Quick-service restaurants
McDonald’s: The Franchise Business Model
About 95% of McDonald’s 41,822 restaurants are franchised. Franchised revenues made up about 60% of its $25.5 billion revenue in 2023.
Company background
Documented factMcDonald’s Corporation operates and franchises quick-service restaurants worldwide. At year-end 2023 there were 41,822 McDonald’s restaurants, and approximately 95% were franchised. Franchisees are independent owners who pay McDonald’s fees such as rent and royalties.
Financial snapshot (2023)
Documented fact| Measure | 2023 |
|---|---|
| Total revenues | $25.494 billion |
| Revenues from franchised restaurants | $15.436 billion |
| Restaurants at year end | 41,822 (≈ 95% franchised) |
Calculated from the 10-K: $15.436B ÷ $25.494B ≈ 60.5%.
The business problem
AnalysisOpening tens of thousands of restaurants requires enormous financial capital and local management. How can one company grow globally without funding and running every location itself?
Strategic analysis
Analysis- Franchisees contribute their own capital and run day-to-day operations. That spreads the startup and operating costs of each restaurant.
- The company earns steady revenue from rent and royalties while franchisees bear many operating expenses.
- Standardized processes and supply chains keep quality consistent across locations, which protects the brand.
- The trade-off is less direct control over each restaurant's customer experience.
Hypothetical franchisee math
Hypothetical scenario| Item (one fictional restaurant, one year) | Amount |
|---|---|
| Sales | $3,000,000 |
| Food and paper costs (variable) | $900,000 |
| Wages (mostly variable) | $870,000 |
| Rent and royalties paid to franchisor (e.g., 13% of sales) | $390,000 |
| Other operating expenses | $420,000 |
| Franchisee operating profit | $420,000 |
Decision simulation
Expand a fictional burger chain
Your 50-restaurant chain wants to reach 500 locations in ten years. Choose how.
Outcomes come from a simplified teaching model built by astrastudy. They are not predictions, and they are not what the company actually did or would experience.
Locations
50
0 vs. start
Company debt index
30
0 vs. start
Brand consistency
80
0 vs. start
Decision 1 of 3
How do you fund expansion?
Key business lessons
- Franchising lets a business grow quickly using franchisees' capital and management.
- Franchisor revenue from rent and royalties can be steadier than running restaurants directly.
- Standardized supply chains and processes protect brand consistency across thousands of owners.
Test yourself on this case
AP-style multiple-choice questions with detailed explanations after each answer.
Sources
- McDonald’s Corporation Form 10-K (fiscal year 2023) · U.S. SEC EDGAR · accessed 2026-10-30
Company names are used to identify the businesses discussed. Figures are reported as published in the cited filings. Hypothetical sections and simulation outcomes are invented for teaching.