how profitable is owning a mcdonald's franchise in melbourne (2)

How Profitable Is Owning A Mcdonald’s Franchise In Melbourne?

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    McDonald's is an internationally recognised fast food chain with locations in over 100 countries, including over 970 in Australia alone. It's no surprise, then, that the iconic golden arches attract people who are both hungry and looking to buy a franchise. If you want to open a McDonald's restaurant in Australia and become a franchisee, you'll need to meet a number of requirements set forth by the company and show that you can afford to do so. Now that we have that settled, we can examine the procedure.

    In addition to the franchise fee, advertising fee, and real estate fee, operators are also responsible for a plethora of other, often unanticipated expenses, such as the cost of new kitchen equipment and restaurant renovations. Franchisees have been feeling the financial impact of McDonald's recent menu changes, such as the introduction of breakfast all day long and customizable burgers, and Bloomberg's Leslie Patton has compiled a list of some of the most notable ones.

    To name a few: $125,000 for a Create Your Taste Kiosk, $13,000 for a McCafe espresso machine, $4,500 for Muffin equipment, $500-$5,000 for all-day breakfast utensils, $600,000 for interior renovations including upgrades to digital menu boards, and $1-$2 million for a full restaurant remodel. If you add in everything that needs to be done to the restaurant, including a complete remodel, it will cost you close to a million dollars. Many franchisees will find that the cost of updating their restaurants rises in direct correlation to the length of time they have been in business. If they do not make the investments, the company has the option of not renewing their franchisee agreement, effectively putting them out of business.

    Initial Costs

    Opening a new restaurant versus purchasing an existing franchise will have different initial investment requirements, as will the location of the franchise. It is important to note that the following expenses are not optional additions to your investment and must be covered.

    • $60,000 licence fee.
    • $5,000 documentation fee.
    • Staff training and other start-up costs (approximately $160,000-$200,000).
    • Equipment and restaurant fit-out (approximately $1.6 million).
    • Your disclosure agreement will provide your initial costs in more detail once you have found a suitable restaurant location.

    Ongoing Costs

    Once you've found a good spot for your restaurant, you can get more information about startup costs by reviewing your disclosure agreement.

    How Do I Finance A Mcdonald's Franchise?

    how profitable is owning a mcdonald's franchise in melbourne (3)

    It's a percentage of your restaurant's monthly gross sales that goes towards your rent and advertising costs. Additionally, McDonald's charges a royalty fee of 5% of your restaurant's monthly gross sales. Payroll, stock, rates, and utilities are just some of the operational expenses you'll be on the hook for.

    Secured Business Loan

    In order to get a secured business loan, you'll need to put up some kind of collateral, most commonly real estate (either residential or commercial). However, the interest rate you pay on the loan will almost always be lower if you don't have anything of value to put up as collateral for the loan.

    Unsecured Business Loan

    If you need a business loan but have no collateral like property to put up, you may want to look into an unsecured loan. It's possible to get an unsecured loan of up to $500,000 from a variety of online and alternative lenders.

    Business Line Of Credit

    A line of credit, in contrast to a traditional loan, gives your company unrestricted, as-needed access to the agreed-upon credit limit.

    The Truth About Running A Franchise

    Who among us hasn't fantasised about owning a successful McDonald's or Domino's franchise, pulling up in a Mercedes at 11 a.m., and just watching as the line out the door grows and grows? The news that some 7-Eleven franchisees had been found guilty of paying their employees less than they were owed, despite claiming they lacked the resources to do so, came as something of a surprise. The common belief is that owning a franchise is a surefire way to get rich.

    It seems like a tough nut to crack for the franchise at this point in time. In many franchise businesses, the only people making less than the child working the register are the ones who bought the franchise. This is because for franchisees, paying fees is simply part of doing business. As part of the agreement to operate a franchise, the franchisee agrees to pay the franchisor a fee in exchange for the right to do so.

    The founders of successful companies like Bakers Delight and Boost Juice have been featured on numerous rich lists. Meanwhile, many franchisees are either late on payments or file lawsuits against their parent company. Given the frequency with which disputes arise in the franchise industry, the Australian Competition and Consumer Commission has devoted an entire page to facilitating a smooth franchise launch. So, obviously, no sane person would ever buy into a franchise.

    The doors of about 10% of the small businesses open at the start of the year will be closed by the end of the year. A long and healthy life is not guaranteed even by surviving the first year. There will be a nett loss of nearly 4 out of every 10 small businesses in the next four years. The reason why people buy franchises is because of this. They want to find a way to make money with their business. Here's the catch, though: Some research suggests that the failure rate for franchises is even greater than that for standalone small businesses. If you put a lot of money into starting up a new company and then see it fail, you're going to feel a lot of frustration. This has led to the proliferation of franchisee complaint websites and online communities.

    One problem is that the parent company will know how well your franchise is doing and may choose to open another location in close proximity. Do you know that there is usually another 7-Eleven conveniently located nearby? For that very reason. Unfortunately, inexperienced franchisees are often to blame for the problem. Take, for example, the man who bought a bakery but was shocked to learn that he had to get up every day at 2 AM to run it. Would a reputable franchisor, however, let someone with so little experience run a company under their brand? Do they really need to check everyone who enters? The question is why they don't want everyone to succeed. Research from 2010 found that 50% of franchise owners got their start in the business following their "instincts." It's to be expected that exhausting efforts would yield crushing disappointment.

    Experts from Griffith University and the University of New South Wales conducted an in-depth study of 28 active and former franchisees this year. Researchers found that most respondents lacked formal business training and that nearly half had not consulted an accountant before investing in a franchise.

    One disgruntled ex-franchisee owner explained how his company fell for the franchisor's sales pitch and how it all went downhill from there. The franchise owner remarked on how crowded the place was. It's easy to see now that the store's location outside the mall was a major factor in why so many potential customers passed it by without going inside. On their way to the mall, they encountered the incident. The demographics of the area meant that we were priced out of the range of potential customers there. Our plane had just touched down in Australia. We had no idea this was happening. Another one of the people who used to run a fast food franchise is sorry they didn't do more research before buying into the dream "They did recommend that potential franchisees consult with established business partners, though. I would have learned how unhappy they were with the franchise and how inefficient the business model was for them if I had taken that step. I probably wouldn't have kept going if I'd known. There is no more to it than that!"

    One retailer franchisee justified their lackadaisical approach to research by citing the following: "Costing me a cool $240,000 to acquire the franchise. No matter how hard I tried, there was no way I could afford a lawyer or accountant with the resources I had at my disposal. I was forced to do yoga." There will always be people who are willing to put their life savings into a franchise without giving it much thought. Unfortunately, some brands prey on people's fears in this way. While Pie Face's rapid expansion across Australia at first seemed promising, the company eventually collapsed under its own weight, forcing it to shut down many of its locations and declare bankruptcy. Similar action was taken by Krispy Kreme, while franchisee complaints caused Eagle Boys Pizza to cut its store count from more than 300 to fewer than 200. However, people still put their money into franchises. Feels very much like you're in a casino. Those who achieve success are relentless in their pursuit of it and in their pursuit of others' success. People who fail keep their mouths shut and leave the scene quietly. If you don't pay attention to what's going on around you, you might think success is easy if what you hear is all you pay attention to.

    In Australia, these are the most lucrative franchises for fast-food restaurants.

    In the fast food industry, if a competitor has been around for a while and has a larger number of locations, you will always be playing catch-up. However, in most cases, we are talking about major brands that have become so ubiquitous as a result of decades of compounding market growth. This multi-decade market presence, however, can present its own unique difficulties well into the year 2020 and beyond, as we are seeing in some cases right now. For example, the issue of ageing store networks in need of significant refurbishment and investment becomes much more pressing when there are hundreds of locations that need it.

    The Biggest Fast Food Franchises In The Australian

    Franchisees and the company itself have put a lot of money into updating the look of the brand. This is a constant process that occurs across a vast retail distribution network. Recent years have seen a decline in the number of stores, which may be a result of the brand's previous history of growth success before increased competition and changes in palate. More than 1,400 units of the brand were reportedly in circulation in 2015. The company has been under pressure to address the widespread belief that it is losing ground to hipper, more innovative approaches to the same basic category of consumer good: contemporary food. Modernizing the brand's offerings and reputation can win over and retain the company's next generation of customers.

    Subway - 1300+ Locations (Au)

    The brand and its franchise owners have invested heavily in refreshing its presence in the market. This continues to be an ongoing process across a large network of stores. Arguably the brand has suffered from its long track record of growth success before increased Competition and palate changes, with store numbers receding in recent years. Reports indicate the brand had some 1,400+ units in 2015. The brand has had to address a perception of it being out-shined by many newer, on-trend food concepts. A menu and brand refresh can attract and hold the next generation of consumers to the brand.

    Mcdonald's - 1,000+ Locations (Au)

    how profitable is owning a mcdonald's franchise in melbourne (2)

    McDonald's has been a mainstay in the Australian economy since it first arrived in the country in the early 1970s. For a long time, its main rivals were Hungry Jack's and the local milk bar, both of which served burgers. 

    Dominos - 694 Locations (Au)

    Domino's Pizza has a master franchiser in Australia, who also owns the rights to franchise the business in other countries. Over 2,600 of their stores can be found in over 100 different countries across Asia and Europe. Growth is being accomplished primarily through candidates from within the organisation, with franchise owners in the group currently operating an average of 2.2 stores each. To increase its average order value, the company has been diversifying its menu in recent years to appeal to customers with a wider range of culinary interests than just pizza.

    Kfc - 680+ Locations

    YUM! KFC's parent company, Brands, operates 24,000 restaurants in 130 countries. They oversee several fast food chains including KFC, Taco Bell, Pizza Hut, and Habit Burger. YUM! Despite the fact that KFC Australia owns and operates 50 restaurants across the country, the company is distinguished in Australia by the presence of groups of franchise owners who are each responsible for a large block of restaurant numbers in specific regions. The majority of the areas appear rundown and in need of significant investment to be revitalised and modernised. As a result of the brand's persistent participation in and visibility during promotions for major sporting codes, the campaigns involving the product at the national level have been very fruitful. Because of this, it's gained a level of prominence that's perhaps unwarranted. However, it would be a stretch to say that the company has been particularly bold or inventive in terms of adding new items to its menu over the years.

    Hungry Jacks - 420+ Locations 

    Since McDonald's debut in Australia, Hungry Jacks—Burger King in the USA—has remained a constant competitor. Many of the company's stores are independently owned and operated, but franchisees are responsible for the majority of the chain's outlets. At first glance, many of the locations appear run down and in need of significant investment to be revitalised and modernised.

    Red Rooster - 360 (Au) Locations

    Her upkeep and management are the responsibility of Craveable Brands, the owner of several different brands including Oporto and Chicken Treat. There appears to be a significant number of ageing locations at another company in this sector of the fast-food industry that is in need of renovation and reinvestment. The next phase of the brand's evolution appears to be crucial. Red Rooster is sending strong signals that it intends to and will take action in response to the difficulties it has had maintaining its position in the market over the past few years, when the market was flooded with competitors selling fresher, more on-trend food products. In contrast to many other well-established food companies, whose sales have been declining in recent years, the company deserves praise for openly acknowledging the problem and taking a more proactive approach. The next step is to share the plan with everyone who has a stake in its success.

    Pizza Hut - 254 Locations

    Allegro Private Equity acquired the master franchisee licence for the brand from Yum! Brands at the end of 2016. The United States of America was the site of this deal. Also in 2016, it bought up the remaining 127 Eagle Boys franchises. Since the brand has eliminated its corporate presence from the vast majority of platforms known to foster franchise expansion, it appears to have slowed the development of new franchises.

    Nando's currently operates 270 restaurants across Australia.

    Nando's - 270 (Au) Locations 

    Although the company has expanded to over 35 different countries since its 1987 founding in South Africa, franchise opportunities are currently only being offered in Australia. The brand's visibility and strength in Australia's ongoing growth and market presence declined significantly in recent years, despite its earlier prominence and strength in those areas. Supposedly runs on what it calls "a blended franchise and company-owned store model." It is unfortunate that the company has been featured prominently in a number of reports over the past few years centred around discussions of issues related to the costs of store refurbishment and closures. The renovations appear essential to prepare the brand for the fiercely competitive fast food and casual dining consumer market of the future.

    Oporto - 172 Locations

    Craveable Brands, which owns and operates a number of different brands, is responsible for running both Red Rooster and Chicken Treat. The brand's stores are predominantly located in New South Wales; however, in 2020, the company will focus on growing its presence in the markets of Queensland, Victoria, and Western Australia. Product distribution by the firm has expanded in recent years to include Singapore and Sri Lanka.


    McDonald's has stringent requirements that would need to be met by any prospective franchisees in Australia. Franchisees are also on the hook for a slew of other, often unforeseen costs, such as the price of new kitchen equipment and restaurant renovations. McDonald's takes 5% of your monthly gross sales as a royalty. It's your responsibility to pay for things like salaries, supplies, rent, and utility bills. If you ever find yourself in need of financial assistance, you can choose from the options below.

    Even though many small businesses fail, the failure rate for franchises is much higher. During the next decade, nearly four out of ten small businesses will go out of business. That's why there are so many forums and blogs dedicated to franchisee gripes these days. An in-depth study of 28 current and former franchisees was conducted by researchers at Griffith University and the University of New South Wales. Most people who participated in the study had no business training, according to the researchers.

    Ex-franchisee: "I probably wouldn't have kept going if I knew." These fast food franchise models have proven to be the most successful in Australia. Although Pie Face's rapid growth was initially encouraging, the company eventually failed due to its own success. Following franchisee complaints, Eagle Boys Pizza reduced its store count from over 300 to under 200. Both the company and its franchisees have invested heavily in modernising the brands' visual identity.

    To attract and keep the company's future clientele, it's important to bring the brand into the modern era, both in terms of its products and its image. As a nationwide chain, KFC Australia owns and operates fifty locations across the country. In most cases, franchisees are in charge of operating a chain's locations. Several of the areas look dilapidated and desperately in need of repair and refurbishment. Red Rooster has made it abundantly clear that it plans to act.

    Currently, 270 Nando's restaurants can be found in Australia. Yum! Brands sold the master franchisee licence for the brand to Allegro Private Equity. Most of the chain's outlets can be found in the Australian state of New South Wales. The company plans to increase its footprint in the Australian states of Queensland, Victoria, and Western Australia in 2020.

    Content Summary

    • In order to become a franchisee and open a McDonald's restaurant in Australia, you must first demonstrate to the company that you can meet certain financial and operational requirements.
    • Operators are responsible for a variety of other, often unexpected costs, such as the price of new kitchen equipment and restaurant renovations, in addition to the franchise fee, advertising fee, and real estate fee.
    • Some franchisees of the 7-Eleven convenience store chain were recently found guilty of underpaying their employees despite their claims that they lacked the funds to do so.
    • In popular culture, owning a franchise is seen as a surefire way to amass wealth.
    • While this is going on, many franchisees are either suing their parent company or are late with payments.
    • The Australian Competition and Consumer Commission has dedicated an entire page to easing the process of launching a franchise due to the high volume of franchise-related disputes.
    • In a typical year, about 10% of the businesses open at the beginning of the year will have shut down by the end of it.
    • During the next decade, nearly four out of ten small businesses will go out of business.
    • The catch, though, is this: There is evidence to suggest that the franchise failure rate is even higher than the small business failure rate.
    • As a result, there is a plethora of franchisee-focused complaint sites and online forums.
    • Your franchise's success may lead the parent company to open a new location in close proximity, which presents challenges.
    • It's unfortunate that inexperienced franchisees are often to blame for issues.
    • Half of all franchise owners, according to a 2010 study, followed their "instincts" when first starting out.
    • Investors who don't do their homework before sinking their life savings into a franchise will always exist.
    • Unfortunately, there are brands out there that use this tactic to sell products.
    • Krispy Kreme did the same thing, and Eagle Boys Pizza reduced its store count from more than 300 to fewer than 200 in response to franchisee complaints.
    • These fast food franchise models have proven to be the most successful in Australia.
    • If a rival fast food chain has been around longer and has more locations, you will be forced to play catch-up.
    • On the other hand, we are typically discussing major brands that have become pervasive over many years of compound market growth.
    • The decline in the number of stores over the past few years may be attributable to the brand's historical growth success before increased competition and changes in palate.
    • In 2015, there were over 1,400 units of the brand in circulation, so clearly there is a market for it.
    • Domino's Pizza has 694 locations. (Au) Domino's Pizza is owned by a master franchiser in Australia, who also holds the rights to franchise the business in other countries.
    • Brands, the company that owns KFC, runs 24 thousand locations in 130 countries.
    • KFC Australia owns and operates 50 restaurants across the country, but the company is most notable in Australia due to the presence of groups of franchise owners who are each responsible for a large block of restaurant numbers in specific regions.
    • According to estimates, there are more than 420 Hungry Jack's restaurants in the world.
    • Previously owned by Yum! Brands, Allegro Private Equity has acquired the rights to become the brand's master franchisee.
    • Furthermore, it acquired all 127 remaining Eagle Boys franchises in 2016.
    • Currently, 270 Nando's restaurants can be found in Australia.
    • The brand's prominence and strength in Australia's ongoing growth and market presence have diminished significantly in recent years.
    • It's too bad that the company has been highlighted in numerous reports over the past few years, most of which have focused on discussing problems related to the high costs of store renovations and closures.

    FAQs About Melbourne's Mcdonalds's

    If you want to own a McDonald's restaurant, you will need to become a franchisee. A franchisee effectively purchases a licence from McDonald's to use their branding, products and operational structure and then runs the restaurant as their own business. While you do not have the autonomy, you would get from starting your own fast food business. In addition, you receive comprehensive training and ongoing marketing and business support in return for ongoing franchise fees.

    You have the choice of purchasing an existing McDonald's franchise restaurant, or starting your location, provided you are approved as a franchisee. McDonald's franchise agreements are usually set for 20 years, and you will need to be fully committed to your restaurant during this time.

    McDonald's has strict requirements for approving franchisees, and there are many criteria that you will need to meet to be considered a McDonald's franchisee. These include:

    • We do not have any other businesses or employment.
    • We can commit to a full-time unpaid training program for a minimum of 12 months.
    • Able to make a significant financial commitment (generally over $1 million).
    • Willing to run a restaurant in regional Australia.
    • We are looking to make a 20-year commitment.
    • Previous business experience or a successful career.

    Purchasing a McDonald's franchise, either from an existing franchisee or opening a new restaurant, requires a large investment. While the initial franchise fee is $60,000 plus GST, you will generally need at least $1 million to purchase a McDonald's franchise and may need more if you plan on opening a new location.

    You're able to make a significant financial investment – upwards of $1,500,000 unencumbered funds. Once you've completed your training, you are open to the challenge of a relocating to a remote town anywhere within Australia. You're looking to make a 20 year commitment.

    Initial Investment. Your earnings potential as a franchise owner depends largely on the brand and industry. Franchise owners in the restaurant industry earn an average of $82,000 per year, which is pretty solid considering the salary range of a non-franchise restaurant owner can range from $24,000 to $155,000.

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