McDonald's franchise finance: how UK franchisees fund a restaurant

McDonald's franchise finance is the funding a prospective franchisee puts together to take on a McDonald's restaurant in the UK: usually a substantial amount of their own unborrowed money plus a business loan from a bank or specialist franchise lender. This guide is for people assessing whether they could fund a restaurant and what lenders will want to see. Smart Funding Solutions is an independent broker, is not affiliated with McDonald's, and can compare franchise lenders on its panel on your behalf. For franchise funding in general, see our franchise loans page.

McDonald's sets a minimum level of personal, unencumbered funds that applicants must have before they are considered. Requirements change, so always check McDonald's UK franchising information for its current position.

01What a McDonald's franchise costs

The total cost depends on the restaurant, its location and whether you are taking over an existing site. Costs typically fall into two groups.

Upfront costs

• The initial franchise fee
• The purchase price of the restaurant's equipment, fixtures and business (for an existing site)
• Working capital to cover the early months of trading
• Professional fees, such as legal and accountancy advice

Ongoing costs

• Service fee or royalty: a percentage of sales paid to the franchisor
• Rent: McDonald's typically owns or controls the property, so franchisees pay rent, which may be linked to sales
• Marketing contribution: towards national advertising
• Staff, stock, utilities and maintenance

Ask for full, current figures during the application process and have an accountant review them.

02How the funding usually fits together

03Eligibility beyond money

McDonald's selects franchisees carefully. Alongside the minimum funds, it looks for business and people-management experience, commitment to running restaurants hands-on, and willingness to complete its training programme. Franchising is not a passive investment.

04Financing options for McDonald's franchisees

Bank and franchise loans

Several UK banks and specialist lenders have franchise teams that lend to franchisees of established brands. They like the proven model, brand support and trading data a large franchisor provides, which can make terms more favourable than for an independent start-up. They still require a significant personal contribution.

Secured business loans

If you own property, a secured business loan can provide larger sums or lower pricing, but your property is at risk if repayments are not met. Borrowing against property to fund the minimum personal contribution may not be acceptable to the franchisor, so check first.

Asset finance

Kitchen equipment, fit-out items and technology can sometimes be financed separately through hire purchase or leasing, which preserves cash. Read about commercial kitchen equipment finance.

Working capital facilities

Once trading, franchisees may use overdrafts, revolving credit or short-term loans to manage stock, payroll and seasonal variation.

05What lenders look at

• The size and source of your personal contribution
• Your personal credit history and assets
• Your management and hospitality experience
• The restaurant's historic trading figures (for an existing site) or projections
• A detailed business plan and cash flow forecast, including all franchise fees and rent
• The franchise agreement terms

Many lenders will also ask for a personal guarantee. Make sure you understand what that means before signing.

Several UK banks and specialist lenders have franchise teams that lend to franchisees of established brands.

06Evaluating profitability

Profitability varies widely between restaurants. The biggest influences are location and footfall, opening hours, drive-thru capacity, labour costs, rent and the share of sales paid to the franchisor. Do not rely on published averages: ask for the actual trading history of the restaurant you are considering and have it reviewed independently.

07Steps to funding a McDonald's franchise

1. Check McDonald's UK's current franchisee requirements and confirm you meet the minimum funds.
2. Talk to an accountant about costs, tax and company structure.
3. Prepare a business plan and cash flow forecast.
4. Compare lenders with franchise experience, directly or through a broker.
5. Take legal advice on the franchise agreement and any loan and guarantee documents.

We can compare franchise lenders on our panel and manage the application once you have the franchisor's figures. It is free to enquire; any broker fee is disclosed separately before you proceed. For a different quick-service brand, see our Subway franchise finance guide, or explore funding options online when you are ready.