept, the handover process will start.

The Handover
The big day. You’ll receive the keys and the day-to-day running of the restaurant is over to you – but you won’t be left to go it alone. A Franchisee Consultant will be on hand to give you expert advice and look to support you as you transition into the restaurant.

 

Frequently Asked Questions

What do I get for my money?
You purchase the equipment and rights to operate a restaurant from a location for a set term. The challenge is to maximise the sales and profitability of the restaurant over 20 years

Can I have more than one store?
They only franchise one restaurant at a time to new Franchisees. It is their intention to put restaurants in the best and most capable hands. If you achieve consistently high standards they’ll be interested in selling you the rights to run additional restaurants. McDonald’s does have population requirements when looking at potential locations for new restaurants, to ensure there is adequate footfall and passing traffic to make it financially viable.

Can I set up the Franchise in my own property?
No. Property selection and Franchisee selection are two separate decisions. As they franchise existing trading restaurants to new Franchisees, the sourcing of a site is not necessary. Our Franchisee selection process is based on an individual’s career or business track record. We only franchise existing restaurants with at least two years’ trading history to new Franchisees

Will I have to work in the business full-time or can I have a manager to look after my store?
Buying into McDonald’s is a significant financial investment, and you are required to fully participate in the day-to-day running of the business

Will I be able to sell my business in the future?
If your personal circumstances change you may sell the remainder of your Franchise term to a McDonald’s approved buyer (someone who has been approved through the McDonald’s Franchisee selection process)

Am I able to enter into a McDonald’s Franchise with my business partner?
No. A McDonald’s Franchise is offered to one person only. A Franchisee can choose whether to operate as a sole trader or limited company (up to 25% of the shares in that company can be issued to their spouse or civil partner).

 

The Financials

McDonald’s has a number of long standing relationships with banks who can lend to Franchisees, offering you investment opportunities that perhaps otherwise wouldn’t be available.
Typical* Annual Sales £1.5 million – £4.3 million
From May 2018 to June 2019, 80% of all McDonald’s UK franchised restaurants had sales between £1,500k and £4,300k.

To invest in a McDonald’s Franchise, the minimum financial requirement is 25% of the total investment in unencumbered funds.

The remaining 75% investment can be funded by a bank and franchisees may wish to use banks with which McDonald’s has a relationship since these provide very competitive rates

Typical* Annual Fees Rent, advertising and service fees
The monthly fees payable by 80% of restaurants franchised between May 2018 and June 2019 ranged between 12.25% and 21% of that restaurant’s net sales. Typically, this rent is fixed for 20 years on the initial term. Rent is calculated over a 10 year period factoring in projected sales and projected profitability.

There is an additional monthly service fee of 5% of the net sales for the use of the McDonald’s system as well as a contribution to the marketing fund which is currently set at 4.3% of net sales

Typical ROI over 20 years 20% – 25%
Return on Investment is modelled such that a Franchisee has the potential to generate 20% – 25%* over a 10 year term. Note that this doesn’t take account of any future investments you will make into your business during the 20-year term.

*The ROI range may vary based on future business performance and how individual restaurants are operated.

As you can see, the franchise journey with McDonald’s won’t be for everyone, but if it is something you’re interested in, hopefully you now know more about the process.

If you have any comments or franchising experience you’d like to share, we’d love to read them in the comments section below.

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Business Opportunities Step by Step Guide to McDonalds Franchise Opportunity