Did You Know McDonald’s Is A $30 Billion Real-Estate Company?

McDonald’s - the name alone is enough to make our hearts Mcflurry…

Eh, hem. Ok.

You may think they made their fortune selling burgers and fries (which isn’t completely wrong). But that’s a mere part of their billion-dollar game.

So how do they have so much in their bank? The answer?

Real-estate. Who could’ve imagined?

Only trhe most cunning (now you) know about this billion-dollar side of McDonald’s. I’ll tell you all the their captivating history and how they’re paddling along today. But before that, let’s give you a little insight into McDonald’s huge realm.

Ready?

McDonald’s Statistics

There’s no doubt McDonald’s is the world's largest fast-food chains (Ray Kroc must be in eternal peace).

With the huge demand for their mouthwatering fast food, they serve almost 66 million people a day, which is like 1% of the world’s population. To meet the need, they must sell 75 burgers every second.

1.8 million employees work at McDonald’s worldwide. Even Philadelphia’s entire population is less than that.

McDonald’s has 37,855 restaurants worldwide now.

Fun facts - Burger King, Arby’s, Wendy’s, and Taco Bell combined don’t have as many restaurants. Also, McDonald’s launches more stores each year than there are a total of Chipotle locations across the world.

That is not it, though. We talked about burgers only. Their main game is real-estate. Without further ado, let us jump in shall we:

McDonald's Real-Estate Realm

McDonald's fate started changing when the Donald brothers partnered with Ray Kroc. While the brothers were busy maintaining the quality, Ray did the fieldwork. He tried to find people who would be interested in the business.

But unfortunately, he didn’t get enough luck in this. He couldn’t expand the way he imagined due to the lack of money. So, he had to open one store at a time.

This went on for a few years until Kroc finally got frustrated and hired Harry Sonneborn in 1956. He went through Ray’s books and, with a haw’s eye - spotted the problem.

Harry told Ray that he had his business model was wrong. It wasn’t a fast-food business nor a franchise he needed to make enormous money.

Know what that is?

Right, Harry advised Ray to start a real-estate business. That’s what Kroc needed to expand his business worldwide - just the way he wanted - explosively.

Sonnebor - showed them the path to success and later became the CEO and the president of McDonald's.

Sonneborn’s idea was to lease the entire site for the restaurant from the owner. This way - they managed to buy the land. Even better? They didn’t have to spend a fortune.

Later they’d sublease it back to the franchisee to manage the restaurant. The restaurant owner would pay them the lease money and monthly revenue. Doing this landed them a constant revenue stream, eventually, allowing them to secure a mortgage and buy both the restaurant and land.

Since the amounts were getting bigger, they needed something to look after their transactions too. So, they came up with Franchise Realty Corporation to take care of their transactions (another smart move).

Their corporation took off well and survived until today. It’s also known as McDonald’s real-estate. No surprise there, huh?

Following Harry’s strategy, Ray made enough money to buy the whole McDonald’s for $2.7 million in 1961.

Imagine what happened after Ray had full ownership of the company.

Within 2 years of owning McDonald’s, in 1963, Ray and Harry opened their 500th location (this is what happens when 2 geniuses work together).

Since then, the company has generated massive profits - making them one of the largest real-estate owners in the world.

Working together - they established a company with $30 billion worth of property and infrastructure. Let’s give a round of applause to the duo.

They’ve achieved so much together that they can easily rank next to companies like Starwood Capital or Lone Star Funds.

People might consider Ray the successor, but originally it was Harry. Ray worked hard but Harry’s idea built the McDonalds empire.

Let’s take a look at an example of how they make deals.

McDonald’s Franchisee Deals

After hearing about those achievements, you must be curious about the process as well. Me too.

Let’s say you want to open a restaurant in a mall. McDonald's will directly talk to the landowner and negotiate about paying an average of $90002/ monthly as rent.

If all goes well, they then ask you - the franchisee - to pay 8.5% monthly as revenue. Now, a McDonald's restaurant usually makes about $200,0003 monthly revenue. (whoa!).

And the required 8.5% generates about $17,000+ monthly, which you need to pay McDonald's. That’s some handsome amount of moolah right there.

These fees not only cover lease expenses, but also profits for McDonald's. As it goes: the rich get richer.

Other than that, McDonald's also earns from the franchisees as they constantly need to buy commodities like packaging, food, and everything else. Franchisees must buy these from McDonald's to maintain the quality and class.

The brand has about 6400 restaurants of its own, and the rest is owned by franchisees. So, a ratio of 18:82 for McDonald's and franchisees.

However, that 18% is enough for McDonald's to generate full 100% profits. So the rest of everything else is extra money - which they use to open new restaurants each year. The epitome of money, making money.

Last Words

You don’t need to have billions in capital to start your business.

Sometimes, an idea and the courage to jump into the field are worth much more than capital, and that’s what you need to produce billions.

Trust your gut, and don’t back off because you failed. Consider failure as your stepping stone to success and keep trying.

Who knows, you might turn out the next Ray Kroc!