With more than 37,000 restaurants worldwide, McDonald's remains a popular and potentially lucrative option for some individuals looking to break into the fast-food industry. However, with falling franchise profits and high out of pocket costs, starting a McDonald's franchise is not easy.
The most significant hurdle facing potential franchisees is the initial down payment. McDonald's requires franchisees to pay, using non-borrowed personal resources, 40 percent of the total price for a new restaurant and 25 percent of the total price for existing restaurants.
Given that the price varies by restaurant, initial down payments vary widely, which is why McDonald's requires franchisee applicants to have a minimum of $500,000 in liquid assets.
Other costs include the $45,000 franchise fee, as well as construction and equipment related expenses. In total, McDonald's estimates that the average total startup investment ranges from $1,013,000 to $2,185,000, with franchisees netting an estimated annual profit of roughly $150,000.
By comparison, it only costs $10,000 to become a Chick-fil-A franchisee.