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Since its inception, McDonald’s has been one of the most profitable companies in the world. In fact, the brand is so iconic that its famous golden arches logo is one of the most recognizable symbols of all time, along with the crucifix and the Nike logo, as reported in Mashed.
As sure you already know, McDonald’s is a fast food restaurant that sells inexpensive hamburgers to people of all socioeconomic levels. The company has expanded tremendously in recent decades and is almost always at the forefront when it comes to research and innovation in the food industry.
Despite all this, many people still wonder how a hamburger company can be so financially successful, even in times when people don’t have enough money to eat out. The answer to this concern is that McDonald’s not only has income from the dishes it serves, it is also a large real estate business.
When you look at the company’s multi-million dollar earnings, a large chunk of it comes from real estate. And is that McDonald’s is actually one of the largest real estate companies in the world, owning more than $ 28 billion in land and buildings.. It also rents land and buildings at around 15,000 of its branches.
McDonald’s essentially controls all of the real estate on which its restaurants are built or set up, then rents its sites to franchisees at a considerable profit margin.
The amount McDonald’s charges its franchisees for the monthly rent depends on how much they have invested, but leases usually range between 8.5% and 15% of the investment. According to McDonald’s official website, the investment to open a franchise ranges between $ 1.8 million and $ 2.2 million.
This ingenious business concept came from the mind of Harry Sonneborn, the first appointed president and CEO of McDonald’s Corporation.
By working closely with Ray Kroc, founder of McDonald’s, Sonneborn proposed that the company own the land where the restaurants are located in order to make money from the leases paid by the franchisees..
That is to say that, in this way, the company obtains money from the sale of hamburgers and all its other products, as well as from the rent of its restaurants to franchisees, so if the sales of the hamburgers fall, it will still have fixed income from rentals, which also tend to increase over time.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.