13/08/2022
MEET THE FAST FOOD COMPANY THAT MAKES BILLIONS "FRYING" LAND
It’s another Saturday, and if you aren’t aware, today is the 222nd day of 2022 (pun intended).
Few days ago, I launched the BMW Club with Rejoice and I thank you deeply for your readership and reviews. On the last episode which I shared via WhatsApp, I introduced “Trouble” to you (I’m actually laughing right now). “Trouble” is the dog that inherited billions from her deceased owner’s real estate investments.
Imagine if I told you of a company that makes billions just by frying “akara” (beancake) or puff puff. You would say it is impossible right? But yes, I am about to tell you about a fast food company that makes so much money (trillions actually) by frying “land”.
If you've ever seen or entered a McDonald's restaurant, you must have noticed that they are in the food business. With 145 menus including their signature burger and fries, over 40,000 restaurants across 119 countries worldwide, serving over 69 million customers daily and $23 billion (N9.6 trillion) revenue in 2021, McDonald holds its own as one of the largest fast food restaurant chains in the world.
Most of us would think of McDonald’s as a burger and fries restaurant, but in the business world, McDonald’s is considered a real estate company. Around 70% of the buildings and 45% of the land at McDonald's around the world are owned by the company. Between the fries and the land, McDonald’s makes a lot more of its money on the land.
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.
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.
The impetus for the McDonald's real estate business model originated in the 1950's when then CFO Harry Sonneborn recognized that the real value for McDonald's would be found in its real estate, not its hamburgers. The McDonald's Franchise Realty Corporation was launched in 1956 with the goal of purchasing cheap property along well-traveled byways for eventual McDonald's concept franchising.
The soul of McDonald's is its over 40,000 properties, paid for with fries. The impetus for the McDonald's real estate business model originated in the 1950's when then CFO Harry Sonneborn recognized that the real value for McDonald's would be found in its real estate, not its hamburgers. The McDonald's Franchise Realty Corporation was launched in 1956 with the goal of purchasing cheap property along well-traveled byways for eventual McDonald's concept franchising.
I will leave you to pick your lessons from today’s episodes. And maybe if you share with me your lessons, I can plan to buy you a McDonald’s burger soon… But mind you, Mc is not yet in Nigeria.
