Linsey Kitts
CTF, Mikla
5/11/12
McDonald’s Restaurant
All information can be found on the McDonalds website.
McDonald’s History
Dick and Mac McDonald opened first
opened McDonalds in 1940 as a Bar-BQue restaurant in San Bernardino,
California.
 They then shut it down in 1948, made
alterations, and re-opened it as a self
serving restaurant.

When did it become a franchise?
McDonald’s became a franchise in
1955. The first franchise restaurant was
opened in Des Plaines, Illinois by Ray
Kroc, a multi-mixer salesman.
 McDonalds has existed as a franchise
for 57 years.

Ten years after McDonalds first became
a franchise in 1955, there was over 700
McDonald’s restaurants throughout the
United States.
 Currently, there are over 31,000
McDonald’s restaurants worldwide.

About Buying a Franchise

Acquiring a Franchise
 Most Owner/Operators enter the System by purchasing an existing restaurant,
either from McDonald’s or from a McDonald's Owner/Operator. A small number of
new operators enter the System by purchasing a new restaurant.
 The financial requirements vary depending on the method of acquisition.

Financial Requirements/Down Payment
 An initial down payment is required when you purchase a new restaurant (40% of
the total cost) or an existing restaurant (25% of the total cost). The down payment
must come from non-borrowed personal resources, which include cash on hand;
securities, bonds, and debentures; vested profit sharing (net of taxes); and
business or real estate equity, exclusive of your personal residence.
 Since the total cost varies from restaurant to restaurant, the minimum amount for a
down payment will vary. Generally, we require a minimum of $500,000 of nonborrowed personal resources to consider you for a franchise. Individuals with
additional funds may be better prepared for additional or multi-restaurant
opportunities.

Financing
 We require that the buyer pay a minimum of 25% cash as a down payment toward
the purchase of a restaurant. The remaining balance of the purchase price may be
financed for a period of no more than seven years. While McDonald’s does not offer
financing, McDonald’s Owner/Operators enjoy the benefits of our established
relationships with many national lending institutions. We believe our
Owner/Operators enjoy the lowest lending rates in the industry.
Buying a Franchise

The cost of buying a McDonald’s
restaurant varies. McDonalds requires a
minimal of $500,000 non-borrowed, to
consider allowing some one buy a
McDonald’s franchise.
Terms, and Conditions

Below are the terms and conditions of buying a McDonalds
franchise.

Term of Agreement and Renewal: Traditional term is generally 20 years. The
Satellite term varies, STO term length is generally 10 years, and the BFL term
length is generally three years. The franchisee is given no right to renew or
extend the franchise after the term of the contract.

Obligations and Restrictions: The franchisee is required to provide full time
and best efforts to and personal on-premises supervision of, the day-to-day
operation of the McDonald’s restaurant business.

Territory: McDonald’s franchises contain a limited grant of authority to use the
McDonald’s System in the operation of the specific restaurant developed by
McDonald’s at that address. Franchisees will not receive an exclusive territory.
Franchisees may face competition from other franchisees, from outlets that
McDonald’s owns, or from other channels of distribution or competitive brands
that McDonald’s controls. The Franchise Agreement does not contain any
exclusive grant, exclusive area, exclusive territorial rights, protected territory, or
any right to exclude, control, or impose conditions on the location or development
of future McDonald's restaurants at any time.
Terms, and Conditions continued

Training and Assistance: McDonald's operates Hamburger University, the
international training center for the McDonald's System. The content and duration of all
operations courses, which are offered at various local sites, are revised and
reconsidered from time to time to meet the needs of the franchisees. All courses and
learning events are offered at frequent intervals and are designed to give franchisees
specific skill sets in the various facets of the conduct of a McDonald's restaurant.
Training also occurs at a McDonald's restaurant, including hands-on and self-directed
learning, and is monitored by a McDonald's business consultant (or other assigned
person). Typically, the training takes place on a part-time basis and spans 9 to 24
months, but a 36-month training time is not uncommon. There are no further mandatory
training requirements for franchisees beyond the initial training. However, annual
meetings, conventions, various workshops, and other training sessions may be
conducted on an ongoing basis within each region, and McDonald’s may require
franchisees to pay for the costs associated with that ongoing training. Additionally,
optional courses may be offered to franchisees or their employees for a fee.

Financial Assistance: Typically, no financing arrangements are offered by
McDonald's. McDonald's issues an Operator's Lease for each site owned or leased by
McDonald's. The Operator's Lease is a standard commercial lease under which the
franchisee pays rent to McDonald's for use of the premises. The Operator's Lease does
not contain any financing terms. Loans to certain franchisees for the purchase of
restaurant businesses sold by the McOpCo companies and for other reasons are made
by a third party lender, Lake Forest Bank and Trust Company.
Initial Investment Fees
Name of Fee
Low
$45,000
Initial Franchise Fee
$22,500 - STO
$0 - Satellite
Base Rent
$450
$750 - STO
Real Estate and Building – 3 $1,425 - Satellite
months rent
Percentage Rent
0%
4% - STO
4.25% - Satellite
$791,000
Signs, Seating, Equipment,
$602,000 - STO
and Décor
$50,000 - Satellite
$11,400
Opening Inventory
$12,000 - STO
$8,000 - Satellite
Miscellaneous Opening
$53,000
Expenses
Travel and Living Expenses
$3,000
while training
$165,000
Additional Funds – 3 months $144,000 - STO
$57,000 - Satellite
$1,068,850
ESTIMATED TOTALS
$837,250 - STO
$172,425 - Satellite
High
$45,000
$22,500 - STO
$500 - Satellite
Base Rent
$310,500
$30,600 - STO
$46,650 - Satellite
Percentage Rent
42.5%
17.3% - STO
23% - Satellite
$1,129,500
$849,000 - STO
$396,000 - Satellite
$27,000
$25,000 - STO
$15,000 - Satellite
$57,400
$20,000
$303,000
$221,000 - STO
$91,500 - Satellite
$1,892,400
$1,225,500 - STO
$627,050 - Satellite
Ongoing
Fees
Service Fee
4% of Gross Sales
Rent
Varies
Advertising and Promotion
Not less than 4% Gross Sales
Audit/ Inspection Fee
Cost of Audit
Satellite Annual Fee
$500 to $2,500
Satellite Rent
Varies
STO Rent
Varies
BFL Rent
Varies
New POS Integration Fee
$1,000 integration fee (one-time fee); $200 annual
integration fee
Restaurant File Maintenance (RFM) Fee
$150
R2 D2 Software Maintenance Fee
$125
New POS Software Fee
Next Gen Cashless Fee
$1,600 license fee (one-time fee); $400 annual software
maintenance fee
$216 license fee (one-time fee); $154 annual
maintenance fee
Help Desk Support Fee
$2,040
Microsoft Subscription License
$449
Restaurant System Management (RSM)
$250
Restaurant Integrated Data Movement (RIDM)
$75
What McDonalds has to offer

Why McDonald's?
 McDonald’s has always been a franchising company and has relied on
its Owner/Operators to play a major role in the System’s success.
McDonald’s remains committed to franchising as a predominant way of
doing business. Listen as four McDonald's Owner/Operators share their
perspective in these areas: Training, McFamily, Customer Satisfaction,
Social Responsibility and Support.

World Class Training
 McDonald’s continues to be recognized as a premier franchising
company around the world. We believe a major component of this is the
world class training you receive prior to becoming an Owner/Operator.
McDonald’s provides hands on training and the materials you need to be
a success in your restaurant business.

World Class Service
 McDonald's offers World Class Service
What they are looking for?

McDonald’s restaurants are looking for
educated people that are trying to make
a business become even more great. To
qualify for a McDonald’s franchise you
also have to be financially stable. Great
business skills are also a plus when
trying to open up a McDonald’s
franchise.
Profits( 1 year )

Annual sales
 $1.3 million

Franchise fees due
 $45,000 + 12.5%, 4% of royalties

Expected profits after the cost of
goods
 $916,000
McDonald’s Popularity

McDonald’s restaurants are very popular for the
menu choose. Their classic Big Mac is an all
American favorite. Aside from the Big Mac,
McDonald’s chicken nuggets, fries, milkshakes,
etc. also help gain McDonalds gain popularity.

There great customer service, and family friendly
environments also help to make them popular.