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Apparently this is McDonald’s modus operandi as well. They’re basically a real estate company who happens to specialize in fast food resturants.

sjcsjc 8y ago
Are you sure? Surely the company itself owns the properties, which is very very different from a controlling family owning the properties.
- arthurcolle 8y ago
  No, they don't own the properties outright. McDonalds operates as a franchise
  - deleted 8y ago
    [deleted]
  - kgwgk 8y ago
    From their annual report: "The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. To assess potential, the Company analyzes traffic and walking patterns, census data and other relevant data. The Company’s experience and access to advanced technology aid in evaluating this information. The Company generally owns the land and building or secures long-term leases for conventional franchised and Company-operated restaurant sites, which ensures long-term occupancy rights and helps control related costs." "The Company owned 45% to 50% of the land and 70% to 75% of the buildings for restaurants in its consolidated markets at year-end 2017 and 2016."
- dahdum 8y ago
  80% of McDonalds are franchise, so it’s often a similar situation. 2/3rds of locations are owned by McDonald’s and leased by the franchisee, who also pays royalties and purchases from corporate affiliated suppliers. Ripe for abuse if McDonald’s were too short term focused. Source: https://www.fool.com/investing/general/2016/04/03/what-percentage-of-mcdonalds-restaurants-are-owned.aspx https://www.fool.com/investing/general/2016/04/03/what-perce...
  - kgwgk 8y ago
    That's not similar at all. McDonald's (the company) owns properties and leases them to franchisees, which is quite different from a WeWork officer owning properties and leasing them to WeWork (the company).
    - humanrebar 8y ago
      Tell that to the McDonald family.
      - kgwgk 8y ago
        I don't know if you're joking, but they were out of the picture even before the company became public in 1965.
        humanrebar 8y ago
        And they were leveraged out of the business partly though lease-to-yourself shenanigans on the part of Ray Kroc.
        kgwgk 8y ago
        How so?
        humanrebar 8y ago
        https://money.howstuffworks.com/mcdonalds2.htm https://money.howstuffworks.com/mcdonalds2.htm Not spelled out there is that the real estate portion of the business was advantageous to Kroc. When it became the vast majority of the business he could use his resources to leverage out the McDonalds.
        kgwgk 8y ago
        I don't see the relevance for the WeWork discussion. WeWork shareholders are potentially harmed when the CEO gives money from the company to himself. If I understand the deal, the McDonald's brothers sold back the royalties they got from McDonald's (the company) for $2.7mn. If McDonald's (the company) got access to the money that the McDonald's brothers demanded by being smart with real estate operations, good for them. Everyone got what they wanted. https://www.marketplace.org/2017/02/09/business/ray-kroc-mcdonalds-fast-food https://www.marketplace.org/2017/02/09/business/ray-kroc-mcd... "The brothers did get a percentage of the profits. The original deal was 1.9 percent of a franchisee's profits. It went to the McDonald's Corporation and 0.5 percent of that went to Dick and Mac McDonald. The falsehood in the movie is that Ray screwed the brothers out of that half a percent. Basically what happened was Ray and the brothers were at odds. He went to them and said, look, what is it going to take to make you go away? They said $2.7 million — we want a million dollars each and $700,000 to pay our taxes. That's how practical they were. And they were happy with that. It was 1961 and the problem was that Ray didn't have anywhere close to $2.7 million. It's important to remember that McDonald's was precipitously close to folding at every step of the game once Ray got involved, because he didn't have the right scheme to make McDonald's grow until he met Harry Sonneborn who came along and told him it's not about hamburgers, it's about real estate. So basically Ray couldn't find $2.7 million to pay the brothers off. Harry found the $2.7 million. And if he hadn't, the situation, the agreement would have continued on the way it was in place with the 0.5 percent going and lining the brothers' pockets in a really lovely, passive income. But Harry saved the day. He was able to convince these men, who they later called in McDonald's lore "The 12 apostles," and those guys came up with the cash that allowed him to buy out the McDonald's brothers and make them go away. The movie says that they got screwed, but they didn't."
samfisher83 8y ago
Watch the the founder. Real estate is where they made their money.

sjcsjc 8y ago

Are you sure? Surely the company itself owns the properties, which is very very different from a controlling family owning the properties.

arthurcolle 8y ago
No, they don't own the properties outright. McDonalds operates as a franchise
- deleted 8y ago
  [deleted]
- kgwgk 8y ago
  From their annual report: "The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. To assess potential, the Company analyzes traffic and walking patterns, census data and other relevant data. The Company’s experience and access to advanced technology aid in evaluating this information. The Company generally owns the land and building or secures long-term leases for conventional franchised and Company-operated restaurant sites, which ensures long-term occupancy rights and helps control related costs." "The Company owned 45% to 50% of the land and 70% to 75% of the buildings for restaurants in its consolidated markets at year-end 2017 and 2016."
dahdum 8y ago
80% of McDonalds are franchise, so it’s often a similar situation. 2/3rds of locations are owned by McDonald’s and leased by the franchisee, who also pays royalties and purchases from corporate affiliated suppliers. Ripe for abuse if McDonald’s were too short term focused. Source: https://www.fool.com/investing/general/2016/04/03/what-percentage-of-mcdonalds-restaurants-are-owned.aspx https://www.fool.com/investing/general/2016/04/03/what-perce...
- kgwgk 8y ago
  That's not similar at all. McDonald's (the company) owns properties and leases them to franchisees, which is quite different from a WeWork officer owning properties and leasing them to WeWork (the company).
  - humanrebar 8y ago
    Tell that to the McDonald family.
    - kgwgk 8y ago
      I don't know if you're joking, but they were out of the picture even before the company became public in 1965.
      - humanrebar 8y ago
        And they were leveraged out of the business partly though lease-to-yourself shenanigans on the part of Ray Kroc.
        kgwgk 8y ago
        How so?
        humanrebar 8y ago
        https://money.howstuffworks.com/mcdonalds2.htm https://money.howstuffworks.com/mcdonalds2.htm Not spelled out there is that the real estate portion of the business was advantageous to Kroc. When it became the vast majority of the business he could use his resources to leverage out the McDonalds.
        kgwgk 8y ago
        I don't see the relevance for the WeWork discussion. WeWork shareholders are potentially harmed when the CEO gives money from the company to himself. If I understand the deal, the McDonald's brothers sold back the royalties they got from McDonald's (the company) for $2.7mn. If McDonald's (the company) got access to the money that the McDonald's brothers demanded by being smart with real estate operations, good for them. Everyone got what they wanted. https://www.marketplace.org/2017/02/09/business/ray-kroc-mcdonalds-fast-food https://www.marketplace.org/2017/02/09/business/ray-kroc-mcd... "The brothers did get a percentage of the profits. The original deal was 1.9 percent of a franchisee's profits. It went to the McDonald's Corporation and 0.5 percent of that went to Dick and Mac McDonald. The falsehood in the movie is that Ray screwed the brothers out of that half a percent. Basically what happened was Ray and the brothers were at odds. He went to them and said, look, what is it going to take to make you go away? They said $2.7 million — we want a million dollars each and $700,000 to pay our taxes. That's how practical they were. And they were happy with that. It was 1961 and the problem was that Ray didn't have anywhere close to $2.7 million. It's important to remember that McDonald's was precipitously close to folding at every step of the game once Ray got involved, because he didn't have the right scheme to make McDonald's grow until he met Harry Sonneborn who came along and told him it's not about hamburgers, it's about real estate. So basically Ray couldn't find $2.7 million to pay the brothers off. Harry found the $2.7 million. And if he hadn't, the situation, the agreement would have continued on the way it was in place with the 0.5 percent going and lining the brothers' pockets in a really lovely, passive income. But Harry saved the day. He was able to convince these men, who they later called in McDonald's lore "The 12 apostles," and those guys came up with the cash that allowed him to buy out the McDonald's brothers and make them go away. The movie says that they got screwed, but they didn't."

samfisher83 8y ago

Watch the the founder. Real estate is where they made their money.