5 ms·

Isn't this exactly how McDonald's did it?

Topgamer7 7y ago
Yes I've heard this too. The franchise agreement states that you are behest to wherever McDonald's decides to let you lease. Unable to corroborate though.
kgwgk 7y ago
How does the analogy "WeWork Founder" ~ "McDonald's Corporation" work precisely?
- reallydude 7y ago
  Ray Kroc is analogous to Adam Neumann. They both expanded a marginally profitable (and hard to grow) business by expanding a few locations than leveraging the capital to buy real-estate, which allowed them to stop caring about the original and individual franchised business success. Using the massive income of being commercial property landlords, even if the franchises failed, they had revenue growth. Now that Kroc is gone, the reference to McDonald's as a corporation is convenient, since the history is understood and available. The movie "The Founder" might clear things up.
  - kgwgk 7y ago
    Did Kroc leased his own real estate to the company he managed? I don’t think so, but I could be wrong.
    - lkschubert8 7y ago
      From what I understand he purchased real estate and then leased it to the franchisees.
    - reallydude 7y ago
      https://money.howstuffworks.com/mcdonalds2.htm https://money.howstuffworks.com/mcdonalds2.htm Just googling the history, so you can understand what happened, is a minimum when having a discussion about history. Whoever went so far as to wasting a point downmodding me, didn't even do that.
      - kgwgk 7y ago
        Please help me understand what happened. Who owned the real estate? Ray Kroc? According to https://www.moaf.org/publications-collections/financial-history-magazine/103/_res/id=Attachments/index=0/McDonalds.pdf https://www.moaf.org/publications-collections/financial-hist... Franchise Realty Corp was owned by McDonald’s.
        reallydude 7y ago
        > Who owned the real estate? Ray Kroc? From wikipedia: At the closing table, Kroc became annoyed that the brothers would not transfer to him the real estate and rights to the original San Bernardino location Regardless of the legal agreements, the intent was the same. Since the beginning of this thread, it looks like nitpicking to avoid concession, so you can believe what you want. GL with that. To recap, history. Ray Kroc is analogous to Adam Neumann. 2 founders who leveraged real-estate over the initial franchise business. Substituting McDonald's in name for Ray Kroc is a matter of a temporal situation (or laziness).
        kgwgk 7y ago
        Ray Kroc, who controlled McDonald’s, set up a scheme where one part of McDonald’s bought real estate and leased it to another part of McDonald’s (which in turn leased it to franchisees). That’s my understanding at least, it seems you don’t dispute it. The intent was for the company to benefit. Adam Neumann, who controls WeWork, set up a scheme where Adam Neumann and relatives bought real estate and leased it to WeWork (no franchise model in this case, by the way). The intent was for Adam Neumann to benefit. The analogy is flawed and misleading, the conflict of interests is evident and this anomalous situation is being corrected. A much better analogy to what McDonald’s did in the beginning is what WeWork intends to do now: https://www.bloomberg.com/news/features/2019-05-15/wework-wants-to-be-its-own-landlord-it-also-wants-2-8-billion https://www.bloomberg.com/news/features/2019-05-15/wework-wa... “WeWork is creating an investment fund that aims to raise billions of dollars to buy stakes in buildings where it will be a major tenant” (Still, it’s not exactly the same, I think, as it will be a fund partially owned by WeWork and partially by external investors; I don’t fully understand what was the structure for Franchise Realty but as far as I understand external investors provided loans to that corporation.)
  - deleted 7y ago
    [deleted]
  - adventured 7y ago
    > The movie "The Founder" might clear things up. The movie The Founder is mostly fake. It's unlikely to clear much up. http://rayandjoan.com/the-founder/ http://rayandjoan.com/the-founder/
elamje 7y ago
To some extent this makes sense for a franchise. It allows McDonalds to use it’s real estate expertise to negotiate the best possible deal, then pass on the deal to the franchisee. If this wasn’t the case, every franchisee would have to become a real estate expert just to open a restaurant. In the case of WeWork, this isn’t a franchise, WeWork has the ability to own the property outright and lease it out. The CEO owning the property effectively guarantees him a good return on his investment and his rent profit goes into his pocket while WeWork the company passes him the profit. If there are holes in the logic please elaborate. That is the best I can compare the two. I’m sure McDonald’s makes a bit of profit off of leasing to a franchisee, although I can’t say. In the case of McDonald’s it seems it is providing a valuable service to a franchisee. No need for a franchisee to try to negotiate property deals, nor put up real estate capital to own the land. McDonalds is effectively cutting out a 3rd Party landowner middleman that could arbitrarily raise rent once the restaurant is opened.
- joezydeco 7y ago
  When McDonalds is the landlord it also gives them the power to evict the franchisee if they are not following the franchise rules. Compare to Subway, which also franchises but doesn’t lease property, to see what difference that makes.
  - elamje 7y ago
    So is Subway the good guy or the bad guy in your comparison? I can’t tell based on your phrasing.
    - servercobra 7y ago
      I'm not sure there's a good guy or bad guy, but anecdotally, I've been in a lot more poorly-run Subways than poorly-run McDonalds, which is maybe the point the OP is getting at?
  - reneherse 7y ago
    Subway has other ways of getting rid of people when it suits them. There was an article posted here recently about the underhanded methods Subway regional managers have used to shut down competing franchisees within their territories. [1] McDonalds is a much stronger company just based on their ownership of some of the most valuable real estate across the USA. [1] https://news.ycombinator.com/item?id=20307988 https://news.ycombinator.com/item?id=20307988
trimbo 7y ago
Did Ray Kroc personally own any of the real estate McDonald's was leasing to franchisees?
mabbo 7y ago
McDonald's buys land then says "If you want to run a McDonald's you must rent from us".
- empath75 7y ago
  That’s a lot different from the ceo personally self-dealing.
auggierose 7y ago
Yup, it's in the movie: https://www.imdb.com/title/tt4276820/ https://www.imdb.com/title/tt4276820/
- pathseeker 7y ago
  Nope, it's not the same at all. Wework is the corporation and it's leasing from the founder. McDonald's is the corporation and it leases out to franchisees.
  - auggierose 7y ago
    Watch the movie, you obviously haven't.
    - mercutio2 7y ago
      I have seen the (largely fictitious) movie. It is not in the movie (which, again, is largely fictitious) that Ray Kroc took personal ownership of properties, and benefitted personally from the corporation he controlled (not counting the above-board appreciation-of-the-overall-corporation, which of course he benefitted from, but capitalists mostly don’t argue with this). There was an intermediary acting as the owner, and there are no franchisees in WeWork’s case. WeWork is vastly, vastly more sketchy.

Yes I've heard this too. The franchise agreement states that you are behest to wherever McDonald's decides to let you lease. Unable to corroborate though.

kgwgk 7y ago

How does the analogy "WeWork Founder" ~ "McDonald's Corporation" work precisely?

reallydude 7y ago
Ray Kroc is analogous to Adam Neumann. They both expanded a marginally profitable (and hard to grow) business by expanding a few locations than leveraging the capital to buy real-estate, which allowed them to stop caring about the original and individual franchised business success. Using the massive income of being commercial property landlords, even if the franchises failed, they had revenue growth. Now that Kroc is gone, the reference to McDonald's as a corporation is convenient, since the history is understood and available. The movie "The Founder" might clear things up.
- kgwgk 7y ago
  Did Kroc leased his own real estate to the company he managed? I don’t think so, but I could be wrong.
  - lkschubert8 7y ago
    From what I understand he purchased real estate and then leased it to the franchisees.
  - reallydude 7y ago
    https://money.howstuffworks.com/mcdonalds2.htm https://money.howstuffworks.com/mcdonalds2.htm Just googling the history, so you can understand what happened, is a minimum when having a discussion about history. Whoever went so far as to wasting a point downmodding me, didn't even do that.
    - kgwgk 7y ago
      Please help me understand what happened. Who owned the real estate? Ray Kroc? According to https://www.moaf.org/publications-collections/financial-history-magazine/103/_res/id=Attachments/index=0/McDonalds.pdf https://www.moaf.org/publications-collections/financial-hist... Franchise Realty Corp was owned by McDonald’s.
      - reallydude 7y ago
        > Who owned the real estate? Ray Kroc? From wikipedia: At the closing table, Kroc became annoyed that the brothers would not transfer to him the real estate and rights to the original San Bernardino location Regardless of the legal agreements, the intent was the same. Since the beginning of this thread, it looks like nitpicking to avoid concession, so you can believe what you want. GL with that. To recap, history. Ray Kroc is analogous to Adam Neumann. 2 founders who leveraged real-estate over the initial franchise business. Substituting McDonald's in name for Ray Kroc is a matter of a temporal situation (or laziness).
        kgwgk 7y ago
        Ray Kroc, who controlled McDonald’s, set up a scheme where one part of McDonald’s bought real estate and leased it to another part of McDonald’s (which in turn leased it to franchisees). That’s my understanding at least, it seems you don’t dispute it. The intent was for the company to benefit. Adam Neumann, who controls WeWork, set up a scheme where Adam Neumann and relatives bought real estate and leased it to WeWork (no franchise model in this case, by the way). The intent was for Adam Neumann to benefit. The analogy is flawed and misleading, the conflict of interests is evident and this anomalous situation is being corrected. A much better analogy to what McDonald’s did in the beginning is what WeWork intends to do now: https://www.bloomberg.com/news/features/2019-05-15/wework-wants-to-be-its-own-landlord-it-also-wants-2-8-billion https://www.bloomberg.com/news/features/2019-05-15/wework-wa... “WeWork is creating an investment fund that aims to raise billions of dollars to buy stakes in buildings where it will be a major tenant” (Still, it’s not exactly the same, I think, as it will be a fund partially owned by WeWork and partially by external investors; I don’t fully understand what was the structure for Franchise Realty but as far as I understand external investors provided loans to that corporation.)
- deleted 7y ago
  [deleted]
- adventured 7y ago
  > The movie "The Founder" might clear things up. The movie The Founder is mostly fake. It's unlikely to clear much up. http://rayandjoan.com/the-founder/ http://rayandjoan.com/the-founder/

elamje 7y ago

To some extent this makes sense for a franchise. It allows McDonalds to use it’s real estate expertise to negotiate the best possible deal, then pass on the deal to the franchisee. If this wasn’t the case, every franchisee would have to become a real estate expert just to open a restaurant. In the case of WeWork, this isn’t a franchise, WeWork has the ability to own the property outright and lease it out. The CEO owning the property effectively guarantees him a good return on his investment and his rent profit goes into his pocket while WeWork the company passes him the profit. If there are holes in the logic please elaborate. That is the best I can compare the two. I’m sure McDonald’s makes a bit of profit off of leasing to a franchisee, although I can’t say. In the case of McDonald’s it seems it is providing a valuable service to a franchisee. No need for a franchisee to try to negotiate property deals, nor put up real estate capital to own the land. McDonalds is effectively cutting out a 3rd Party landowner middleman that could arbitrarily raise rent once the restaurant is opened.

joezydeco 7y ago
When McDonalds is the landlord it also gives them the power to evict the franchisee if they are not following the franchise rules. Compare to Subway, which also franchises but doesn’t lease property, to see what difference that makes.
- elamje 7y ago
  So is Subway the good guy or the bad guy in your comparison? I can’t tell based on your phrasing.
  - servercobra 7y ago
    I'm not sure there's a good guy or bad guy, but anecdotally, I've been in a lot more poorly-run Subways than poorly-run McDonalds, which is maybe the point the OP is getting at?
- reneherse 7y ago
  Subway has other ways of getting rid of people when it suits them. There was an article posted here recently about the underhanded methods Subway regional managers have used to shut down competing franchisees within their territories. [1] McDonalds is a much stronger company just based on their ownership of some of the most valuable real estate across the USA. [1] https://news.ycombinator.com/item?id=20307988 https://news.ycombinator.com/item?id=20307988

trimbo 7y ago

Did Ray Kroc personally own any of the real estate McDonald's was leasing to franchisees?

mabbo 7y ago

McDonald's buys land then says "If you want to run a McDonald's you must rent from us".

empath75 7y ago
That’s a lot different from the ceo personally self-dealing.

auggierose 7y ago

Yup, it's in the movie: https://www.imdb.com/title/tt4276820/ https://www.imdb.com/title/tt4276820/

pathseeker 7y ago
Nope, it's not the same at all. Wework is the corporation and it's leasing from the founder. McDonald's is the corporation and it leases out to franchisees.
- auggierose 7y ago
  Watch the movie, you obviously haven't.
  - mercutio2 7y ago
    I have seen the (largely fictitious) movie. It is not in the movie (which, again, is largely fictitious) that Ray Kroc took personal ownership of properties, and benefitted personally from the corporation he controlled (not counting the above-board appreciation-of-the-overall-corporation, which of course he benefitted from, but capitalists mostly don’t argue with this). There was an intermediary acting as the owner, and there are no franchisees in WeWork’s case. WeWork is vastly, vastly more sketchy.