How to buy a McDonald's franchise and succeed

Many people believe McDonald's is the premier franchise business in the United States and perhaps the world. The company's pervasive advertising and massive market presence makes it a very valuable franchise. Here's what you have to do to get one -- and succeed.

Things You'll Need

• $300,000 to $5,000,000
• Management and business experience, especially in managing multiple businesses

Instructions

1. -- Be sure you know what you are getting yourself into. McDonald's franchises are much sought after so the company can be picky about who they sell franchises to. They're not going to give you a restaurant just because you have the cash. McDonald's is looking for people with business experience who can eventually run more than one restaurant. They want franchisees who will be involved in the day-to-day business of their stores. You can't be an absentee owner.

   -- The McDonald's franchise contract is very strict with little leeway on the products you sell. This isn't really a problem since McDonald's massive advertising promotes its products so well. Cleanliness and health codes are critical parts of the contract. You must be prepared and able to run a McDonald's restaurant and comply with the company's high standards or you run the risk of losing your store.

   -- McDonald's will provide you with its "Financial Disclosure Document (FDD)" This 200+ page brochure gives full details of the franchisee-company relationship, the training program, financial statements, and a sample franchise agreement. Study the FDD carefully before you make a financial commitment.

   -- Be sure that you have sufficient financial resources. McDonald's says that prospective franchisees must have a minimum of $300,000 in cash. The overall approximate financial requirements to buy a McDonald's are:

   For New Restaurants (very hard to get):
   $45,000 franchise fee
   $900,000-$1.8 million equipment and start-up fees
   40% of these fees must be paid in liquid, personal assets

   For existing restaurants (this is how most new franchisees enter the McDonald's system):
   $45,000 franchise fee
   Approximately $1 million to $5 million to the existing franchisee (McDonald's calls them "owner/operators") or to the company if the store is company-run.
   A minimum of 25% of these fees must be paid in liquid, personal assets.

2. Apply for a franchise through the McDonald's website. Although you could start the process by negotiating directly with an existing McDonald's franchisee, you are better off applying with McDonald's, have the company vet you, and take the company's training program. The training program takes 9 months or as long as 24 months if done part time.

   Because of the length of the training program, a McDonald's in your area may not be available when you finish the training program. For this reason, McDonald's also considers your willingness to relocate after your training is completed.

   The McDonald's corporation will give you a list of available franchises if they are interested in you. The purchase of an existing franchise is made by negotiating a price with the owner subject to the approval of the company. The price for an existing store reflects the good will paid to the franchisee for the business he has built up over the years. Good stores will command higher prices and you could get into a bidding war with other prospective buyers. The company has a veto over who may buy a particular restaurant and may not approve you for the McDonald's you may want to buy.

   Thoroughly investigate any McDonald's you are thinking of buying. If a store seems to command an unusually low price, there's probably a reason. Keep in mind an important rule for your success: LOCATION, LOCATION, LOCATION! If your McDonald's is in a hard to reach area, you could be buying a dud and never make a profit.

   Make sure you ask the existing franchisee and McDonald's to share with you the financial records of any store you're thinking of buying for at least the last 5-7 years. Carefully examine profit and loss statements.

3. After you come to an agreement on a McDonald's franchise to purchase, you will pay the applicable fees and schedule a date when you will assume control of your new franchise.

4. Manage for success. If you buy McDonald's in a good location, run the store the way the company taught you, and did not over pay, you should earn a profit in a few years. That is, of course, if you can address the one wild card in any small business: personnel. Your success depends on staffing your McDonald's -- which may be open 24 hours a day -- with competent, courteous, and reliable personnel to provide a quality product. You will need a management plan that includes shift managers to run your operation. Finding and keeping reliable people is not easy, but it is the key to your success. You will get training on how to do this, but in the end, you either have this skill or you don't. McDonald's obviously is looking for people with a proven track record of managing busy retail stores.

5. So what if McDonald's turns you down? If you don't have enough cash, you can save up and reapply. If you don't have enough sales experience, you can work at that too and reapply.

   On the other hand, there are many, many other franchises available that are much easier to obtain and less expensive. Click on the nearby ads for information.

Tips & Warnings

• McDonald's also has many franchises outside of the United States. The web site for these franchise opportunities is at the end of this article.

Resources

• McDonald's Franchise US Website
• McDonald's International Franchise Site