01/28/2026
Why would Starbuck's sell their real estate?
We all know the story of McDonald's and how Ray Kroc built an empire based on having the best real estate in every city. At one time, the CFO of McDonald's claimed that they weren't a Burger company, but a real estate company in disguise...
Well, since then, McDonald's and almost all other big name franchises have changed their tune. McDonald's now only owns about 40% of their real estate, the other 60% is owned by investors like me...
So, why is that?
Here is why. It's called a sale leaseback.
1. They build for cheap, sell for a premium...
Let's say it costs approx. $1.2M to build this Starbucks. Because they sign a long-term lease on that property and investors know Starbucks will be around forever and they have good credit of paying rent every month, investors are willing to pay a premium in exchange. They are able to sell the property for $2.4M and use the $1.2M in profit to fund operations or fund expansion of another location...
2. Their money works harder in coffee than in real estate...
If Starbucks keeps the building, their return is the slow appreciation of real estate. But if they sell it, they free up millions from their balance sheet and have the cash to pour back into what they're best at...SELLING COFFEE! The return on every $1 invested into the Starbucks operating company is much higher than parking that $1 in the real estate...
3. Expansion fuels growth...
Every time Starbucks opens a new store, it's not just about the lattes. Each store adds to the company's revenue and profit. Real numbers that Wall Street multiplies when valuing the whole company. One more store = more revenue = more enterprise value = higher shareholder value.
So, instead of tying up money in real estate, Starbucks unlocks that capital and uses it to grow faster, expand gloabally, and keep rewarding shareholders...
It's a win-win scenario: investors get stable rental income backed by a global brand, and Starbucks gets the cash to keep growing.