McDonald's vs Subway vs Domino's Franchise Fees: What the FDDs Really Say

Franchise buyers often compare brands by headline investment and miss the more important comparison: the fee stack. McDonald's, Subway, and Domino's all make their money differently, and Item 6 is where the truth starts. Once you see the ongoing fee structure, the initial investment number starts to mean something different.

This is not an abstract exercise. If you open a store doing $1,000,000 in annual gross sales, the ongoing fee difference between these three systems can swing your take-home by tens of thousands of dollars before you touch rent or labour.

The royalty: how the percentage hits differently

Subway charges 8% of total gross sales as a royalty, paid weekly. McDonald's charges a service fee that sits on top of rent obligations and typically runs around 4% to 5% depending on the restaurant structure. Domino's charges 5.5% of gross sales for traditional stores.

That means on $1,000,000 in sales, Subway takes $80,000 in royalty, Domino's takes $55,000, and McDonald's takes roughly $40,000 to $50,000 before rent. Subway has the lowest entry cost in the group by a wide margin but extracts the highest ongoing royalty percentage. That tradeoff is the central tension in this comparison.

The advertising obligation adds another layer

Subway adds a 4.5% advertising fee on gross sales on top of the 8% royalty, which means the combined base fee load is 12.5% before you account for any other fees. Domino's charges 4% to a national advertising fund and then may add local cooperative advertising contributions of 1% to 4% depending on your market. McDonald's requires contributions to regional advertising cooperatives and a national fund.

This means Subway's combined base fee load can exceed the total fee load at Domino's even though Subway's initial investment is a fraction of Domino's higher-end buildout. The brand that looks affordable to open may be more expensive to operate on a percentage-of-revenue basis.

Technology, transfer, and other fees

Item 6 does not stop at royalty and advertising. Domino's charges technology fees, required insurance, and various operational fees. Subway charges a technology fee currently stated per location per week. McDonald's has its own technology and equipment fee structure baked into the broader occupancy relationship.

The pattern is consistent across all three. Royalty and advertising are the headline fees, but the technology, training, audit, and transfer fees are where buyers often get surprised. None of these brands is cheap to operate at the Item 6 level, even where the initial investment looks approachable.

Minimum royalties: when the fee is independent of sales

Some franchise systems include minimum royalties that apply regardless of actual sales levels. These minimums mean the fee is owed even during slow ramp-up periods when revenue is building. If you are projecting a slow first year, a minimum royalty clause can change the viability of the deal significantly.

Reading the remarks column in Item 6 is where minimum royalty triggers usually appear. They are easy to miss if you read Item 6 too quickly, and they can convert a manageable percentage into a fixed overhead that hits whether you have a good week or a bad one.

How to read the fee stack as a buyer

The right approach is to calculate your all-in fee burden at three sales scenarios: a weak opening month, a mid-range steady-state, and a strong mature period. At each level, add up royalty, advertising, technology, and any minimum fee obligations. Then compare that total to your projected gross margin before fees.

If the combined fee load leaves you with less than 50% of gross sales to cover rent, labour, food cost, and your own income, the deal may work at the high end of sales but become very difficult in the first year. That is the honest version of the comparison that McDonald's, Subway, and Domino's buyers should be doing before they sign. If you want help running those numbers from the actual FDD disclosures, fddinsight.com can extract and organise Item 6 for you.