In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the McDonald’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a McDonald’s franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a McDonald’s franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned McDonald’s outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of McDonald’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low annual sales volume for the 12,169 domestic traditional McDonald’s restaurants; 11,370 domestic traditional franchised McDonald’s restaurants; and 799 domestic traditional McOpCo McDonald’s restaurants opened at least 1 year as of December 31, 2017 (separately stated)
- percentage of domestic traditional McDonald’s restaurants opened at least 1 year as of December 31, 2017 with 2017 annual sales in excess of $2,200,000, $2,400,000, and $2,600,000, respectively
- 2017 total cost of sales, gross profit, other operating expenses, and operating income before occupancy costs for 10,220 independent franchisee traditional restaurants open and operated by a franchisee for at least 1 year, with 2017 annual sales of $2,200,000, $2,400,000, and $2,600,000, respectively
- percentage of independent franchisee traditional restaurants open and operated by a franchisee for at least 1 year, with 2017 annual operating income before occupancy costs greater than $569,000, $639,000, and $718,000, respectively
Section I – Background Information
18 Things You Need to Know About the McDonald’s Franchise
Sets Science-Based Target to Reduce Greenhouse Emissions
1. At the end of March 2018, McDonald’s announced that it will partner with franchisees and suppliers to reduce greenhouse gas emissions related to McDonald’s restaurants and offices by 36% by 2030 from a 2015 base year in a new strategy to address global climate change.
2. Additionally, McDonald’s commits to a 31% reduction in emissions intensity (per metric ton of food and packaging) across its supply chain by 2030 from 2015 levels. This combined target has been approved by the Science-Based Targets initiative (SBTi).
3. McDonald’s said that through these actions the company expects to prevent 150 million metric tons of greenhouse gas emissions from being released into the atmosphere by 2030. The company added that these targets will enable the brand to continue its growth without growing its emissions.
4. To reach its goal, McDonald’s will work across its supply chain, offices, and restaurants to be more innovative and efficient through improvements such as LED lighting, energy-efficient kitchen equipment, sustainable packaging, restaurant recycling, and by elevating and supporting sustainable agriculture practices. McDonald’s will also prioritize action on the largest segments of its carbon footprint: beef production, restaurant energy usage, as well as sourcing, packaging, and waste.
5. By working with Science-Based Targets initiative (SBTi) – which is a collaboration between WRI, WWF, CDP (formerly the Carbon Disclosure Project), and the United Nations Global Compact that helps companies determine how much they must cut emissions to do their part to address climate change – McDonald’s has become “the first restaurant company to set a science-based greenhouse gas emissions target.”
Expands Commitment With Alliance for a Healthier Generation
6. Around the middle of February 2018, McDonald’s announced an expanded commitment to families through the company’s long-term global growth plan by leveraging its reach to impact children’s meals, access to reading, and keeping families together through Ronald McDonald House Charities.
7. McDonald’s has been working with the not-for-profit Alliance for Healthier Generation (Healthier Generation) to develop a comprehensive plan for 20 major markets to increase customers’ access to fruit, vegetables, low-fat dairy, and water; and many of those markets are ahead of schedule in their progress on those prior commitments.
8. By 2022, McDonald’s will make improvements to the Happy Meal menu across 120 markets to
offer more balanced meals, simplify ingredients, continue to be transparent with Happy Meal nutrition information, reinforce responsible marketing to children, and leverage innovative marketing to help impact the purchase of foods and beverages that contain recommended food groups in Happy Meals.
9. McDonald’s plans to accelerate changes to the Happy Meal menu for the U.S. market. Starting
in June 2018, 100 percent of the meal combinations offered on Happy Meal menu boards in the U.S. will be 600 calories or fewer, and 100 percent of those meal combinations will be compliant with the new nutrition criteria for added sugar and saturated fat, and 78 percent compliant with the new sodium criteria.
New Restaurant at Headquarters to Feature Global Menu
10. On April 25, 2018, McDonald’s opened a one-of-a-kind restaurant, which features menu items from the brand’s global locations, at its new headquarters. The new restaurant is now open to the public and is located on the ground floor of McDonald’s new corporate headquarters in Chicago’s West Loop neighborhood.
11. The rotating menu offers classic McDonald’s items such as the Big Mac and Quarter Pounder with Cheese as well as global favorites like Canada’s Mighty Angus Burger and Australia’s Cheese & Bacon Loaded Fries. There is also a Latin American-style dessert center and an Australian McCafé area.
12. The more than 6,000-square-foot restaurant is another of McDonald’s Experience of the Future (EOTF) restaurants and features modern global-inspired interiors, an ever-changing wall map with Golden Arches that illuminate when an item from a specific country is featured on the menu, outdoor seating for patrons to enjoy in the warmer months, enhanced customer experiences with table service, mobile order and payment, and McDelivery with Uber Eats.
13. McDonald’s EOTF restaurants are designed to transform the customer experience with more
convenience, personalization, and choice. McDonald’s plans to transform most of its U.S. restaurants to Experience of the Future by 2020.
14. The McDonald’s story began in 1940 when Maurice and Richard McDonald moved their family’s restaurant to San Bernardino, California. The brothers renamed the restaurant “McDonald’s Bar-B-Que” and mostly sold barbecue, including hamburgers. After a few years, the McDonald brothers realized that most of their profits came from selling burgers, so they decided to establish a streamlined system with a simple menu consisting of only hamburgers, cheeseburgers, potato chips, soft drinks, and apple pie. A year later, they swapped out the potato chips and pie for french fries and milkshakes. At the end of 1948, they reopened their restaurant and changed its name to just McDonald’s.
15. In 1952, the McDonald brothers felt that they needed a new building and partnered with an architect named Stanley Clark Metson to design the new restaurant. They worked on making the new McDonald’s more eye-catching and the brand’s iconic “golden arches” was born. Around this same time, the brothers started looking for franchisees.
16. Two years later, Ray Kroc – who is credited with making McDonald’s what it is today – visited the original McDonald’s location in San Bernardino after learning that the brothers were using eight multi-mixer milkshake machines from Prince Castle, which was the company that Kroc worked for. Kroc believed that he could help the McDonald brothers turn their business into a national franchise and he became their franchise agent. The first official franchised store opened in 1955, which is the date that McDonald’s cites as its official founding.
17. According to several accounts, Kroc and the McDonald brothers fought for control of the company and Kroc eventually came out on top. He ended up buying the McDonald brothers’ equity in the company and grew McDonald’s into a large international brand. Today, there are over 37,280 McDonald’s restaurants around the world.
Entrepreneur’s Franchise 500
18. McDonald’s earned the No. 1 spot on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of McDonald’s franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on McDonald’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 12,833
- Outlets at the End of the Year: 12,894
- Net Change: +61
- Outlets at the Start of the Year: 12,894
- Outlets at the End of the Year: 13,047
- Net Change: +153
- Outlets at the Start of the Year: 13,047
- Outlets at the End of the Year: 13,145
- Net Change: +98
- Outlets at the Start of the Year: 1,511
- Outlets at the End of the Year: 1,357
- Net Change: -154
- Outlets at the Start of the Year: 1,357
- Outlets at the End of the Year: 1,106
- Net Change: -251
- Outlets at the Start of the Year: 1,106
- Outlets at the End of the Year: 884
- Net Change: -222
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Part 1 – Average Gross Sales for Domestic Traditional Restaurants
Domestic Traditional (Franchised and McOpCo) Restaurants
- Of the approximately 12,169 domestic traditional McDonald’s restaurants opened at least 1 year as of December 31, 2017: