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Business Operations Business Models

How Does McDonald’s Make Money (Business and Revenue Model)

The Mcdonald's business model

How Does McDonald's Make Money?
Here’s what you should know:
  • What is McDonald’s, and how does McDonald’s work?
  • How does McDonald’s make money?
  • Fees From Franchised Restaurants
  • Sales From Company Operated Restaurants
  • Other Revenues
  • McDonald’s Subsidiaries, Acquisitions, and Exits
  • McDonald’s profit and revenue
  • What is the McDonald’s business and revenue model?
  • McDonald’s funding and market cap

How does McDonald’s make money? Here is a full, in-depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the McDonald’s business model, their year-over-year revenue, and how McDonald’s works.

What is McDonald’s, and how does McDonald’s work?

McDonald’s is an American multinational fast food restaurant available in 119 countries.

Founded in 1940 by Richard McDonald and Maurice McDonald, and later bought outright by Ray Kroc in 1961. McDonald’s began trading on the New York Stock Exchange (NYSE) on April 21, 1965, under the ticker symbol “MCD”.

Today, McDonald’s is the world’s largest restaurant chain by revenue, serving over 69 million customers per day with more than 40,000 restaurants across 119 countries.

Some of McDonald’s competitors include Burger King, Wendy’s, Chick-fil-A, and other fast food restaurant companies.

McDonald's App in Apple App Store | McDonald's Business Model | How Does McDonald's Make Money? | How Does McDonald's Work?
Source: Apple App Store | McDonald’s

How does McDonald’s make money?

According to page 3 of McDonald’s 2021 Form-10K, McDonald’s has more than 40,000 fast food restaurants, 93% of which are franchised. Which totaled over $112 billion in gross sales in 2021 alone.

So how does McDonald’s make money off of all those franchises, restaurants, and total sales?

Below is a breakdown of how much money McDonald’s makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how McDonald’s makes money (in 2022):

McDonald’s has a revenue model that makes money in three (3) ways – fees from franchised restaurants, sales from company operated restaurants, and other revenues.

#1. Fees From Franchised Restaurants

McDonald’s makes the majority of its money from franchise fees. In fact, according to page 11 of McDonald’s 2021 Form-10K, $13.1 billion or 56.3% of McDonald’s total revenue came from franchise fees in 2021.

By the 2021 year end, 37,295 or 93% of McDonald’s restaurants were franchised. Of which, McDonald’s collects franchise fees from each of those 37,295 restaurants.

These fees include things like initial franchise fees, monthly royalty fees, and rent. You can see the cost breakdown below.

McDonald’s Franchise Fees:

  • Initial franchise fee: $45,000
  • Royalty fee: 4% of gross sales (monthly fee)
  • Rent: base rent or percentage rent of monthly sales (paid to McDonald’s)
McDonald's Franchise Costs and Fees | McDonald's Business Model | How Does McDonald's Make Money? | How Does McDonald's Work?
Source: McDonald’s

Note: 93% of all McDonald’s fast food restaurants are franchised.

#2. Sales From Company Operated Restaurants

McDonald’s makes the other bulk of its money from company operated restaurant sales. Which, in 2021, generated an additional $9.78 billion or 42.1% of McDonald’s total revenue.

McDonald’s Cost:

  • anywhere from $1 off the dollar menu to $10+ for a combo meal (prices vary by location)
McDonald's Sales | McDonald's Business Model | How Does McDonald's Make Money? | How Does McDonald's Work?
Source: Uber Eats

Note: Of their more than 40,000 fast food restaurants, only 2,736 are operated by McDonald’s.

#3. Other Revenues

The remainder of McDonald’s money comes from what they call “other revenues” comprised of a few smaller revenue streams that total just $350 million.

Other revenues, according to page 13 of McDonald’s 2021 Form-10K, are made up of “fees paid by franchisees to recover a portion of costs incurred by [McDonald’s] for various technology platforms, revenues from brand licensing arrangements to market and sell costumer packaged goods using the McDonald’s brand and third party revenues for the Dynamic Yield business.”

McDonald’s Subsidiaries, Acquisitions, and Exits

To date, McDonald’s Corporation has made a total of 4 acquisitions, 2 investments, 1 lead investment, and 1 successful exit.

McDonald's Acquisitions | McDonald's Business Model | How Does McDonald's Make Money? | How Does McDonald's Work?
Source: Crunchbase | McDonald’s

McDonald’s profit and revenue

In 2021, McDonald’s reported $23.2 billion in revenue.

Note: Because McDonald’s Corporation is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of McDonald’s publicly released financial reports, including annual reports, through McDonald’s investor section on their website.

What is the McDonald’s business and revenue model?

McDonald’s makes money through a few revenue models that they combine within their company, they are:

  • Franchise business model
  • Transaction based business model
  • Rental Property business model
  • Royalty business model
  • Licensing revenue model
  • Affiliate business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

McDonald’s funding and market cap

As of April 2022, McDonald’s had a market cap of $187.2 billion.