Top 3 Reasons to NOT buy a McDonald’s Franchise


Is McDonald’s a good franchise to buy? How much does a McDonald’s franchise cost,
and how much money can you make – all these questions will be answered in today’s video. Taken from their 2017 franchise disclosure
documents the total investment required to buy a McDonald’s franchise is $1,008.000 to
$2,214,080. A lot of people see that the franchise fee
for a McDonald’s is only $45,000 and assume that is all you need but that is absolutely
not the case. You will need a minimum of $750,000 in liquid
capital, that’s cash, in order to qualify. You are also required to have a very strong
background in business, preferably in a managerial or supervisory capacity as you typically will
be managing 50-125 employees. If you think McDonald’s is a “sit back while
your franchise makes money” type of business think again – taken from their website McDonald’s
requires you to actively participate in the business and will not sell to investors, investor
groups or corporations. After buying your store your ongoing fees
for your McDonald’s will include a Service fee equal to 4% of Gross sales due on the
10th day of each month. Advertising and promotion is not less than
4% and will vary depending if you are involved in local co-ops. There are other small fees such as licensing
and software, and of course your major expenses of rent and staffing. Your monthly base rent will vary depending
on the total amount invested by McDonald’s in the acquisition and development of the
building and land. So how much does a McDonald’s store earn? That amount will vary but this chart taken
from Bloomberg, sourced from Janney capital markets gives a nice snapshot of a McDonald’s
financial scenario. Now these figures are from a few years ago,
we know that today from looking at the QSR50 the revenues have actually dropped by about
$150,000 since this chart was made, so they are likely even lower today than back in 2012. lets take a look. We have net sales of 2.7 million in 2012 which
appear to have dropped to 2.55 million in 2017. Still pretty decent money right? Subtract your food and paper costs leaves
you with about $1.7 million. Pretty solid so far! But hold on there are many more expenses related
to running your McDonald’s. Once you back out payroll, taxes, advertising,
maintenance, utilities and operating supplies you get down to $761,000. Still not bad right! But hold on you forgot rent, insurance, and
other expenses which bring you down to just over $150,000. Now given the fact most executives can earn
$150,000 at a job, not having to invest 1.5 million or worry about running a business
with dozens of employees, this begs the question of how great of an investment owning a McDonald’s
actually is. Now don’t get me wrong investors that got
in early and have prime locations will do far in excess of those numbers. But it’s tough to find a great location anymore
with so many stores. Always remember the emerging brands of today
are the McDonald’s of tomorrow. As we always say it is critical to get in
at the right part of the growth curve not at the tail end, which is where most investors
do get in because they see all these locations and think that must mean success. Not the case. McDonald’s has also had it’s share of challenges
financially as a corporation and you can see here taken from their franchise disclosure
documents they have closed hundreds of US based stores and hundreds more in other countries
over the past 3 years. Additionally recent surveys of McDonald’s
franchisees indicate many are unhappy with how the company is being run. “The system is broken,” one franchisee said
in the survey comments collected by analyst Mark Kalinowski. “There is no leadership, no plan, no respect
for operators or their investment bottom line.” Another said, “Relations between McDonald’s
corporation and operators are the worst I have even seen.” Not one franchisee surveyed said the six-month
outlook was “excellent.” This Business Insider article reads: Furious
franchisees slam McDonald’s for costly demands and ‘wasteful’ changes. This Bloomberg article entitled “McRevolt:
The Frustrating Life of a McDonald’s Franchisee” is a good read Ill put the link to it in the
description box. If you do a quick Google for McDonald’s and
unhappy franchisees there is no shortage of content to look at, so it appears the culture
at McDonald’s franchising is also on the decline. So is a McDonald’s franchise a good investment? The trends would indicate that the opportunity
is nowhere near their peak in the 80’s and 90’s and it would be prudent to look at several
other franchise options before buying a McDonald’s just for sake of comparison. Little bit of McDonald’s history, McDonald’s
was started in 1940 by Richard and Maurice McDonald who opened their store in San Bernadino
CA. At the time no bank would lend them money,
until Bank of America finally extended a loan of $5,000 which started the empire you see
today. It wasn’t until 1962 the Golden Arches as
we know them today came into use, prior to that the McDonald’s mascot was a hat wearing
hamburger called Speedee! Don’t forget to like and subscribe and if
you need help researching or finding a franchise visit us at franchise.city, and feel free
to browse our franchise directory with over 600 franchises that link is at the top right
of the screen. Thanks for watching. https://www.mcdonalds.com/ca/en-ca/about-us/franchising/purchase-franchise.html https://www.bloomberg.com/features/2015-mcdonalds-franchises/ http://www.Franchise.city https://www.qsrmagazine.com/content/qsr50-2017-top-50-chart

100 comments on “Top 3 Reasons to NOT buy a McDonald’s Franchise”

  1. Joseph Kim says:

    $150,000 for managing one restaurant ain't bad but ain't good either, I'd say it's fair especially considering that it's a low risk investment – you are almost guaranteed a profit as long as you put in the work.

  2. yamahonkawazuki says:

    i was in management back in the day. late 80s etc. at the time, i was contemplating this. but i also got my hands on the paperwork/invoices for our store. you could if all thibngs were right, clear 15k after you sold everythign that came in on the truck.; minues overhead etc. plus if you own the building you have mortgaes etc, also when not if, but when mcdoorknobs chqanges store look you have no choice. you have to follow suit. which i cnaq understand but this can get pricy. for a million bucvks you have a better chance of starting your own party. and have a better shot at becoming a success. gas stations forget it. profit on a gallon was 6 cents. AS he said real estate is a better shot at success. even with the ever present bubbles in that market. or do like a delivery service. aka take out taxi etc. but 80 hours a week is not an exaggeratiopn. as a manager youre salariedand will put in close to this amount of time. so your hourly rate can be around 2 or 3 dollars per hour. honestly less risk to health or freedom by becoming a drug dealer lol.

  3. Derrick Ng says:

    I would totally buy a McCafe franchise

  4. Vinny Carrocia says:

    A great video as are all of your videos! I have no intention of opening any type of business but I am very interested in the workings of franchises and your videos provide some great information.

  5. Seth Morrison says:

    I'm but a lowly wage slave, still find these videos interesting though.

  6. Adam Hearn says:

    Is the Mandela effect in effect or did you just mix up net and gross profit?

  7. Jolfer 13 says:

    According to this guy every franchise is a bad buy

  8. Momentum Productions says:

    daddy with that beard!!

  9. Cell G says:

    One reason for the decline is that the food SUCKS💯!! I only eat there if I’m constipated their food is a good colon cleanser 🤣

  10. label1877 says:

    If I had 1 million dollars…I would take $300,000 to Cebu Philippines and live it up until I die.

  11. Daytona Sixty-Eight says:

    I want to own a McDonald's some day. That's why I vote for unreasonably high minimum wage increases so the businesses can become more motivated to develop automation. Then I will buy a McDonalds when I only need to staff it with 2-3 people at a time.

  12. Douglas Stejskal says:

    McDonalds food made of goundup recycled milk jug plastic bottles and surplus Chinese drywall? Yummy!

  13. NultyMusic says:

    I love this channel and I love these videos. It's so interesting to gain insight on all these business's. Keep up the videos!!

  14. KanadianSpaceProgram says:

    We have 45 McDonald's restaurants in the city I live in and only two are privately owned.

  15. Shotgun Reloader says:

    why dont you mention the franchises that are worth investment??

  16. Ramon Ornelas says:

    Mcdonalds started in Chicago il

  17. DMSteeley says:

    The guy that owns our local McDonald's just hangs around and scares customers.

  18. Edgar Arenas says:

    If you have a $1,000,000 cash 💰, buy 16 income properties 🏡 🏠 in the Midwest that produce easily over $180,000 net profit annually. Hours needed to manage = 4 hrs a wk vs 60 hrs at a ghetto McDonald’s. And when your burger 🍔 flipper doesn’t show up, you’re the one that has to do it.

  19. Shawn Afshar says:

    taco bell is the same it costs $$$$ just hit the like button 1k likes now ! 🙂

  20. This is the Beginning says:

    The Mcdonalds in my neighborhood had to hire 2 Security guards because of the various "Interesting" customers. Im pretty sure McDonalds isnt paying for that.

  21. Kenny Xu says:

    I have 53 canadian dollars, so thats like 2 real dollars, what franchise should I buy

  22. Scott Gibson says:

    I am older now and have worked for companies, myself and owned businesses and they all have their pluses and minuses. If you own a business you have the potential to make more money but trust me you are going to work and you have no paid vacation, holidays, medical plan ect. I now work as a private contractor to the company I used to work for and other than the medical insurance issue its what I prefer. Owning a McDonald's sounds like hell and very uninteresting.

  23. hassan chahrour says:

    Can u do Ihop

  24. Simerr says:

    Mother fuck, what is a good business to buy then!!!!!!!!!!

  25. TemplarGaming says:

    I have been looking into franchises, I have 3 mil cash and the ability to finance much more but cannot device what franchise I want to get involved in.

  26. William Wonka says:

    whatevere u buy dont buy a baskin robbins

  27. Ob Bop says:

    Look for YouTube videos showing the crazed customer cohort attracted to fast food joints and how that 13% behave either inside or at the drive-through order window. Do you want to deal with that idiotic mob? If not… do not buy any fast-food joint.

  28. Samson Bryant says:

    looking like a mcdonalds franchisee yourself these days, impressive bloat

  29. David Azinger says:

    If a franchise has an average hamburger, an average chicken sandwhich, & average iced tea — then why pay an above average price for it?? What you are paying for is that BIG YELLOW M. The BIG YELLOW M adds nothing to the hamburger, or sandwich, or iced tea, so, what is it good for ???

  30. Reynaldo Cardoza says:

    If they approve minimum wage of $15.00 an hour for the fast food industry, the profit will drop a lot

  31. TEAM6USA says:

    Most Millenniums avoid McDonald's. McDonald's tried really bad to attract them with salads, cold coffee drink, etc, but numbers are clear it didn't work. Sad….. because Millenniums are broke enough to eat every day at MCD's

  32. Andrew Howard says:

    A McDonalds managers would seriously get paid $108,000? That's £84,790 here in the UK, and that's double what I'm on and I'm a senior developer with 10 years experience.

  33. Monsiemage says:

    Knew a couple from my home town that owned one. They sold it about 2 years later. Buying a McDonalds franchise is buying a job. They were both working close to 100hrs a week at the start and even after it got rolling they were both doing 70 plus. About a year into it "When it should be self sufficient" They found the real problem with Mcdonalds. It's a temporary job for people, most people who choose to be in upper management at one have no idea how to treat people or run the business properly, they are always the target of workers comp claims, and legit mismanagement claims.

    Basically you can't rely on your cheap labor to "Step it up" no ones going to bust their ass so you can sit at home and rake in hundreds of thousands. They found this out very quickly, they always ended up short staffed, and they second they left for more than two weeks, the restaurant fell into shambles.

    Ive seen far more restaurant owners do way better owning their own restaurant opposed to a franchise. They would come into the Mexican restaurant I worked at, and my boss sat down with them one day and said "You own McDonalds?" They said yes of course, and he said "Ohh you might need a bigger safe than me" They said "Safe"? He said yes I no trust banks, so I had a safe built into my house.

    Obviously he was doing way better than them. He even offered to train my to operate my own restaurant, I told him I didn't know if that was what I wanted to do, he said come to my house some time and look at my safe, maybe it can change your mind.

    If your going to buy a job, might as well not have a corporate name, and corporate price tag behind it, much cheaper to open your own, and in my opinion since your not paying franchise fee's if ran properly you will make much more.

    Lets not lie though, Real estate is the best way to make money, so little risk, so little work, it's more free.

  34. Brian Page says:

    I worked at Mcdonalds for almost 3 years before moving on to a small family owned restaurant, anybody thinking of franchising one, should think twice, one thing I noticed (at the location I worked at) and lots of people say throughout other locations in my area, It seemed from an employee standpoint, everybody views McDonalds as a stepping stone, Considering a vast majority of the staff, say won't be managers or team leads (Whatever they call it these days) Culture and management was really rude and bad at communicating too, I love this video cause it is one I can relate to the most, As Snack eater said these videos are very interesting, I just want to point out one other thing, anybody thinking about getting into a food serving franchise, please look up some statistics on food theft. People seem to view stealing food not as bad as money(not just taking food home, I'm talking about cooking it and eating when say supervisor is on break or such) , however it's the exact same thing, I've seen tons of restaurants close (Franchise or Family own) cause people don't realize how complex it is

  35. Mar Blox says:

    Um, if I had this money – I would not spend it on a franchise.

  36. Trotskisty says:

    I haven't patronized McDonald's for decades. Your past & present practice hasn't cost you enuff customers, AFAIC.

  37. Ranjit says:

    They have a idiot as g.m.

  38. Robin Lillian says:

    Start your own hamburger place. If you have a million dollars, you can afford it. Make simple REAL hamburgers from half a pound of ground beef each. Have a variety of fresh toppings. Real food will get you a profitable business. Five Guys started their own restaurant chain–look at how successful they are–and the food is MUCH better than McDonalds.

  39. rgd963 says:

    you better off running you very own burger joint!

  40. Ch Pe says:

    From what I've seen all Franchises are a bad deal for the owners. It's only good for the Corporate office and for the consumer. I knew a McDonald's owner. He had to physically work there for 3 years despite being a millionaire coming in. The biggest issues with fast food franchises is bad corporate management. They have too many competing franchises in close proximity to each other and the each restaurant is forced to participate in promotions with means selling food cheaper than full price and giving away food.

  41. Barney Google says:

    I don't even go to McDonald's since I found out about pink slime.

  42. TRUTHSPEAKER says:

    Does anyone have information about franchising a "McDowell's" restaurant? There was a nice on in Queens, NY where a nice kid named Akeem was working…..always wondered how his life turned out?

  43. atl_1ne says:

    the thing about mcdonalds also is that they impose a lot of products on their stores, which sometimes requires new equipment, and another perishable item, and manpower such as store managers spend a lot of time learning the assembly schematics then having to train their staff on it.

  44. Free Soul says:

    McDonald's owner in Reno, NV was employing illegals forging fake work documents social security numbers, 56 illegals working at his restaurants. Got busted and fined a million but no jail time.

  45. Can Billy says:

    I know of one McDonald's in Australia closed down, the funny thing is that had high foot traffic, but not as many customers.

  46. Smokeythecat says:

    This is great insight into the business aspect of franchise ownership. Thanks for the great video!

  47. Jason G says:

    100 k on paper and its not napkins and tp WTF

  48. philtrich says:

    Oh ya because it’s just so easy to buy a franchise that we can say no easily to one.

  49. Bob Crane says:

    McDonald's pushes high sugar junk on kids, they're nothing but a playground drug dealer!

  50. RV Life says:

    i was gonna say NOT because they are satanic whores feeding the masses with garbage, but that's a good reason too.

  51. ESSE says:

    McDonald's is still a good franchise but too expensive

  52. James B says:

    "McDonald's is a real estate company which sells hamburgers." -Ray Kroc
    That's why they are selling off their corporate stores which make less than $4 million annually.

  53. YouMan Chew says:

    I’ll save my money and get a hotdog stand

  54. Supreme H says:

    Buying a McDonalds franchise was such an 80s thing to do. Back when the food was still decent and people lined up out the doors. Also, there weren’t many major competitors back then. As a kid we mostly cooked during the week and maybe ate out during special occasions or on the weekends. Nowadays the quality of food has gone down along with a million smaller chains sprouting up everywhere. To eat at a McDonalds now has to be a last option decision.

  55. Gaybama says:

    Nobody own a franchise, they just lease it for a period of time with an option to renew if the franchiser allows it. But you have the pleasure in investing your money, time, blood and sweat to build the business and then the franchiser can just take it from you as a buyout.

  56. Scott Simms says:

    I worked as employee for McDonald's when I was 16 years old , that was 30 years ago . It went from a corporate-owned the best place I ever worked to a franchisee that was the worst place I ever work ! I live in the middle of nowhere, but the new McDonald's has wen't to a touchpad screens instead of cashiers which will cause the loss of jobs in my area ! Franchisees now believe that it is more profitable to screw families than insure quality!
    Ed !!!!

  57. TheSushiandme says:

    Franchises aren't worth it.

  58. super nerd says:

    using those numbers and a few increases in food costs,rent, insurance or salaries and you are in the RED!

  59. KeepIt Real says:

    Everything u said about McDonalds is true but not the up and coming franchises. In fact every new franchise in the fast food and restaurant biz in the last decade has fallen on its face and failed. I’m surprised with your background that u would even consider any restaurant. It’s one of the worst investments u can ever make and very risky.

  60. Foreign Classics says:

    Buying a job! Bump that

  61. Brenden James Martel says:

    In general, restaurants only see a 10-15% profit margin.

  62. Liso Campos says:

    Why not let them run their own business?

  63. DELIBRIUM says:

    i worked in a McDonalds in belgium and i can say the guy who owned that restaurant had like 5 or 6 other McDonalds restaurants in the area.
    This guy is super loaded, he even once called from vacation in turkey just to hear how the profits were rolling in.

  64. Xiao'sChannel says:

    what happened to sound quality?

  65. shaesham says:

    Switching to black and white for no reason is weird as shit. Stop it.

  66. Mr. D BOI says:

    This explains a lot. People often think why do they suck. They can't afford to have exceptional help and motivated people.

  67. Binozia - Tech says:

    In my town the mc Donald’s (maccas) is a gold mine it’s the only one in the town and is on the beach next to a giant skatepark and is also next to a giant tourist trailer park and huge hotels

  68. Big Boss says:

    Usually the owner has multiple locations and they rarely visit the stores. This counts as residual income because you’re not there 8 hours a day

  69. Manhwa Fan says:

    I suppose San Bernadino is not easy to say to non locals, lol

  70. tskjesusfreak says:

    So, if I had $2.7 million I rather stick that money into the stock market. Why? I can get a better return of my investment and not to have to work as hard (if at all).

  71. Potato says:

    Just saying the S&P 500 average is like 10%. So basically do nothing and get 10%.

  72. John Doe says:

    I would sell my family to open a chickfila.

  73. M Man says:

    I am puzzled, you are critics of every franchise and consider yourself franchise consultant? Your channel is pure "project fear".

  74. Brian The Explorer says:

    I’m not lovin’ it…as a franchise

  75. Brian The Explorer says:

    That unfortunate how Roy Croc muscled our the original McDonald’s brothers, but if his didn’t do that McDonald’s wouldn’t be as it is today.

  76. bil Srky says:

    Movie the ‘founder ‘ brought me here . It’s available on Amazon prime. It’s a good movie. 👍

  77. Joey Jojo says:

    this guy and his team exposing the thieves! i'm LOVING IT 🙂

  78. Deja Voodoo says:

    Great videos! Any feedback on Dunkin Donuts or Chipotle franchises?

  79. b b says:

    This guy is spreading disinformation, don't let him talk you out of it, when was the last time you seen MD go out of business.

  80. A says:

    All publicly traded companies are destined to be shortsighted and nasty because the CEOs must boost their books in order to prove their worth. This is why massive amount of competent employees are laid off, franchisees are squeezed to death, senseless business decisions are made, low quality products are produced. They are all for immediate profits which will make the CEOs look good during their terms. The hell with the corporations long term sustainability because the CEOs don't care. They will just pocket the bonuses and then prey on the next victims.

  81. trublgrl says:

    Face into the frame. Sitting on the left, facing the left, with your eyes turning to the right, into the dead space behind you looks ridiculous. Also, get a boom mic or a lavalier, it sounds like you recorded this in a tin can. This is day one stuff, man.
    I also question your strange desaturation filter during the program, but that's an artistic choice, not a "mistake".
    That said, I find your videos very interesting and the information is very valuable. Thanks for posting. I also like the clock.

  82. Green Giant says:

    7:57
    Well that’s just un-American.

  83. Thezorro Mark says:

    I am a retired electrical; engineer and just watching your videos has saved me from making some very basic mistakes on buying a franchise. Thank you very much. Keep up the great work.

  84. Rakesh Sharma says:

    Ive always felt the '80s and early '90s was the best time to start a business.

  85. froilan anthony says:

    jollibee

  86. Sam Walton says:

    Thanks for your inputs. I found same information on web. One has to be moron to put $1Million and then work on the top of it to earn $200K. It is not bad but also not smart.

  87. Hassan Bazzi says:

    Great video as always. It is a bit over 6% on investment return. If I have that cash I would invest in the market as a moderate investor. Thank you 🙏

  88. Kyle Gardner says:

    What some of you are forgetting is… you don’t spend 1-2 million… you get a loan.

  89. Bob Smithies says:

    Those figures are if the store is selling one meal per minute all day long.

  90. Jonas Ark says:

    https://www.google.com/amp/s/www.forbes.com/sites/greatspeculations/2014/09/11/mcdonalds-faces-declining-sales-in-asia-after-china-food-scandal/amp/
    The rumours r true. Asians r only less careful hiding it. Dont chance ur wallet to sinister crooks much less ur stomach. Boycott mcdonalds today.

  91. markdely says:

    Great video, just like any investment timing is crucial

  92. doksan says:

    391.500 for the rent makes 32.583 a month. I wonder where would be that location

  93. Sam Lyons says:

    dialysis centers are the new fast food franchise

  94. IamKaylaMarie says:

    I’m shook 😮

  95. reality check says:

    If you have $750,000 you must be doing alright,why bother with a McDonald's franchise ?!

  96. Coffee Now says:

    I live in Siberia, we don't have these here, would it be good to open one here….🤔🤔🍔🍟💂‍♂️

  97. Baron Will says:

    Ask any employee who worked for McDonald's corporate and then their employment was transferred to a franchisee. They'll tell you that before their restaurant was sold, equipment would get fixed quickly, they'd get more uniform easier, holidays were easier to take and they didn't lose holidays, people were disciplined less and pay rises were given more often. If you scored good in a company performance review they would give you the pay rise, a franchisee still has to review you but makes excuses not to give you full marks, so no raise. It seems all McDonald's care about is keeping it the same for the customer, the staff suffer when a restaurant is bought by a franchisee with more reason to tighten their belt than corporate. Sure you can apply to a company restaurant, their website tells you but it could be sold at any time in the future.

  98. Jaim Diojtar says:

    54K of taxes? thats like a 2% here in argentina you have like 70% of taxes WTF

  99. Ricardo Boereau says:

    I'm not discouraged, I'm still gonna be a future franchisee 💰💰

  100. Rudy St. Surin says:

    HEARTBREAKING VIDEO,BUT GREAT!

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