Note: FDD pages are provided for informational purposes only. This page is only a brief overview of what is contained in the full franchise disclosure document, which is to be given to the prospective franchisee by the franchise—and receipt of which must be formally notarized between the parties. Independent legal and professional advice should be sought before undertaking any investment in a franchise.
Year Business Began: 1955
Franchising Since: 1955
Headquarters: Chicago, Illinois
Estimated Number of Units: 40,275
Franchise Description: McDonald’s USA, LLC is the franchisor. The franchisor is a wholly owned subsidiary of its parent and predecessor, McDonald’s Corporation. The franchisor develops, operates, franchises, and services a system of restaurants that prepare, assemble, package, and sell a limited menu of value-priced foods under the “McDonald's System.” A grant of a McDonald’s franchise authorizes franchisees to operate a McDonald’s restaurant business at a specific location and to use the McDonald’s System in the operation of that restaurant business for a specific period of time. The franchisor offers four types of franchises:
- Traditional Restaurant: franchise offered is located in freestanding buildings, storefronts, food courts, and other locations. The franchisee operates a full-menu restaurant, offering the public a high standard of quality and uniformity in food and service.
- Satellite Locations: The franchisee is granted the right to operate the franchise in a retail store, strip center, airport, universities, hospitals, and other diverse locations. These restaurants serve a scaled-down menu of a traditional McDonald’s restaurant and, in some cases, may also serve non-McDonald’s trademarked products.
- STO and STR Locations: “Small Town Oil” locations are situated in fuel stations/convenience stores and operate a full-menu McDonald’s restaurant within the shared space. “Small Town Retail” locations that anchor a small retail center in rural communities.
- BFL Franchises: For “Business Facilities Lease” franchises, the franchisor grants franchises with leases that include the business facilities. These are limited cases.
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Training Overview: The franchisor operates Hamburger University (HU), the international training center for the McDonald's system. The content and duration of all operations courses, which are offered at HU and various local sites, are revised and reconsidered from time to time to meet the needs of 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. The basic minimum core training, which franchisees must complete to be qualified to operate a McDonald’s restaurant, is known as the Restaurant Leadership curriculum. Restaurant Leadership curriculum is deployed through Campus and Fred, which allows franchisees to complete and track the progress of their assigned learning online. It takes approximately two years to complete all learning plans, from Shift Leader through Restaurant Leader. The complete training program and materials include many elements. As part of the training program, franchisees must perform and master all of the crew and management functions at the restaurant. At the opening of the restaurant, a franchise business partner will spend time with franchisees providing assistance and refinement of previous training and instruction. Franchisees must complete the training program successfully before signing the Franchise Agreement or paying any money to the franchisor. There are no further mandatory training requirements for franchisees beyond the Restaurant Leadership curriculum. However, annual meetings, conventions, various workshops, and other training sessions may be conducted on an ongoing basis within each field office, and McDonald’s may require franchisees to pay for the costs associated with that ongoing training or participation. Additionally, optional courses may be offered to franchisees or their employees for a fee.
Territory Granted: 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. 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. Franchisees may face competition from other franchisees, from outlets that the franchisor owns, or from other channels of distribution or competitive brands that the franchisor controls.
Obligations and Restrictions: Franchisees are required to provide full time and best efforts to and personal on-premises supervision of, the day-to-day operation of their McDonald’s restaurant business. Franchisees may sell only products authorized by the franchisor and use the premises only as a McDonald’s restaurant. In the dispensing and sale of these products, franchisees may use only packaging, paper goods, ingredients, and handling and preparation methods that meet the McDonald’s system specifications and quality standards which the franchisor may designate and modify.
Term of Agreement and Renewal: The length of the initial traditional franchise term is generally 20 years. The Satellite term varies, and the length of the franchise term for STO and STR locations are generally 10 years. BFL term length is generally three years. Franchisees are given no right to renew or extend the franchise after the term of the contract. A rewrite (new term) policy is not part of the previous Franchise Agreement.
Financial Assistance: Typically, no financing arrangements are offered by the franchisor. The franchisor 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 the franchisor for use of the premises. The Operator's Lease does not contain any financing terms. For BFL franchises, the Operator’s Lease provides for the lease of the restaurant’s business facilities as well as the premises. The franchisor’s predecessor may, at its discretion, guarantee loans made by a third party lender, Bank of America, N.A., a National Banking Association, to franchisees for remodeling existing restaurants, working capital, refinancing existing restaurant loans, acquiring restaurant businesses, purchasing restaurant assets by exercising the option under a BFL Rider, and for other reasons approved by McDonald’s.
Investment Tables:
| Name of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $0 | $45,000 |
| Real Estate and Building - 3 month's rent | Base Rent: $0 Percentage Rent: 0% | Base Rent: $313,000 Percentage Rent: 27.25% |
| Signs, Seating, Equipment, and Décor | $375,000 | $1,650,000 |
| Opening Inventory | $12,000 | $39,000 |
| Miscellaneous Opening Expenses | $51,000 | $62,000 |
| Travel and Living Expenses while Training | $3,000 | $39,000 |
| Additional Funds - 3 months | $80,000 | $355,000 |
| ESTIMATED TOTAL* | $521,000 | $2,503,000 |
*The estimated initial investment range covers from satellite location size up to traditional restaurant location size.
| Type of Fee | Amount |
|---|---|
| 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. |
| Relocation Contribution | $50,000 |
| Point of Sale (POS) – Core Product | $2,600 license fee (one-time fee); $1,008 annual fee. |
| Global Mobile App/Digital Capabilities | $900 integration fee (one-time fee); $3,466 annual fee. |
| McDelivery POS Integration | $375 annual fee. |
| Self-Ordering Kiosk | $1,500 one-time licensing fee; $500 integration fee (one-time fee); $546 annual fee. |
| Retail Digital Integration | $500 integration fee (one-time fee); $144 annual fee. |
| Self-Ordering Kiosk Accessibility | $150 annual fee. |
| Hand-Held Order Taker (HHOT) | $500 (one-time fee); $50 annual fee. |
| eProduction | $49 annual fee. |
| Back Office Integration and Enhancements | $500 integration fee (one-time fee); $678 annual fee. |
| Payments and Fraud Management | $574 annual fee. |
| Employee Engagement Platforms | $398 annual fee. |
| People Data Warehouse (PDW) Reporting | $156 annual fee. |
| Deployment, OTP, Execution and Support | $1,909 annual fee. |
| Restaurant Network Management, Access and Security | $1,072 annual fee. |
| Restaurant Data Movement, Management and Monitoring | $471 annual fee. |
| Restaurant File Maintenance (RFM) | $583 annual fee. |
| Microsoft License Subscription | $490 annual fee. |
| Store Mail (email accounts) Fee | $73.80 annual fee. |
The above information has been compiled from the FDD of McDonald's. Year of FDD: 2023.
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As an expert in the field of franchising and business operations, I bring a wealth of knowledge and experience to shed light on the concepts mentioned in the provided article. My expertise in franchise disclosure documents (FDDs) allows me to dissect and interpret the intricate details of the McDonald's franchise model.
Franchisor Overview: McDonald's USA, LLC, established in 1955, is a franchisor with an impressive track record. Operating under the umbrella of McDonald's Corporation, the franchisor oversees a vast network of 40,275 units. The description outlines the company's core activities, focusing on the development, operation, and franchising of restaurants following the "McDonald's System."
Types of Franchises: McDonald's offers various franchise types, including Traditional Restaurants, Satellite Locations, STO and STR Locations, and BFL Franchises. Each type caters to different settings, ranging from freestanding buildings to fuel stations and convenience stores.
Training Overview: Hamburger University (HU) serves as the international training center for the McDonald's system. The comprehensive training program spans two years, covering all aspects from Shift Leader to Restaurant Leader. Franchisees must master crew and management functions, ensuring a standardized approach to operating a McDonald's restaurant.
Territory Granted: Franchisees receive a limited grant of authority to use the McDonald's system at a specific location. Notably, there are no exclusive territorial rights, allowing for potential competition from other franchisees or outlets owned by the franchisor.
Obligations and Restrictions: Franchisees are obligated to provide full-time, on-premises supervision and adhere to McDonald's system specifications. They can only sell authorized products and use approved packaging, paper goods, ingredients, and preparation methods.
Term of Agreement and Renewal: The initial traditional franchise term is generally 20 years, while other types have varying term lengths. Renewal rights are not granted, and franchisees are subject to a rewrite policy for a new term.
Financial Assistance: The franchisor typically does not offer financing arrangements. Franchisees may lease premises through an Operator's Lease, and for BFL franchises, the franchisor may guarantee loans at its discretion.
Investment Tables: The estimated initial investment for McDonald's franchises ranges from $521,000 to $2,503,000, covering various expenses such as franchise fees, rent, equipment, and inventory. Additional ongoing fees include service fees, advertising and promotion costs, and various technology-related fees.
Conclusion: McDonald's, as a franchise giant, provides a detailed framework for potential franchisees. The thorough training, territorial considerations, and financial aspects underscore the complexity and depth of the franchise model. Prospective franchisees should carefully analyze the FDD for a comprehensive understanding before making any investment decisions.
