McDonald’s FDD Item 6 is the section of the Franchise Disclosure Document that lists every ongoing fee a franchisee will pay after the initial $45,000 franchise fee. For most prospective McDonald’s franchisees, this is where the true cost of ownership becomes clear, and where many first-time buyers realize that the 4% royalty they have been hearing about is only part of a much larger financial obligation. At Lopes Law LLC, we routinely review McDonald’s FDDs for prospective franchisees, and the conversations we have about Item 6 are among the most important in the entire engagement.

This guide breaks down exactly what McDonald’s discloses in Item 6, explains why the total ongoing fee burden often exceeds 15% to 20% of gross sales, and walks through the specific line items that every buyer needs to understand before committing capital to a McDonald’s franchise.

What Is FDD Item 6 and Why Does It Matter for McDonald’s?

Item 6 of any Franchise Disclosure Document is titled “Other Fees.” It is required by the FTC Franchise Rule (16 C.F.R. Part 436) and must disclose every recurring fee, contribution, or payment obligation the franchisee will owe during the term of the franchise agreement. Item 5 covers the initial fees. Item 6 covers everything that comes after.

For McDonald’s specifically, Item 6 is critical because the franchise system operates on a unique real estate model that creates layers of financial obligation most other franchise systems do not have. In a typical franchise, you pay a royalty and an advertising contribution. With McDonald’s, you also pay rent to McDonald’s (or its affiliate) for the building and land. When you combine the royalty, the advertising fee, the rent, and the technology fees, the total ongoing cost of being a McDonald’s franchisee is substantially higher than what the headline “4% royalty” suggests.

Understanding every line item in Item 6 is not optional. It is the difference between making an informed investment decision and discovering, after you have committed, that your margins are thinner than you expected.

What Fees Does McDonald’s FDD Item 6 Disclose?

McDonald’s Item 6 is one of the most detailed fee schedules in the franchise industry. Here is a breakdown of the major categories disclosed:

Fee Category	Typical Amount	When Paid
Monthly Service Fee (Royalty)	4% of gross sales	Monthly
Advertising / Marketing	~4% of gross sales (national + local co-op)	Monthly
Rent / Occupancy	Base rent or % of gross sales (whichever is greater)	Monthly
Technology Fees	Varies; covers POS, digital ordering, kiosks	Monthly / As incurred
Insurance	Required minimums (varies by state)	Annually / As required
Remodel / Renovation	$500,000 to $2,000,000+ per cycle	As mandated (typically every 7-10 years)
Training	At franchisee’s expense	Before opening / Ongoing
Transfer Fee	As disclosed in FDD	Upon transfer of franchise
Late Payment Penalties	As disclosed in FDD	As incurred

Each of these line items deserves separate analysis. Let us walk through the most consequential ones.

The Monthly Service Fee: 4% of Gross Sales

The monthly service fee, commonly referred to as the royalty, is 4% of gross sales. For a McDonald’s location generating $3 million in annual gross sales, this equals $120,000 per year paid directly to McDonald’s Corporation. This fee is calculated on gross sales, not net profit. Whether your restaurant earns a 20% margin or loses money in a given month, the royalty is owed on every dollar that comes through the register.

The 4% royalty is actually lower than many franchise systems, which commonly charge 5% to 8%. However, isolating the royalty rate without accounting for the other fees in Item 6 gives a misleading picture of the total cost structure.

Advertising and Marketing Contributions

McDonald’s requires franchisees to contribute to advertising at both the national and local level. The combined advertising contribution is approximately 4% of gross sales. A portion goes to the national advertising fund managed by McDonald’s Corporation, and a portion goes to the local advertising cooperative in the franchisee’s market.

For a $3 million location, this is another $120,000 per year. Unlike many franchise systems where the advertising fund contribution is a smaller percentage, McDonald’s national marketing operation is one of the largest in the world and requires substantial franchisee participation. The franchisee has limited control over how the national advertising fund is spent, though local cooperatives typically provide more input on regional campaigns.

Why Is McDonald’s Rent the Fee Most Franchisees Underestimate?

This is the single most important section of this guide, and the issue that catches the most prospective McDonald’s franchisees off guard.

McDonald’s operates on a real estate model that is fundamentally different from most franchise systems. In most franchises, the franchisee finds a location, negotiates a lease with a landlord, and pays rent to a third party. With McDonald’s, the company (or an affiliate) owns or controls the real estate for the majority of its franchise locations. McDonald’s then subleases the property to the franchisee.

The rent structure typically works on a “greater of” basis: the franchisee pays either a base monthly rent or a percentage of gross sales, whichever is higher. This means that as your sales increase, your rent increases with them. In high-performing locations, the percentage-of-sales rent can significantly exceed the base rent amount.

Here is why this matters financially. If the rent equates to 8% to 10% of gross sales (which is common for high-volume McDonald’s locations), and you add the 4% royalty and the 4% advertising contribution, you are already at 16% to 18% of gross sales going directly to McDonald’s before you pay a single employee, buy a single case of beef, or cover any utility bill.

The real estate model also gives McDonald’s significant leverage in the franchise relationship. Because the company controls the lease, it controls access to the location. If the franchise agreement is terminated or not renewed, the franchisee loses the right to operate from that location. This is a fundamentally different dynamic than a franchise system where the franchisee holds the lease directly and could, in theory, convert the location to a different business after the franchise relationship ends. For a deeper look at what happens at the end of a franchise term, see our guide on franchise agreement red flags to watch for.

Technology Fees and Digital Platform Costs

McDonald’s has invested heavily in digital ordering, self-service kiosks, mobile app integration, and data-driven operations. These technology platforms are not optional for franchisees. The technology fees cover point-of-sale systems, the McDonald’s app integration, digital menu boards, kiosk maintenance, and data platform access.

Technology fees can vary by location and are subject to change as McDonald’s rolls out new digital initiatives. What is consistent is that the franchisee bears the cost. Technology upgrades may be mandated with relatively short implementation timelines, and failure to comply can constitute a default under the franchise agreement.

Remodel and Renovation Requirements

McDonald’s requires periodic restaurant remodels to maintain brand consistency and keep pace with evolving design standards. A major remodel can cost between $500,000 and $2 million or more, depending on the scope and the age of the existing facility.

Remodel requirements are especially consequential during two key moments: franchise renewal and franchise transfer. McDonald’s may condition renewal of the franchise agreement on the franchisee’s commitment to a full remodel. Similarly, if you are buying an existing McDonald’s franchise from another operator, the company may require you to commit to a remodel as a condition of approving the transfer.

These costs are not small. A franchisee who purchased a location for $1.5 million and then faces a $1.5 million remodel obligation within two years has effectively doubled the investment. Item 6 discloses this obligation, but many buyers underestimate the financial impact until they are faced with the actual mandate. For more on understanding the total cost of franchise ownership, read how much a franchise lawyer costs and why the legal review is a fraction of the investment at stake.

How Do Item 6 Fees Add Up for a Typical McDonald’s Location?

To illustrate the real financial impact of Item 6 fees, let us look at a hypothetical McDonald’s location generating $3 million in annual gross sales. This figure is close to the national average for a McDonald’s restaurant and provides a realistic basis for modeling total fee obligations.

Fee	Calculation	Annual Cost
Monthly Service Fee	4% of $3,000,000	$120,000
Advertising Contribution	~4% of $3,000,000	$120,000
Rent (% of sales model)	~8.5% of $3,000,000 (illustrative)	$255,000
Technology Fees	Estimated monthly charges	$15,000 – $30,000
Insurance (minimums)	Varies by state	$15,000 – $30,000
Total Item 6 Fees		$525,000 – $555,000

That is approximately 17.5% to 18.5% of gross sales going to McDonald’s-related fees before the franchisee pays for food cost, labor, utilities, maintenance, or any other operating expense. When you factor in food costs (typically 28% to 32% of sales) and labor costs (typically 25% to 30% of sales), the margins available to the owner-operator become significantly tighter than many first-time franchisees expect.

This is why a careful review of Item 19 financial performance representations alongside Item 6 is essential. Item 19 tells you what locations earn. Item 6 tells you what you owe. Together, they allow you to model what you actually keep.

A Client Scenario: When Item 6 Fees Changed the Investment Decision

A prospective franchisee came to our firm after receiving approval from McDonald’s to acquire an existing location from a retiring operator. The purchase price for the franchise rights was approximately $1.2 million. The location was generating roughly $2.8 million in annual gross sales, and the buyer had modeled a comfortable owner-operator income based on the royalty alone.

When we reviewed the complete Item 6 fee schedule, the picture changed significantly. The buyer had accounted for the 4% royalty ($112,000) and the advertising contribution ($112,000). However, the buyer had not fully modeled the rent obligation, which under the sublease terms amounted to approximately 9% of gross sales, or $252,000 per year. Technology fees, insurance minimums, and required equipment upgrades added another $40,000 annually.

The total Item 6 fee burden was approximately $516,000, not the $224,000 the buyer had originally projected. Additionally, McDonald’s was requiring a $700,000 remodel as a condition of transfer approval, which the buyer had not budgeted for. When we recalculated the total investment (purchase price plus remodel) against the projected margins after all fees, food cost, and labor, the projected owner-operator income dropped from approximately $180,000 per year to approximately $65,000. For an investment exceeding $1.9 million, that return was well below the buyer’s minimum threshold.

The buyer ultimately decided not to proceed. That decision, informed by a complete analysis of Item 6 alongside the rest of the FDD, saved the buyer from a seven-figure commitment that did not meet the financial objectives. At Lopes Law LLC, this is exactly the kind of outcome a thorough FDD review is designed to produce: a clear, complete picture before the capital is committed.

What Should Prospective McDonald’s Franchisees Look for in Item 6?

When reviewing McDonald’s FDD Item 6, focus on these specific areas:

• The rent formula: Determine whether your location’s rent is a flat base, a percentage of sales, or a “greater of” structure. Model the rent at various revenue levels to understand how it scales. If the location performs above expectations, your rent increases proportionally.
• Advertising fund allocation: Identify how much goes to the national fund versus the local cooperative. Understand whether you have any voice in how local advertising dollars are spent.
• Technology fee escalation: Check whether technology fees are fixed or subject to increase as McDonald’s rolls out new platforms. Ask current operators what their technology costs have been over the past three years.
• Remodel obligations and timeline: Determine when the next required remodel will occur, what the estimated cost range is, and whether McDonald’s contributes anything toward the expense.
• Transfer fee terms: If you plan to eventually sell the franchise, understand what fees are triggered by the transfer and what conditions McDonald’s imposes on the buyer.
• Late payment penalties: Understand the consequences of late royalty or rent payments, including interest charges and potential default triggers.
• Insurance minimums: Confirm the required insurance coverages and limits. Insurance costs vary significantly by state and by the location’s claims history.

Training Costs

McDonald’s requires new franchisees to complete an extensive training program, which can span 12 to 18 months. The franchisee bears the cost of travel, lodging, and living expenses during training. While there is no direct “training fee” in the traditional sense, the out-of-pocket cost of sustained training, often in a different city, is a real financial obligation that Item 6 acknowledges.

Equipment Upgrades

Beyond the periodic remodel, McDonald’s may require specific equipment upgrades to accommodate new menu items, updated food safety standards, or technology integrations. These mandates are separate from the major remodel cycle and can arise with limited advance notice. The cost of compliance is borne entirely by the franchisee.

How Does McDonald’s Item 6 Compare to Other QSR Franchises?

McDonald’s fee structure is unusual in the quick-service restaurant industry primarily because of the real estate model. Most other major QSR brands (Chick-fil-A being a notable exception with its own unique model) allow franchisees to secure their own real estate or lease from third-party landlords. This means the franchisee’s rent is negotiated independently and is not paid to the franchisor.

When you compare a typical QSR franchise charging a 5% to 6% royalty and 3% to 4% advertising with third-party rent to a McDonald’s franchise charging 4% royalty, 4% advertising, and 8% to 10% rent to McDonald’s, the total fee to the franchisor is significantly higher with McDonald’s. The trade-off is that McDonald’s provides the real estate, which reduces the franchisee’s upfront capital requirement for land and building acquisition, but the ongoing cost is higher.

Understanding this trade-off is essential for any investor comparing franchise opportunities. The total cost of ownership, not just the royalty rate, determines your profitability.

Why Legal Review of Item 6 Is Not Optional

The fees disclosed in McDonald’s Item 6 represent contractual obligations that will continue for the full term of the franchise agreement, typically 20 years. Signing the franchise agreement without fully understanding these obligations is the financial equivalent of signing a 20-year commercial lease without reading the rent schedule.

A franchise attorney can help you model the total fee burden against realistic revenue projections, identify fees that may increase over the term, evaluate the remodel obligation relative to your expected return on investment, and compare the total cost structure against other franchise opportunities you may be considering.

At Lopes Law LLC, we review McDonald’s FDDs and franchise agreements regularly. Our flat-fee FDD validation review is $3,000 and covers all 23 items of the FDD, with particular attention to the fee structure in Item 6 and the financial performance data in Item 19. For a complete overview of what that process involves, see our guide on what to expect from an FDD review.

Frequently Asked Questions About McDonald’s FDD Item 6

Reach out, we are friendly. Call now for a free consultation at (267) 777-9117 or schedule your free 20-minute consultation online.

Last updated: March 10, 2026