Want to Own and Operate a McDonald’s? | Post 3 | Maine
Had to happen sooner rather than later. The first McDonald’s I have encountered on this coast-to-coast journey is this McDonald’s Café on U.S. Route 1 on the outskirts of Machias, Maine.
That this establishment is hiring (as of July 2011, the date of this Google image) reminds me of a truism circulating during my high school years that one in four Americans was related to someone who had worked at McDonald’s. I carried the load for my immediate family when I flipped burgers and dunked Filets o’ Fish into tubs of oil during the summer of 1993 in Dedham, Mass. — at the McDonald’s I patronized as a small boy no less. Whether or not there’s a proper footnote for that 1-in-4 statistic, Eric Schlosser did report in his book Fast Food Nation that, perhaps more amazingly, almost 1 in 8 American workers were themselves McDonald’s employees at some point in their lives.
Besides carrying the dream of working at the Golden Arches, the mind of my small boy self also wondered why McDonald’s advertisements for new sandwiches and games (e.g. Monopoly) always warned that particular promotions were “at participating McDonalds’ only.” Wasn’t McDonald’s McDonald’s? No, apparently, and I think I now know why: Franchising. There are more than 35,000 McDonald’s Restaurants around the world (or McCafés or McExpresses or whatever), and over 80 percent are owned and operated by people other than the McDonald’s Corporation of Oak Brook, Ill. These owners (at least in the U.S.) pay the mothership a monthly service fee of 4 percent of monthly sales as well as a monthly rent, also negotiated as a percent of monthly sales. In return, they get a license to sell Big Macs and Happy Meals and up to a year-and-a-half’s worth of training, including week-long workshops at Hamburger University in Oak Brook. Presumably, owners can opt out of certain promotions.
The bar to own and operate a McDonald’s is not low. Headquarters itself says it is looking for “individuals with significant business experience who have successfully owned or managed multiple business units or have led multiple departments and who have significant financial resources.” By “significant” they mean the wherewithal to make a 25 percent cash downpayment towards the purchase of the restaurant. At a minimum, this amounts to $750,000 in non-borrowed personal resources. If one is purchasing a brand-new McDonald’s — the vast majority of new franchisees are actually buying existing outlets — there is also a one-time fee of $45,000 paid to Oak Brook and a requirement to cover equipment and pre-opening costs, which can run up to $2.3 million, only 60 percent of which may be financed. The typical franchise term for a new McDonald’s is 20 years.
While McDonald’s may be the foremost icon of the American franchise business model today, it was not the first, and not even the first in the restaurant industry, or even the first among restaurants that Americans associate with rest stops and road trips. The franchise business model really emerged in the 1930s with Howard Deering Johnson’s effort to expand his successful Quincy, Mass., restaurant — Howard Johnson’s. Orange-roofed HoJo’s were very much fixtures on the interstate landscape beginning in the 1930s and 1940s (thanks in part to early, exclusive deals with the Pennsylvania, Ohio, and New Jersey Turnpikes) and there were over 1000 restaurants in Howard Johnson’s heyday, the 1970s, though only 25 percent were franchises. (The figure was reversed for Howard Johnson Motor Lodges: 75 percent of those were franchises.) The mid-1970s oil embargo, however, and competition from McDonald’s, violent incidents at a couple of locations, and strategy fails eventually took a toll. Corporate ownership changes saw the decimation of the company-owned HoJo’s — Marriott, for example, converted many to Big Boy restaurants — and though franchisees came together to form Franchise Associates Incorporated to reinvigorate the brand, HoJo’s was down to eight restaurants in the mid-2000s. Today, Wikipedia tells me, only three remain. Two are in upstate New York, and one is only about 85 miles west of Machias in Bangor. Perhaps we will stop by.
For now, however, this joint a few miles back seems a decent spot:
Ground covered since last post:
- Start: Lubec — Campobello U.S.-Canada border crossing
- West on Maine Route 189
- South on U.S. Route 1
- End: Machias, Maine
Trip to date:
Blog post sources:
- http://en.wikipedia.org/wiki/McDonald's
- http://www.aboutmcdonalds.com/mcd/franchising.html
- http://en.wikipedia.org/wiki/Franchising
- http://en.wikipedia.org/wiki/Howard_Johnson%27s
Originally published at www.mmuspratt.com on February 16, 2015.
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