McDonald’s, a big food franchise known for its hamburgers earns more than domino’s, Burger King, and many more franchises business but how?
There are a few ways from where McDonald’s earns.
- By selling fast-food.
- By lending franchises to individuals.
- Through real-estate.
Yes, I know that you are shocked to know that this big fast-food giant earns through real-estate as well. But the question is how? We’ll get to the core of this, but let us see their history first.
Mcdonald’s was started by the McDonald brothers in 1948 in California. They used to buy appliances for their small hamburger shop from salesman Ray Kroc, who was known for shake mixers but in 1954 when he visited their shop, he gave them the simple idea how they can earn from the small restaurant too.
McDonald’s brothers were so stubborn that they did not accept the new ideas. But getting to know Ray Kroc they realized what if they cut down the prices of the burgers and self-service counters allowed them to work even without waiters. This is how they started to compete in the market and further getting into the real estate business.
How McDonald’s Earns by Selling Fast-Food?
The biggest reason behind McDonald’s success is its diversified menu around the globe.
They have something for everyone. From fries to burgers and shakes to ice creams, you can get anything from McDonald’s. But one of the main reasons behind their success is their efforts towards children’s meals, that is the happy meals.
Hearing the name Mcdonald’s what comes first in mind is the big burger franchise with their McDonald’s happy meals which includes toys for the children and many more burgers; one of them is Big Mac which is universally famous.
But, getting to the real point that is not their real earning method, how they actually earn is through buying lands and putting them on a lease that we can say is a rental process.
Mcdonalds Franchise Model
Mcdonalds is a very large food franchise that in every second, they sell around 75 burgers throughout the world. So what about in a minute, that is around 4500. Isn’t 4500 a big amount they sell in a minute? This is why Mcdonald’s is known everywhere.
Do you know there are around 39,000-40,000 restaurants of Mcdonalds exist and only 5% of them are company-owned? I know you’ll be thinking what do company-owned means here,
They have only around 5% of the restaurants under them, which means they only operate 5% of the restaurants and the rest of them are operated by the franchise owners.
But again you guys are thinking if the rest of the franchises are operated by other company owners then how the real franchise owners are earning,
Again You will be shocked to know that the real owners get rent from the rest of the franchise owners excluding that 5%.
They buy lands and give them on lease. So for them, it is easy to operate the restaurants and what they are concerned about is rents according to their monthly sales and royalty which is known as their revenue system
How Mcdonald’s earn from real estate?
As said by former Mcdonald’s CFO Harry J.Sonneborn “We are basically not in the food business. We are in the real estate business. The only reason why we sell burgers for 15 cents is that they are the greatest producer of revenue from which our tenants can pay us rent”
Mcdonalds rather than selling their franchises and making money from huge royalties they choose another method or we can say their real trick to get into real estate.
What they actually do is they bought some properties and putting them on a lease, what really happens here is they get a share of your shop’s gross sales. Their main method is that they buy properties and sell hot properties and getting rents from the franchised properties
Financial record for the year 2019
Mcdonalds earn a profit of around $6 billion from $21 billion. That is a huge profit isn’t it, almost 28.5% profit is a big share from the total of the sale.
$9 billion from the franchises they own but almost around $8 billion are their direct expenses
But how they get a $6 billion share of profit, the fees they get from the franchises
How can one open Mcdonald’s in 2020?
Ever come in mind to own Mcdonalds, This is how you can-
- You must have $250000-$500000 of your own
- Must have the extra financial stability to borrow up to $1700000
- $45000 for security in the starting
- Nine-month training program on how to run a restaurant in Mcdonalds way
- 20 year contract for a specific place
- To pay 4% of your monthly sales and rental charges based on your monthly sales
- You need to construct the building and interior according to them.
- Now you are ready to run a restaurant named Mcdonalds
What comes to mind is Mcdonald’s earns through selling their hamburgers but how they actually earned their real earnings is through real estate. That is a fact that very few people know. And now, you are being counted in those very few.