The golden arches are synonymous with burgers and fries, but business people find something meatier to sink their teeth into when looking at McDonald’s ledger: the real estate.
Consumers think of McDonald’s as a burger restaurant, but in the business world, McDonald’s is considered a real estate company.
While the brand has sold more than one billion hamburgers to customers around the world, 85% of its stores are owned by franchisees. Franchisees pay to use McDonald’s brand name, its proprietary processes and trademarked menu items, but unlike other franchises, McDonald’s owns the land the stores are built on.
Between the burgers and the land, McDonald’s makes a lot more of its money on the land.
McDonald’s owns thousands of iconic pieces of real estate around the globe. From New York City’s Times Square to Moscow’s Red Square, McDonald’s has ventured around the world, buying up prime real estate. Franchisees pay McDonald’s a cut of their food sales, but a much larger portion of McDonald’s revenue comes from the rent it’s paid on its real estate. After all, rent in Times Square isn’t cheap, but a Big Mac is.
McDonald’s still takes a royalty on its franchisee’s sales but enjoys a much fatter revenue stream from the leases on nearly 33,000 franchisee-owned restaurants.
“The Founder,” a 2016 film about McDonald’s history explains the dynamic succinctly: “You don’t build an empire off a 1.4% cut of a 15 cent hamburger, you build it by owning the land on which that burger is cooked.”
