Franchise Question- please help?

[Player77]

I have recently been looking into franchises such as McDonalds.
I am a bit confused on some of the figures they claim...on average each location pulls in about 2.6mil in gross revenue, and claims to earn approx. 200K net profit. I did a search for McDonalds profit margin, and found that there margins are 6.4%...something isn't adding up? This would give me a profit of roughly $166K without taking expenses out? I must be doing something wrong or misinterpreting the information? Can anyone provide some feedback? Thanks a lot.

[TejasWebHosting]

Generally, it depends on the location. Franchises such as McDonalds are very strict on what you can and cant do. Other franchises are a little more open to what you do. You must do your own analysis to see if the business is worth it. Depending on location and size of town and previous bank statements of McDonalds in the area, I would make a judgement. Not off of what they say "on average" they make. Hope this helps!

[Paul]

The 6.4 margin is probably the net margin, after expenses. You do need to understand the entire McDonalds financial structure before making a decision. It's a bit more complex than run of the mill franchises. It may involve land leases and other aspects not usual to other franchises. One thing about McDonalds is they don't want losers. Many lesser fanchises are dependent on the upfront franchise fees with less concern about the ongoing success.

Have you asked for a copy of the Franchise Disclosure Document? It will answer many questions you have.