Did you know that the golden arches are more recognised than the christian cross?
When Ray Kroc purchased the company in 1955, I’m sure he didn’t expect the McDonalds symbol to ever be bigger than Jesus..
But what makes McDonals’s so successful? Yes the fries and burgers are pretty tasty, but to understand how it came to be one of the largest global franchises we need to dig a little deeper.
McDonalds stores are everywhere; they pop up in every capital city all over the world and they’re only ever in fantastic property locations.
The individual store operators (franchisees) only have the ability to generate profits from the food they sell in their resteraunt, while paying rent to McDonalds. McDonalds always builds the buildings and owns the land.
So what business is McDonalds really in? Most people don’t realize that McDonalds business model isn’t a burger flipping franchise but one of the worlds best real estate portfolios.
The individual stores sell the burgers and McDonalds owns the greatest commercial property.
The former CFO of McDonald’s, Harry J. Sonneborn said
“We are not basically in the food business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent.”
Today, McDonald’s property portfolio is valued at more than 8 billion dollars. The company has always maintained a successful real estate portfolio. Just like any other investor, McDonald’s will buy properties that it feels are, or will be, hot locations, and sells properties that are under performing or not doing so well.
So are McDonalds stores necessarily in the best locations for selling burgers or just the ‘hottest location’? How important is the location to a business and its performance?