A franchise is an agreement that allows a franchisee to market a product or service using the trademark of a franchisor. A McDonald's franchise costs between £125,000-£325,000 with at least 25% as a down payment, plus ongoing fees including rent of 10-15% of sales, a 5% service fee, and 4.5% for marketing. Cashflow for franchisees typically ranges from £95,000-£200,000 annually. The document profiles one franchisee, Des Lamph, who was attracted to McDonald's proven system and community after a career in pharmaceuticals, and now owns multiple locations in Northern Ireland.

1. BICS LO1 Franchising - Growth
Franchising
A franchise is an agreement or license between two parties which gives a person or group of
people (the franchisee) the rights to market a product or service using the trademark of
another business (the franchisor).

2. BICS LO1 Franchising - Growth
McDonald’s Franchise
How much does a McDonald's franchise cost?
As a guide, the cost of a restaurant typically ranges from £125,000 to £325,000. You will
need to provide at least 25% of the value as unencumbered funds; the remaining 75% can
be funded through a bank loan with favourable funding terms. There’s also a one-off
franchise fee of £30,000 and a training deposit of £5,000 which is refunded when you
complete your training.
There are also ongoing fees:
 Monthly rent on the premises, based on sales and profitability (usually
ranging from 10% to 15%)
 Service Fee for the use of the McDonald’s system – 5% of sales
 Contribution to the national marketing spend, currently 4.5%
And the returns?
Cashflow (before debt repayment) typically ranges from £95,000 to £200,000 per year for
each restaurant but this isn’t guaranteed: it could be more, it could be less.
Enthusiastic Over McDonald's
Jetting around the world and staying in expensive hotels for a
pharmaceutical business still didn’t give Des Lamph the job satisfaction
he craved. “I wanted to do something for myself,” said the Northern
Ireland franchisee.
Des had been in the pharmaceutical business for 12 years and when he
heard McDonald’s was breaking into Northern Ireland he saw his
opportunity. “I was attracted to it because it was a proven system with
25,000 restaurants worldwide. It meant I could run my own thing, but there was back up.
You are part of a community and a systemwhere there is help at the end of the phone.”
Three months later he had packed in his job and had started a year’s training as a crew
member at Liverpool Edge Lane. “In my previous job I only flew first class and stayed in 5
star hotels, suddenly I was making chips on a retail park!” Des laughed. “But I loved it.”
Des admired the regimented approach to business and the desire for perfection. “It was
always a challenge that you can do something better each time. I like to compare how I’m
doing when I go to other people’s restaurants.”
In 1992 Des opened his first restaurant in Bangor. “It was very scary. We took £62,000 in our
opening week. It was the first Drive-thru in Northern Ireland, and we blocked the dual
carriageway!” recalled Des. “In fact one customer waited an hour to be served, and said he
didn’t mind as he just wanted to be part of the experience.”
The challenge now for Des is keeping the momentum going. “I find it easy to promote the
brand because I’m enthusiastic and believe in it,” said Des. “It’s the same key points that we
learnt at the beginning about keeping the customers happy. I make sure I share information
with my team and offer incentives schemes to keep on improving things.”