Is McDonald's a Franchise? How the McDonald's Business Model Works

Is McDonald’s a Franchise? (Direct Answer)

Yes. McDonald’s Corporation is one of the largest and most recognized franchise systems on the planet. Approximately 95% of McDonald’s 40,000+ restaurants worldwide are owned and operated by independent franchisees. The remaining 5% are company-operated locations that McDonald’s uses for testing, training, and benchmarking purposes.

But calling McDonald’s “a franchise” undersells the complexity of its business model. McDonald’s is simultaneously a franchisor, a real estate company, and a brand management operation — and understanding how those three functions intersect is essential for anyone considering a McDonald’s franchise investment.

How the McDonald’s Franchise Model Actually Works

What McDonald’s Corporation Owns vs. Licenses

Unlike most franchise systems where the franchisee secures their own real estate, McDonald’s Corporation owns or holds the master lease on the vast majority of its restaurant locations. The franchisee then leases the property from McDonald’s, purchases the equipment and interior build-out, and operates the restaurant.

This means McDonald’s Corporation functions as both your franchisor and your landlord. You pay a service fee (royalty) of 4% for the franchise rights AND rent of 8-15% of gross sales for the real estate. The franchise fees page explains how this double-layer fee structure differs from a typical franchise arrangement.

The franchisee owns the equipment, the business operations, and the right to the restaurant’s cash flows. The franchisee does not own the building, the land, or the brand — those remain with McDonald’s Corporation.

Why McDonald’s Owns the Real Estate (The Ray Kroc Insight)

Ray Kroc didn’t invent the McDonald’s hamburger — the McDonald brothers did. What Kroc recognized, with the guidance of financial advisor Harry Sonneborn, was that the real money in franchising wasn’t in selling hamburgers or collecting royalties. It was in controlling the real estate.

By acquiring the land and building (or master-leasing properties) and then sub-leasing to franchisees, McDonald’s Corporation created a revenue stream tied to each restaurant’s gross sales. If a location thrives, McDonald’s collects more rent. If a franchisee underperforms, McDonald’s can terminate the lease and install a new operator — the real estate retains its value regardless.

This model generates roughly $7-8 billion annually in lease and rent income for McDonald’s Corporation, making it one of the world’s largest commercial real estate portfolios. The franchise service fees (royalties) generate an additional $4-5 billion. Combined, these two revenue streams have gross margins exceeding 80%, which is why McDonald’s stock has compounded wealth for decades.

How Many McDonald’s Locations Are Franchised vs. Corporate-Owned

Metric	Approximate Figure
Total worldwide locations	40,000+
Franchised locations (worldwide)	~38,000 (95%)
Company-operated locations	~2,000 (5%)
U.S. locations (total)	~13,500
U.S. franchised locations	~13,000 (95%)

McDonald’s has steadily increased its franchise ratio over the past two decades. In 2006, roughly 80% of locations were franchised. By 2015, that figure crossed 85%. Today, the target is 95% franchised globally. The strategy is deliberate — franchised locations generate higher-margin revenue for the corporation (fees and rent) without the operating costs and capital expenditure of company-owned stores.

The Three McDonald’s Franchise Arrangements Explained

McDonald’s offers three distinct franchise structures, each with different economics and levels of corporate involvement.

Conventional Franchise (20-Year Term)

This is the standard domestic U.S. arrangement and the one most prospective franchisees will encounter. Key characteristics:

• Term: 20 years with no automatic renewal (renewal is at McDonald’s discretion).
• Real estate: McDonald’s owns or leases the property. You sub-lease from McDonald’s.
• Capital investment: You pay for equipment, signage, seating, decor, and interior improvements. Typical investment: $1 million to $2.2 million.
• Ongoing fees: 4% service fee + rent (8-15% of gross sales) + ~4% marketing contribution.
• Equity: You build transferable equity. You can sell your franchise with McDonald’s approval.

Conventional franchisees are independent business owners responsible for hiring, daily operations, local marketing, and P&L management. McDonald’s provides the brand, systems, supply chain, and national marketing.

Business Facilities Lease (BFL)

The BFL arrangement is less common and typically applies to smaller or lower-volume locations, including some Walmart and airport locations. Under a BFL:

• McDonald’s provides the fully equipped restaurant, including all equipment and decor.
• The franchisee’s initial investment is significantly lower — sometimes under $500,000.
• In exchange, the rent percentage is higher, and the franchisee may have less operational flexibility.
• BFL franchisees generally build less equity than conventional franchisees.

This structure exists for locations where McDonald’s wants a franchised operator but the economics don’t justify the full conventional investment model.

Developmental Licensee (International)

Outside the U.S., McDonald’s often uses developmental license agreements where a single entity (often a large corporation or investment group) holds the rights to develop and operate McDonald’s restaurants across an entire country or region. Examples include Arcos Dorados (Latin America) and Alsea (parts of Europe and South America).

Under these agreements, the licensee typically owns the real estate, pays a modified royalty structure, and commits to aggressive unit development timelines. This model isn’t relevant for individual U.S. franchise candidates but explains why McDonald’s international operations function differently.

How McDonald’s Franchising Differs from Burger King, Subway, and Chick-fil-A

Factor	McDonald’s	Burger King	Subway	Chick-fil-A
Franchisor owns real estate?	Yes (most locations)	No	No	Yes
Franchise fee	$45,000	$50,000	$15,000	$10,000
Royalty rate	4%	4.5%	8%	~15%
Rent to franchisor	8-15% of sales	None	None	Yes
Franchisee builds equity?	Yes	Yes	Yes	No
Franchise term	20 years	20 years	20 years	Annual renewal
Multi-unit common?	Yes	Yes	Yes	Rare
Training duration	12-18 months	Weeks	2 weeks	Months

The most important distinction: McDonald’s and Chick-fil-A both control the real estate, but Chick-fil-A operators don’t build equity. McDonald’s franchisees invest more upfront but own a sellable asset. Burger King and Subway franchisees own their real estate (or lease independently), resulting in lower fee loads but also more personal capital at risk for the physical location.

Our guide to franchise royalty fees breaks down how different royalty structures affect your bottom line.

Why McDonald’s Chose Franchising — and Why It Still Works

McDonald’s adopted franchising in the 1950s for the same reason most brands do: it allowed rapid expansion using other people’s capital and management energy. But what made McDonald’s model endure where thousands of other franchise systems failed comes down to three structural advantages.

Real estate control creates alignment. Because McDonald’s owns the dirt, both parties have skin in the game on the same asset. McDonald’s is incentivized to place restaurants in high-traffic locations because their rent income depends on it. Franchisees benefit from corporate real estate expertise they couldn’t afford independently.

Operational standardization at scale. Every McDonald’s operates from the same playbook — the same equipment, the same supply chain, the same food safety protocols, the same kitchen layout. This consistency is what allows a brand to deliver a predictable customer experience across 40,000 locations and 100+ countries. That predictability drives repeat visits and underpins the entire value chain.

Franchisee-as-operator model. McDonald’s requires franchisees to be hands-on operators, not passive investors. This dramatically reduces the principal-agent problem that plagues brands where absentee owners hire managers with no ownership stake. The result is better-run restaurants, lower employee turnover, and higher customer satisfaction scores.

Who Qualifies to Become a McDonald’s Franchisee Today

McDonald’s is one of the most selective franchise systems in the world. Here’s what the current qualification process looks like:

Financial requirements:

• Minimum $500,000 in liquid, non-borrowed personal resources
• No specific published net worth minimum, but practical threshold is $1.5 million+
• Willingness to invest $1 million to $2.2 million per location

Operational requirements:

• Must be a hands-on operator (no absentee or passive ownership)
• Must complete 12-18 months of training, including time at Hamburger University in Chicago
• Prior restaurant or business management experience strongly preferred (but not always required)

Other factors:

• Strong credit history and no recent bankruptcies
• Community involvement and leadership experience valued
• McDonald’s evaluates candidates over a 2-3 year timeline

Today, most new McDonald’s franchisees enter by purchasing an existing location from a retiring operator rather than building a new restaurant. The transfer process requires McDonald’s approval and involves paying the selling franchisee a purchase price plus the $45,000 franchise fee to McDonald’s.

Ready to explore whether a McDonald’s franchise or another brand is the right fit? Our franchise due diligence checklist walks you through every step, and our franchise directory lists 2,000+ brands for comparison.

Frequently Asked Questions