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Transferring Ownership: What McDonald’s Owners Should be Considering Now

Posted by Steve Bickert on Tue, Sep 20, 2022

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Transferring Ownership: What McDonald’s Owners Should be Considering NowMcDonald’s new rules may affect a lot of Owners, including how you transfer your restaurants.

Restaurant transfers and sales have always been an important and complicated part of McDonald’s ownership – it affects how you’ll be set up for retirement and how the next Owners will be set up for success in the future.

Here’s what Owners should know about McDonald’s new rules affecting Next Gen Owners.

The 6 Key Metrics of Transition

Here’s what we say are the six key metrics of McDonald’s restaurant transition: family, business, financial, legal, tax and McDonald’s Corporation. The last factor has even more weight now with the new standards.

Every McDonald’s Owner makes a lot of important decisions for your family business in regards to your exit or transition strategy. Those decisions can affect your family, the business, and your financial future.

These decisions could also have legal and tax implications for your family and your business. In addition, as McDonald’s franchisees, your decisions can also be affected by the Franchisor – McDonald’s Corporation and the new changes effective for next year.

How Will You Transfer?

What are some ways you could potentially structure your transition strategy? Often there are a lot of options and flexibility. Here are some questions to consider:

  • Will you be gifting ownership, selling ownership or a combination of the two?
  • Where is your wealth? Is the majority in the restaurants and needs to be extracted?
  • Will you hold a seller’s note or will your Next Gen need to obtain bank financing? This impacts whether you receive a lump sum cash payment or payments over time.
  • Do you want to work in the business forever and bequest final ownership at death?
  • Do you expect fair market value for your transfers of ownership, or would you consider discounting?


And just a quick reminder that ownership of your McDonald’s restaurants is not the same thing as having approved operator status for your restaurants. Typically Next Gens get corporate approval one restaurant at a time. So regardless of your family’s ownership status, you want to be sure you have clear written documentation from the corporation as to who in your family is approved and for what restaurants are they approved.

The bottom line is all of these options require thoughtful consideration and these personal decisions need to be made prior to setting off on the road trip to succession success.

READ MORE: The Exit Path: Transfer Ownership of Business to Active Family Members

Interfamily Transfers

Many of you will likely exit by selling a portion (or all) of your restaurants to your Next Gens. Some Next Gens may be planning on their parents gifting the entire organization or a material portion, but the reality is that most of the First Gens will need to sell a portion of their restaurants in order to fund their retirement.

This scenario is very different from a sale to the outside:

  • There’s no new cash flows to the organization
  • But now there is new debt for Next Gen to buy out parents
  • There’s also potential tax consequences to either side of the transaction


Adding new debt without any new cash flows can negatively impact financial viability. This makes it critically important to have a financial transition strategy in place for success.

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Related Party Sales

Another tax nuance that families need to consider is U.S. Tax Code Section 1239 which addresses the gain from sale of Depreciable Property Between certain related taxpayers. In the case of a sale or exchange of property, directly or indirectly, between related taxpayers, any gain recognized on the transaction shall be treated as ordinary income (not capital gain) if such property is, in the hands of the transferee, of a character which is subject to the allowance for depreciation provided in Section 167.

READ MORE: How Much is My McDonald’s Restaurant Worth? A Valuation Primer

Use of Trusts for Transferring Ownership

There are several trusts that can be useful tax-saving tools in transferring ownership of businesses. They include:

  • Grantor Retained Annuity Trusts (GRAT)
  • Intentionally Defective Grantor Trusts (IDGT)

GRATs and IDGTs have slight variations, but can be a useful tool to transfer/sell ownership over a period of time (a maximum of 7 years for McDonald’s Owners). Monthly payments are made tax free over the term and ownership transfers tax free once all payments are made.

This does not impact your lifetime exclusion. However, you must survive to the end of the term. Otherwise, the amount is brought back into the estate.

For More Information

With all these complex considerations, it makes sense to carefully plan and make good decisions with your transition or exit plan from day one with a qualified team of professionals who understand your business and the nuances of being a McDonald’s franchisee.

Our team has worked with McDonald’s Owners on transition for more than 50 years and can help your family find its optimal solution. Please contact us for more information.

Topics: McDonald's management

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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