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Facts about the McDonald's Franchise System

McDonald's has been a franchising company since 1955 and has relied on its franchisees to play amajor role in the system's success. McDonald's remains committed to franchising as a

predominant way of doing business. Today, the McDonald's franchise is the leading globalfoodservice retailer with more than 30,000 restaurants, located in more than 100 countries.

If you are considering buying a McDonald's franchise you will most likely buy an existing franchise

restaurant. Most franchisees enter the system by purchasing an existing restaurant, either from

McDonald's or from a McDonald's franchisee. A very small number of new operators enter the

system by purchasing a new restaurant.

Franchise Offer: McDonalds offers four types of franchises:

1. Traditional restaurant franchise offered is located in freestanding buildings, store fronts, foodcourts, and other locations. The franchisee operates a full-menu restaurant, offering the public a

high standard of quality and uniformity in food and service. The term of a traditional restaurant is

generally 20 years.

2. Satellite locations The franchisee is granted the right to operate the franchise in a retail store,strip centre, airport, universities, hospitals, and other diverse locations. These restaurants serve a

scaled-down menu of a traditional McDonalds Restaurant and in some cases may also serve non-

McDonalds trademarked products. The term of the franchise depends on the location.

3. STO and STR locationsSmall Town Oil locations are situated in fuel stations/conveniencestores, and operate a full-menu McDonalds restaurant within the shared space. Small Town

Retail locations that anchor a small retail canter in rural communities.

4. BFL franchisesBusiness Facilities Lease franchises grant franchises with leases that includethe business facilities. Under a BFL, the franchisee has a conditional option to purchase certain

restaurant assets after the first year and extend the franchise for up to 20 years after the

beginning of the term.

Financial Requirements and Start-Up Costs to Open a McDonald's

An initial down payment is required when you purchase a new restaurant (40% of the total cost)or an existing restaurant (25% of the total cost). The down payment must come from non-borrowed personal resources, which include cash on hand; securities, bonds, and debentures;

vested profit sharing (net of taxes); and business or real estate equity, exclusive of your personalresidence.

Since the total cost varies from restaurant to restaurant, the minimum amount for a down

payment will vary. Generally, you need a minimum of $300,000 of non-borrowed personal

resources to be considered to open a McDonald's franchise. Individuals with additional funds may

be better prepared for additional or multi-restaurant opportunities which McDOnald's encourages.

Other Requirements to Open a McDonald's

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Significant business experience - Individuals who have demonstrated successful ownership or management of multiplebusiness units or have managed multiple departments.

Rapid growth - Individuals who possess the capability to grow rapidly with McDonald's. Business plan - The ability to develop and execute a business plan. Manage finances well - Ability to manage finances including a thorough understanding of business financial statements. Good management skills - Commitment to personally manage the day-to-day operations of the restaurant business. Training - Willingness to complete a comprehensive world class training program and become proficient in all aspects

of operating a McDonald's restaurant business.

Exceptional customer experience - The capability to effectively manage an organization that recruits, trains, andmotivates restaurant employees who deliver an exceptional customer experience.

Good credit history - An acceptable credit historyOngoing Fees to McDonald's

During the term of the franchise, you pay McDonalds the following fees: Service fee- A monthly fee based upon the restaurants sales performance (currently a service fee of 4.0% of monthly

sales).

Rent - A monthly base rent or percentage rent that is a percentage of monthly sales. McDonald's usually owns theproperty and also acts as the landlord.

Term of Agreement and Renewal: Traditional term is generally 20 years. The Satellite term

varies, STO and STR term length is generally 10 years, and the BFL term length is generally three

years. The franchisee is given no right to renew or extend the franchise after the term of the

contract.

Obligations and Restrictions: The franchisee is required to provide full time and best efforts to

and personal on-premises supervision of, the day-to-day operation of the McDonalds restaurant

business.