McDonald’s is clearly one of the largest fast food chains in the world. Some estimate that they sell 75 burgers a second and to more than 70 million people every single day.
Whoa.
But what might surprise you is that the majority of their multi-billion dollar profits aren’t a result of food sales, but real estate.
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Only about 5% of the 36,000 McDonald’s in the world are company owned, meaning the rest are franchised out – run by contracted individuals – which means they pay rent to McDonald’s, in addition to putting up all of the money to actually run the restaurant.
If you franchise a McDonald’s, you’ll be paying a $45,000 franchise fee, a monthly service fee equal, plus monthly rent that averages around 10.7% of sales.
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Former McDonald’s CFO Harry J. Sonneborn even said…
“We are basically not in the food business. We are in the real estate business.
The only reason we sell 15 cent hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent.”
Clearly that quote is from a while back, but in 2014, Wall Street Survivor reported that McDonald’s made $27.4 billion. $9.2 billion of that came directly from franchised locations, and they kept 82% of the revenue from those locations as opposed to just 16% from directly-owned locations.
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Which is to say, while consumers may be all about that Big Mac and fries, the powers-that-be at McDonald’s corporate are all about that prime real estate.
And it’s paying off big time.
Now you know!
