3 ms·

> McDonald's doesn't really make its money selling food either I would like to learn more about McDonald's business model. How is this possible?

Judgmentality 6y ago
Admittedly I haven't actually read this article, but the title suggests it's accurate. https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chain-its-a-brilliant-30-billion-real-estate-company/ https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...
- jldugger 6y ago
  I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out. It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.
  - chii 6y ago
    I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.
    - Talanes 6y ago
      But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.
    - jldugger 6y ago
      Well yea, in the same way that McDonalds employees aren't all billionaires.
mraza007 6y ago
Hey you should watch The Founder basically explains how McDonald got started and how it went international
- surround 6y ago
  I have. It was very interesting, but I don't think it mentioned that McDonald's doesn't make most of its money from food.
  - mraza007 6y ago
    I agree with you. I believe mcdonalds makes most its money from franchising and royalties earned by mcdonalds franchises rather than food. McDonalds is cheap in US but some countries it’s considered a luxury
jmchuster 6y ago
The article I originally read was years ago and was about Burger King, but I'd imagine the same idea holds. You'd buy up land that wasn't worth much yet, build a restaurant on it in the meantime, and 40 years later it's way more valuable. There's also a nice little synergy that building fast food causes more surrounding to retail to be built, increasing your land value faster. Here's one I was able to find on McDonald's: https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyond-the-burger/ https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...

Judgmentality 6y ago

Admittedly I haven't actually read this article, but the title suggests it's accurate. https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chain-its-a-brilliant-30-billion-real-estate-company/ https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...

jldugger 6y ago
I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out. It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.
- chii 6y ago
  I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.
  - Talanes 6y ago
    But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.
  - jldugger 6y ago
    Well yea, in the same way that McDonalds employees aren't all billionaires.

mraza007 6y ago

Hey you should watch The Founder basically explains how McDonald got started and how it went international

surround 6y ago
I have. It was very interesting, but I don't think it mentioned that McDonald's doesn't make most of its money from food.
- mraza007 6y ago
  I agree with you. I believe mcdonalds makes most its money from franchising and royalties earned by mcdonalds franchises rather than food. McDonalds is cheap in US but some countries it’s considered a luxury

jmchuster 6y ago

The article I originally read was years ago and was about Burger King, but I'd imagine the same idea holds. You'd buy up land that wasn't worth much yet, build a restaurant on it in the meantime, and 40 years later it's way more valuable. There's also a nice little synergy that building fast food causes more surrounding to retail to be built, increasing your land value faster. Here's one I was able to find on McDonald's: https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyond-the-burger/ https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...