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> McDonalds had $1.9B in profit in 2022 Out of curiosity, what does that mean? It appears to me the main business of McDonald's is to collect franchising fees.
by credit_guy 3y ago
> McDonalds had $1.9B in profit in 2022
Out of curiosity, what does that mean? It appears to me the main business of McDonald's is to collect franchising fees. Most McDonald's fast food joints (93%) are owned and operated by independent local business owners, who have to pay McDonald's-the-company the frinchising fees, which are about $45k/year [1].
So, I can see how McDonald's, the company, can be highly profitable, while individual stores could be barely surviving.
[1] https://www.investopedia.com/articles/insights/072516/cost-buying-mcdonalds-franchise-mcd.asp https://www.investopedia.com/articles/insights/072516/cost-b...
- sschueller 3y agoDon't they also pay % on top of the franchise fee as well as are required to purchase all the food and werez from Macdonalds which I assume also got more expensive.
- yunohn 3y agoAFAIU McDonald’s sets menu prices, so presumably they make sure franchises can be net positive despite item costs and fees.
- verall 3y agoSure, and if those individual franchises start failing or finding other corporate overlords, then McDs profits may go down and they may have to reduce those fees in order to remain competitive. Such is capitalism. Does this equilibrium-finding method create undo misery and stress for the franchise owners? I would say yes. If franchisees banded together to negotiate in order to extract better fee arrangements from McDs without going through individual bankruptcy, well...
- mattzito 3y agoSince the franchisees are themselves independent businesses, wouldn’t this constitute collusion and price fixing? Something similar was raised around discussions about Uber drivers jointly negotiating rates with Uber.
- user3939382 3y ago1/5th of locations aren’t franchise. The fees are a market price that are coming out of the same pot that covers wages so the two are related.