How does the McDonalds franchise work

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McDonald’s franchise - is it worth getting started?

Reading time: 4 minutes

What a franchisee gets from McDonald’s

First of all, a functioning company concept is the key to success for every company. But there are other factors as well. One important factor, for example, is that McDonald’s ensures that the branches are not too close to one another so that there is no internal predatory competition.

In addition, McDonald’s pays for the entire construction and development costs. For the entire process of manufacturing the sales products in the restaurant and the services, McDonald’s provides a comprehensive work concept that specifies, down to the last detail, how a McDonald’s restaurant must be run. This eliminates a large part of the work that an entrepreneur normally has to laboriously do in the first few years

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What McDonald’s gets from the franchisee

McDonald’s concludes a contract with the franchisee that stipulates a commission based on net sales. 5 percent is common. In addition, McDonald’s charges a fee for leasing the restaurant. The amount is also determined by net sales.

In addition, every franchisee is obliged to invest 5 percent of their net sales in advertising. Part of this amount goes to the "Advertising Fund for National and Regional Sales Promotion", which uses it to finance national television advertising, for example. Even if the fees in themselves are not particularly high, the overall result is a relatively large financial burden.

What else the franchisee has to pay

The franchisee is provided with the restaurant, but McDonald’s does not pay for the establishment of the restaurant, the equipment and various other costs that arise when setting up a branch. In practice, this means that the franchisee must first invest a high six-figure sum before he can even open the restaurant. As a rule, of course, this only works with the help of a bank. The credit risk then lies entirely with the franchisee, because McDonald’s ultimately has nothing to do with the credit.

How lucrative is the McDonald’s franchise?

There is no generally binding answer to this question, because the profit at McDonald’s depends on many factors. A good location is essential. A branch located in the middle of the student district of a large city will have no problems attracting guests around the clock.

But there are also locations that generate significantly lower sales. In addition, the competition also plays a major role. Even if there is no other McDonald’s branch in the immediate vicinity, it is typically the case that in the vicinity of a McDonald’s branch there is often at least one other fast food temple.

It is very difficult to get reliable figures on the franchisee's profits. But most branches are probably well in the profit zone. But there are certainly also one or the other branch that does not make big profits or even losses.

Usually, however, McDonald’s then intervenes relatively quickly, because ultimately McDonald’s only benefits when a branch makes a profit. That is also the biggest advantage of the franchisee, because the franchise concept is designed in such a way that McDonald’s is only successful if the franchisee is successful. However, it is not a guarantee that a branch will work.

Longstanding commitment to McDonald’s

A McDonald’s lease usually runs for 20 years. First of all, this gives the franchisee a great deal of security. On the other hand, the franchisee also runs a considerable risk, because if a branch is not running, it is not that easy to get out of the contract without major injuries.

The financial risk lies to a large extent with the franchisee, not least because they take on a large part of the initial financing. The large branch network of McDonald’s in Germany and in many other countries suggests that the company concept basically works well. But it doesn't always work.

Become a McDonald’s franchisee or not?

You can only answer this question on your own. First of all, of course, you have to meet the requirements set by McDonald’s. If you don't have enough equity to get a large bank loan, McDonald’s is out of the question for you.

But if you have so much money available that you could get involved with McDonald’s, you should ask yourself whether a franchise concept is really the optimal solution for you. While you become an entrepreneur in a way, you are also locked into a rigid concept that you can hardly influence. Is this your dream of freelance entrepreneurship?

On the other hand, the McDonald’s franchise concept has proven itself many times over, so that you take less risk of founding a company than with your own company, which you have to redesign from scratch. But at McDonald’s you will probably never recognize your own signature in the restaurant.

If it is enough for you to make a decent profit every month, then McDonald’s is definitely an interesting alternative to setting up a private company. You just have to realize that by choosing McDonald’s you are planning the next decades of your life in advance. It is also not easy to run a restaurant successfully because you have to work with a large number of people.

Do you have the necessary leadership skills?

Even if you have the money and can get a notoriously lucrative branch, you should find out for yourself whether you are capable of leading a large team 365 days a year. This is what it boils down to, because you have the management role in your branch.

If you take all the hurdles and are firmly convinced that the McDonald’s franchise concept is perfect for you, then you have a good chance of becoming a successful restaurateur. If you have the slightest doubt, bury the idea because the financial risk is too great to try half-heartedly.

PS: Quality management is important to us!

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