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Starbucks can negotiate way better deals on rent than mom and pops. IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays

by pydry 4y ago

Starbucks can negotiate way better deals on rent than mom and pops. IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays rent to itself. For many small businesses - especially mom and pops, the majority of the surplus value is captured by property owners, and the amount has increased over the years. This is partly how Piketty's r > g came about.

lm28469 4y ago
> Starbucks can negotiate way better deals on rent than mom and pops. On coffee too, they're big enough to go straight to the farmers and set their prices https://www.thecommonscafe.com/starbucks-criticized-for-low-wages-paid-to-coffee-farmers/ https://www.thecommonscafe.com/starbucks-criticized-for-low-...
JohnFen 4y ago
> IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays rent to itself. I read somewhere that McDonald's makes more money from their real estate holdings than anything else they do. Can't vouch for how accurate that is, but it seems very plausible.
- shagie 4y ago
  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... > About 85% of the company in 2016 was represented by franchisee-run locations—people who agree to operate individual McDonald’s restaurants with a licensed privilege to the branding. But rather than collect a lot in royalties or sell its franchisees cooking equipment, McDonald’s makes much of its revenue by buying the physical properties and then leasing them to franchisees, often at large mark-ups. https://www.wallstreetsurvivor.com/mcdonalds-beyond-the-burger/ https://www.wallstreetsurvivor.com/mcdonalds-beyond-the-burg... > Today McDonald’s makes its money on real estate through two methods. Its real estate subsidiary will buy and sell hot properties while also collecting rents on each of its franchised locations. McDonald’s restaurants are in over 100 countries and have probably served over 100 billion hamburgers. There are over 36,000 locations worldwide, of which only 15% are owned and operated by the McDonald’s corporation directly. The rest are franchisee-operated.
SECProto 4y ago
Yes, and historically, mom-n-pop style shops (not specifically coffee) made the property costs work by living in the same building or property. But if you own a house and want to turn the ground floor into a cafe: surprise, modern zoning laws don't allow it. Which brings it around to a similar issue as my original comment: strict zoning is holding back what our cities could be.
- kderbyma 4y ago
  It's the city councils...ours is criminal. All of them.
  - SECProto 4y ago
    Planning decisions tend to be made by municipal staff not by elected Council. Regardless, if every city council/staff is causing the same issue, then I think that's a pretty reductive argument. We need to look at places that are doing planning/zoning "right", figure out what we're doing wrong, and improve it. (And actually, all that has been done, but action isn't being taken, so now we have to solve that problem)

by pydry 4y ago

lm28469 4y ago

> Starbucks can negotiate way better deals on rent than mom and pops. On coffee too, they're big enough to go straight to the farmers and set their prices https://www.thecommonscafe.com/starbucks-criticized-for-low-wages-paid-to-coffee-farmers/ https://www.thecommonscafe.com/starbucks-criticized-for-low-...

JohnFen 4y ago

> IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays rent to itself. I read somewhere that McDonald's makes more money from their real estate holdings than anything else they do. Can't vouch for how accurate that is, but it seems very plausible.

shagie 4y ago
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... > About 85% of the company in 2016 was represented by franchisee-run locations—people who agree to operate individual McDonald’s restaurants with a licensed privilege to the branding. But rather than collect a lot in royalties or sell its franchisees cooking equipment, McDonald’s makes much of its revenue by buying the physical properties and then leasing them to franchisees, often at large mark-ups. https://www.wallstreetsurvivor.com/mcdonalds-beyond-the-burger/ https://www.wallstreetsurvivor.com/mcdonalds-beyond-the-burg... > Today McDonald’s makes its money on real estate through two methods. Its real estate subsidiary will buy and sell hot properties while also collecting rents on each of its franchised locations. McDonald’s restaurants are in over 100 countries and have probably served over 100 billion hamburgers. There are over 36,000 locations worldwide, of which only 15% are owned and operated by the McDonald’s corporation directly. The rest are franchisee-operated.

SECProto 4y ago

Yes, and historically, mom-n-pop style shops (not specifically coffee) made the property costs work by living in the same building or property. But if you own a house and want to turn the ground floor into a cafe: surprise, modern zoning laws don't allow it. Which brings it around to a similar issue as my original comment: strict zoning is holding back what our cities could be.

kderbyma 4y ago
It's the city councils...ours is criminal. All of them.
- SECProto 4y ago
  Planning decisions tend to be made by municipal staff not by elected Council. Regardless, if every city council/staff is causing the same issue, then I think that's a pretty reductive argument. We need to look at places that are doing planning/zoning "right", figure out what we're doing wrong, and improve it. (And actually, all that has been done, but action isn't being taken, so now we have to solve that problem)