May 17, 2008

Five % Royalties?

McDonald's Owner/Operators in the USA will find some
interesting numbers in the McDonald's 10-Q published
May 6th. Ever wonder what your fees to McDonald's
would be if you owned the land and building and simply
paid Service Fees?

As you'll recall McDonald's sold its businesses in 18
Latin American and Caribbean countries. They sold about
1,600 a developmental licensee that now
owns the business, including the real estate. The buyers
pay monthly royalties commencing at a rate of 5% of
gross sales.

When comparing this to the fees you pay don't forget to
include your Service Fees which are essentially royalties
by a different name.

The first quarter MCD 10-Q is HERE



Anonymous said...

3% to 5% of sales is about what other franchise chains charge. Is the oportunity to pay four or five times that worth it to have a McD store?

Anonymous said...

4% is the norm in high end sit down restaurants, 5%-6% in QSR or fast casual restaurants. You have to remember though that does not include your rent. Which is of course a variable but many times around 5%-10%

Richard Adams said...

McDonald's franchisees can only dream about 5%-10% rents. MCD Corp is the landlord and the rent on new stores can be 13% to 16% plus the fixed 4% royalty (service fees).