Page 3: The advantages for the franchisor
McDonald's recognises the benefits of a franchised operation. Franchises bring entrepreneurs, full of determination and ideas, into the organisation. Franchising enables McDonald's to enjoy considerably faster growth and the creation of a truly global brand identity. The more restaurants there are, the more McDonald's can benefit from economies of scale.
On the financial side, McDonald's receives a monthly rent, which is calculated on a sliding scale based on the restaurant's sales, i.e. the higher the sales, the higher the percentage and vice versa. There is also a service fee of 5 percent of sales in addition to the contribution to marketing. The purchase price of a restaurant is based on cashflow and is generally about £150,000 upwards. The new franchisee is expected to fund a minimum of 25 percent of this from their own unencumbered funds.