How to Open a McDonald's Franchise

Getting Started

Read the McDonald's Franchise Disclosure Document. Before you make the decision to open a McDonald's franchise, you should closely look over a copy of their Franchise Disclosure Document (FDD). This is a 375 page documents that provides an extensive overview of the rights and responsibilities of a McDonald's franchise owner. The FDD explains the basics of cost, location, training, operations, and the ongoing fees involved in operating a McDonald's franchise. The document contains a lot of legal and business terms, so if you do not have an extensive background in law or business you may want to hire a business or corporate lawyer to help you decipher the FDD. You want to make sure you fully understand your rights and responsibilities before committing to a franchise. The FDD contains a 15 page franchise agreement, which you should have a lawyer look over so you understand your rights as a franchise owner. As the FDD is a fairly long read, you may want to review specific sections only and skim the rest. Item 19, for example, is vital for potential franchise owners as it provides an overview of the costs of opening a franchise as well as the amount of money you can make depending on location. This item is important to read as you want to make sure a McDonald's Franchise is a viable business venture in your area before making the decision to go into business. A physical copy of the McDonald's FDD can be purchased online using PayPal or a credit card. However, you can find a free PDF online through a simple google search. If you're only planning to read certain sections, or if you're comfortable reading from a screen, it might be best to save your money and simply go online.

Be prepared for a lot of expenses. Opening a McDonald's franchise can be costly, and you'll need to put down a lot of money upfront. You need to have a great deal of money saved up to open a McDonald's franchise. You may have to wait a few years and save before applying for a franchise. You need a minimum of $750,000 in personal funds upfront. This money has to be yours and cannot come in the form of a loan or credit. If you're purchasing an existing restaurant, you must have 25% of the down payment towards the total cost must be paid up front. For a new restaurant, you must be able to pay 40% up front. Pre-opening costs for equipment and other supplies usually run somewhere between $959,450 to $2.11 million. The good news is, for these kinds of cost, you can apply for a bank loan. As a franchise, you will be charged a service fee of 4% of total sales. Also, $45,000 of your initial franchise fee must be paid to McDonald's. If you have limited funds and want to buy a franchise or any business, you can get a loan from the bank you do your banking or find banks that have the option of SBA loans. But you would have to find out if the franchise allows that type of financing. Generally, they will buy whatever the franchise's requirements are. They may want a certain amount of cash from the franchise buyer. For example, some percent of it may have to be cash from the buyer, and the rest can be financed. Another option is to raise capital as equity. Look for investors that will take an equity percentage in the business and provide capital to buy the franchise.

Learn the conditions of operating a McDonald's. As a franchise owner, you have some freedom in regard to when you operate and the hiring process. However, you must adhere to certain rules of the McDonald's corporation as you're representing an international chain. McDonald's as particular independent suppliers, who you will learn about in training, that they require you purchase food, packaging, equipment, and other supplies. You cannot, therefore, switch up the kinds of napkins or ketchup packets you use, as unity is important to building a chain. If McDonald's is having a national special or releasing a new product, your establishment will have to comply with prices and dates set by the corporation. You may be able to set some of your own schedules or specials, such a weekly customer appreciation day, but you would have to get a clearance from the corporate headquarters first. The dollar menu is a hot button item for franchise owners, as many find themselves losing money do to the heavily marked down prices. Unfortunately, you cannot get rid of or alter the dollar menu during your time as a franchise owner.

Undergo the application process. Once you have your funds in order, you can apply to be a franchise owner. In order to have your application accepted, you must have experience in entrepreneurial business, have excellent credit, and have adequate funding. You will start the application process by filling out an online application. The application will ask for basic information, like your name, address, phone number, date of birth, and e-mail address. It will also ask whether you've ever been convicted of any crimes other than minor traffic violations and, if so, the details of those crimes. It will ask basic questions about your credit history, financial situation, and your educational background. After your initial application is accepted, there will be a phone interview and a round of Personality and Ability testing. You will fill out a personality questionnaire as well as take some ability tests to make sure you know the basics of operating a large business. Once this phone interview and testing is complete, you will spend a few days working in a McDonald's restaurant while being observed. At the end of this, you will undergo a panel interview to see what you've learned. You will also meet with existing franchisees to ask questions about operating a McDonald's. If you pass all the above mentioned parts of your application, you will be invited for a one-on-one interview in a McDonald's headquarters near you. After this interview, the McDonald's corporation will make a final decision on whether or not to proceed with your application and allow you to open a franchise.

Establishing A McDonald's Restaurant

Undergo the corporate training process. Before you can open your restaurant, McDonald's requires you undergo a training process run through their corporation. You will need to undergo 9 to 18 months of training at a McDonald's restaurant near your home. You will learn everything from hands-on skills to the basics of operating a business. Any operating knowledge specific to the McDonald's corporation will also be taught during this time. There are also a number of seminars, conferences, and one-on-one training sessions you will be required to attend as you begin creating your own McDonald's restaurant. Such opportunities will not only provide you will valuable information about operating a McDonald's, they allow you to network with other professionals in the field. Operating training classes, which come in the form of 2 advanced 5-day courses, must be completed to finish your franchise training. Courses are taught in Oak Brook, IL, so be prepared to travel if you don't live close by.

Hire professionals. As you begin to open your franchise, you'll need to hire a number of professionals to help with construction, legal issues, and business operations. You should hire a franchise consultant and a franchise lawyer from the beginning, as large sums of money will be exchanged in the process of opening a franchise. You want to make sure you have a legal professional overseeing any transactions. You should make sure your lawyer has specific experience with franchises and is not just a general business lawyer. You will also probably need to hire a reputable construction crew, especially if you're building a new location rather than purchasing an existing location.

Learn about location requirements. You have two options when opening a McDonald's franchise. You can either buy an existing restaurant or open your own location. Buying an existing location is recommended, if possible. The down payment required for purchasing an existing location is 15% less than it is for buying a new restaurant and there will also be less costs associated with renovations and repairs. McDonald's has specific guidelines for what types of buildings can be used for their stores, and it may be difficult to find a suitable location in your area. It is not always possible to buy an existing site. There may not be a McDonald's near you or existing sites may not be for sale. Understand the requirements for a franchise building. Ideally, a building should be at least 50,000 square feet. There should be at least 4,000 square feet available to build on, and the store should near the corner of two major streets. There should be parking available and you should be able to build to a minimum height of 23'4".

Opening Your Restaurant

Get the basics set up. Before you can open your franchise, you need to make sure you have all supplies ready to go. You need to buy food supplies from the McDonald's restaurant, figure out how to deal with waste management, and set your hours. In order to buy and sell food, you need to apply for the proper permits in your city. Such permits vary from district to district, so make sure you visit the Department of Health website in your town to find out the rules and regulations. This should also tell you what you need to know about trash disposal. You may need to provide your own private dumpster for restaurant-related trash or you may have access to a community dumpster for restaurants in the area. This depends on your location and the regulations of your city. The McDonald's corporation will mail you the food supplies you need from your restaurant, and you will learn the process for placing orders as well as basic costs during your training. Setting your hours can be complicated. Most cities have regulations as to how early or late businesses can operate by district. You may be in a 24 hour zone, but operating 24 hours can be risky as there's added cost of labor, utilities, and all else needed to keep a restaurant running. To determine your hours, you should see what sort of establishments are in your area and what their hours look like. You should also figure out when the peak hours are for the place where your building is located. Is it most crowded at lunch rush hour or are people more likely to stop by on the their way home from work? Is this a bar district? If so, maybe staying open until 2 or 3AM would be a good idea as people may be on the lookout for food after the bars close.

Hire employees. Once you've established your location, you need to begin the process of hiring employees. You'll need to hire kitchen workers, servers, janitors, managers, and the full range of employees needed to keep business operations going. The McDonald's corporation has specific applications they require for the hiring process. You can download and print applications for various positions online or you can order bundles. It may be difficult to select applicants to interview and hire, especially if you're opening in an area where you can expect to get a lot of applications. You may have to make difficult choices about hiring and you may often have to choose between two equally qualified candidates. If you're nervous about hiring, and do not have previous experience conducting interviews, try talking to other franchise owners you met during your training. They can offer you advice and insights on the hiring process.

Try a soft opening. Oftentimes, doing a soft opening with special promotions and deals can help you get started. It will draw in customers and generate early interest and excitement before your official opening. You should announce a soft opening a month or a few weeks before you'll officially open your franchise. Advertise the opening in flyers you leave around town, on local radio stations, and in local newspapers. Offer one time specials and deals to entice people to come. For example, you could offer buy one get one half off for entrees or allow children under 12 to eat free. Promote positive public relations during your soft opening, making sure your staff is polite with guests. Advertise when your franchise will actually open. Have flyers in the store with the date of your official opening listed.

Prepare for ongoing fees. There are ongoing fees associated with opening a McDonald's franchise. Once you get your franchise going, you will still have to pay some dues to the McDonald's corporation. There is a monthly service fee, based on your restaurant's sale performance. It is usually about 4% of total sales. You will also have to pay monthly rent on your building. Cost of rent depends on the size and location of your franchise.