According to the fascinating article “McDonald’s Secret Sauce: Commercial Real Estate” from QuickLiquidity.com, McDonald’s – the world’s largest chain of hamburger fast food restaurants – has “more retail storefronts than Burger King, Wendy’s, Taco Bell and Arby’s combined, (serving) about 75 hamburgers every second!” Yet, as astonishing as these accomplishments are, “McDonald’s makes more money in real estate than from hamburgers? In fact, McDonald’s has nearly $30 billion in real estate holdings, making it one of the largest commercial real estate owners in the world.”
“Compared to the largest real estate investment firms in America, McDonald’s would rank next to companies such as Blackstone, Starwood Capital, Lone Star Funds and Brookfield Asset Management.” In the late-50’s, the brilliant strategist and McDonald’s CEO Harry Sonneborn came up with the idea to lease each McDonald’s site (including the land) to the franchisee. The plan was so successful, Sonneborn started the Franchise Realty Corporation for McDonald’s, which eventually allowed Ray Kroc to buy out the McDonald brothers in 1961.
“The genius of what Kroc and Sonneborn created was a consistent low-risk to return on investment ratio. While they rely on franchisee revenues to maintain real estate debt, their brand has created a consistent customer base which has generated McDonald’s massive profits.”
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