There's no question about it, McDonald's is
the most successful restaurant in the history of the world. The company isn't worth millions, but billions,
nearly $150 billion, and that number keeps climbing every day. Back in the 1950s, the man who would eventually
turn McDonalds into an international powerhouse, Ray Kroc, had a lot of big ideas for the restaurant. But perhaps his biggest idea can be summed
up in a single word. "Franchise, franchise, franchise, franchise,
franchise." The food at McDonald's has always sold like
hotcakes but once the restaurant started franchising, the world began eating up the brand. So, it's not surprising that for decades,
entrepreneurs have been flocking to the Golden Arches with dreams of opening their own McDonald's. But being a franchise owner isn't as easy,
or profitable, as you might think. For starters, buying into a McDonald's franchise
is expensive, and if prospective franchisees want to get a piece of the pie, they'll have
to bring some heavy coin to the table. According to Business Insider, the initial
investment is between $1 million and $2.2 million. That price tag is pretty broad, but McDonald's
notes that these costs are based on the restaurant's location and size. Long story short, it's going to cost a lot
more to buy a McDonald's franchise in San Francisco than it is in Saginaw, Michigan. Before you take the plunge with Mickey D's
and start your own franchise, keep in mind that 40 percent of that initial investment
must be cash or non-borrowed assets. Whether it's McDonald's or other fast food
restaurants, franchise owners can do pretty well, at least, once they get past their initial
investment hurdle. According to Business Insider, the average
McDonald's restaurant takes in around $2.7 million a year in sales. That may not be quite as high as other well-known
eateries, such as Chick-fil-A or Panera Bread, but it's still pretty good. Of course, some McDonald's franchise owners
are going to make more than others, but most franchisees pull in an estimated yearly profit
of roughly $150,000. However, after $2.7 million in sales, a profit
of $150,000 isn't even 6 percent. Once you deduct the price of supplies, food,
payroll, and about a dozen other costs handed down by the corporation, that's what an average
franchise owner is left with. The franchise system has been a major reason
for Ronald and his company to celebrate since the 1950s, and it's actually how McDonald's
makes a significant portion of its profit. Plus, franchise owners have historically brought
a lot more than money to the table by contributing some of the company's most important innovations. "The Big Mac, the Filet-O-Fish, even the drive-through
concept were all developed by franchisees working within the McDonald's framework." So while McDonald's franchise owners can make
a six-figure salary through their restaurant, the McDonald's corporation is making much,
much more. It all starts with the $45,000 franchise fee
that owners pay. Then, there's the never-ending monthly service
fee that takes 4 percent of a location's gross sales. After that, franchisees pay a rental fee each
month, which works out to be an average of around 10.7 percent of sales. So basically, McDonald's franchise owners
are forking over 15 percent of their sales every month to the Mickey D's machine. This system is extremely profitable for the
Golden Arches. So much so that only around 5 percent of the
McDonald's locations on the planet are owned by the company. The rest are franchise operations that are
paid for upfront by the franchise owner. According to Reader's Digest, McDonald's raked
in 27.4 billion dollars in revenue in 2014, and how that breaks down is pretty telling. $9.2 billion of the revenue was from franchised
locations and $18.2 billion was attributed to company-owned locations. On the surface, it sounds like the company-owned
locations are the real money-makers, but that's simply not the case. The cost of running a business, especially
a restaurant, can really cut into its profits. At the end of the day, McDonald's only keeps
around 16 percent of the revenue its company-owned stores make, but it keeps 82 percent of the
revenue franchisees pay out to it. That all adds up to mega-bucks for Mickey
D's. So, while owning a franchise should put plenty
of food on your table, the McDonald's corporation will take a huge bite out of your bottom line. "It's like they don't care if you make money
as long as they make money. What kind of corporation does that?" Check out one of our newest videos right here! Plus, even more Mashed videos about your favorite
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