If you plan to open up a business, adopting an idea from scratch requires plenty of time, capital, and work. Especially if one wants to venture into the restaurant industry, it does not come easy. On the other hand, a franchise-based model is a good option here. Acquiring franchises from well-established brands helps one leverage the name and mark their position with reputation. The restaurant industry's most obvious example of franchise-based models is McDonald's.
The well-known food chain company enjoys a prime presence across the globe. The footprints of McDonald’s extend across more than 100 countries. Moreover, McDonald’s is currently the largest restaurant chain in the world. Therefore, when it comes to opting for a food chain franchise, McD’ can be one’s best bet.
In India, McDonald’s is currently operating through two companies. Therefore, depending on the location, one would need to contact either of these two for a franchise option.
- North and East Region: The company Connaught Plaza Restaurants Private Limited caters to McDonald’s franchise requirements in the Northern and Eastern areas. There is no other way to opt for the process.
- South and West Region: To open a McDonald’s franchise in these parts of India, Hardcastle Restaurants Pvt. Ltd. will be the point of contact.
Required Documents
To get a clearer idea of the terms and conditions for owning a McDonald’s franchise, one can refer to their Franchise disclosure document. The same is readily available for purchase online and can be downloaded in PDF form. The transaction can be done through a Debit/Credit card. This 300-450 pages document shows the franchise working and its terms and conditions. Connecting with an accountant or lawyer for a detailed understanding of the document is also good. More details are available here: McDonald's Franchise Model.
McDonald's Franchise Model
Now, let us dive deeper into the cost analysis for opening a McDonald’s franchise in India. Depending upon the locality and store size, McDonald’s offers four different types of franchise options. The requirements also specify a lease agreement and a franchise fee, varying on the store size. The four options are as follows:
- Traditional Restaurant: This is the most common kind of model. Traditional McDonald’s franchise includes outlets in malls, food courts, residential buildings, etc. These are large stores offering sitting areas for dine-in and a whole range of menus. The lease agreement holds for 20 years, and the franchise fee is around Rs. 30 lakhs.
- Satellite Locations: These kinds of outlets are comparatively smaller in size and mainly provide takeaways. Such outlets are suitable for airports, universities, and more. The lease agreement duration depends upon the location, and the franchise fee is around Rs. 15 lakhs.
- STO/STR Locations: Denoting Small Town Oil locations and Small Town Retail locations, STOs are found near petrol pumps and other rest areas on highways. Subsequently, STR outlets are located near large malls or department stores in small towns. STO and STR outlets offer dining space and a full range of menus. The franchise period holds a validity of 10 years.
- BFL Franchise: Provided to corporations to establish canteens, there are known as Business Franchise Leases. These outlets are initially locked on a three-year lease base but can be extended according to the response and maintenance.
Along with these models for McDonald’s franchises, one also has the option to buy an existing franchise. In rare cases, a running franchise is found on sale and can be purchased with the proper processes.
McDonald's Franchise Investment and ROI
Apart from the costs mentioned above of franchise fees, one would need additional investment for other expenses. The requirement for investment in equipment, staff training, maintenance, and other expenses comes to around Rs. 6.6 to 14 crores. Above all, an additional liquid capital of Rs. 5 crores is also required to meet any unexpected expenses or set apart as safety money.
Naturally, this large sum will cause concern regarding the profit and return. So, let us look at some benefits of opting for the McDonald’s franchise model. The brand value of McDonald’s is unmatched. Almost all kinds of customers rejoice at the sight of a McDonald’s outlet. Hence, a franchise owner wouldn’t have to worry about getting customers. Moreover, the investment will be quite efficient as the outlets' will flood with a good customer footprint.
A franchise owner of McDonald’s does not need to spend any extra amount for marketing or advertising. Instead, the company relies on its effective research and marketing strategies. Hence, a franchise owner can take leverage of the same.
Land / Store Requirements For McDonald’s Franchise
The basic requirements specify that applicants should have a 2000-15000 sq. ft space for a McDonald’s franchise. There are two possible options for the same. First, if the applicant owns a space, the same can be considered. Secondly, the applicant has a chance to opt for the franchise under a one-year lease.
McDonald’s Franchise Application Process
After fulfilling the capital, staff, and compliance requirements, one can get in touch with either of the two companies mentioned above. After filling out the application form, the applicant must pass through a phone interview. Additionally, the franchise enablers also conduct a Background/Credit check.
Subsequently, the process involves steps such as Panel interview, Financial verification, and review of legal documents to enter the training program. Post that, a qualified candidate is granted a franchise opportunity. Furthermore, you can visit your nearest McDonald's Store.
McDonald’s Franchise Charges
- A franchise owner is required to pay a service charge of 4 percent on the sales and a monthly fee to McDonald's.
- If Mcdonald's owns the store property and acts as a landlord, the franchise owner is charged for rent every month.
Considering the charges and the past performances, investing in a McDonald's franchise is quite profitable. A franchise owner can recover the fixed investments within two years. The actual recovery time may also vary depending on the city and the location. The profit margin will be directly linked to the sales generated by a franchise outlet.
