Published: 01-04-23Category: Insight
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Most people see McDonald’s as a fast-food chain with great food and reasonable prices. But this staple of American culture is actually more than that: It’s one of the world’s largest real estate companies.
The fast-food chain owns nearly twice as many properties as its competitors or any business of a similar nature. Instead of leasing retail space out from other property owners, the company purchases its own units, then leases them out to its franchisees, who find the opportunity attractive thanks to the plentiful awareness around McDonald’s brand name.
Let’s take a look at how McDonald’s went from a small family-owned operation to a billion-dollar company.
A Brief History of McDonald’s
Mac and Richard McDonald opened the first McDonald’s restaurant in San Bernardino, California, in 1940. The restaurant first operated as a drive-in with a large menu, but it wasn’t yet known for its fast service.
In 1948, the brothers re-envisioned the business to produce large amounts of food quickly and cheaply. At the time, they called it the “Speedee Service System,” only selling hamburgers, potato chips, pie, and drinks. They replaced their drive-in with a self-service counter to save on labor costs.
In 1954, appliance salesman Ray Kroc visited McDonald’s to see why the brothers needed so much equipment. Soon after, he became a franchise agent for McDonald’s and launched what is known today as the McDonald’s Corporation. After growing tired of the brothers’ rules and regulations surrounding their franchising, Ray Kroc bought McDonald’s from the brothers in 1961.
Ray Kroc grew McDonald’s into a franchise with specific standards for quality that ensured that customers received the same item no matter which franchise they visited. To do this, he launched a training program called Hamburger University, a program that aimed to keep McDonald’s quality the same around the world.
How McDonald’s Became a Real Estate Company
McDonald’s was founded as a franchise, meaning each McDonald’s restaurant was owned and operated by an independent contractor who could make their own decisions about the business. This model proved successful but meant that McDonald’s had no control over the locations, the design of buildings, or the length of the lease.
This was problematic, as McDonald’s was unable to control its own growth, and lease terms were often unfavorable, making it difficult to expand. A number of attempts were made to create partnerships with real estate developers to build on their own properties.
These attempts were often unsuccessful, as developers wanted the flexibility to lease to other companies. This led McDonald’s to shift to a different approach: becoming a real estate company.
The company was able to invest in large amounts of real estate and lease it to its franchisees with exclusive long-term contracts, giving McDonald’s complete control over the locations and designs of its buildings as well as the lease terms.
This not only ensured long-term growth for both the company and the franchisees but also universally enforced McDonald’s quality standards no matter the location: If a franchisee were to go rogue, McDonald’s could simply cut their lease and repossess the property.
The Pros of Owning Real Estate
Owning real estate is often looked at as a long-term investment with long-term profit. Whereas a restaurant’s revenue only lasts as long as it can stay in business, real estate has the potential to generate income for decades.
Tenants of your real estate investment can come and go, and barring any natural disasters that destroy your property, your investment is likely to continue producing revenue for you so long as it’s occupied.
Ray Kroc understood this when he transformed McDonald’s into a real estate business: While a restaurant’s revenue may fluctuate depending on the local economy and consumer spending, the real estate income stays steady so long as a majority of your units are occupied. Owning real estate is also a scalable investment and one of the ways that McDonald’s is able to make so much money.
As the company grows, it can expand on the number of properties it owns and leases, ensuring that it always has plenty of room to grow without sacrificing control over how the franchisee operates their location.
This contrasts with restaurant owners who lease their space out from real estate owners, as the growth of their business can be hampered by the owner’s lease terms.
McDonald’s as One of the Biggest Real Estate Companies
McDonald’s is one of the biggest real estate companies in the world. It owns or leases more than 38,000 restaurants in over 100 countries and has a portfolio worth an estimated $30 billion. The company’s golden arches are one of the most recognizable logos in the world, and its franchisees operate under fixed rates set by McDonald’s.
The company has been criticized for its environmental impact, labor practices, and unhealthy food. However, it has also been praised for how its economic success and franchise model made it one of the most valuable brands in the world.
McDonald’s Real Estate Process
When opening a new location, McDonald’s will first find an ideal property to buy. This is then leased to the company at a rate equal to the market rate of interest, as well as a rental fee. The real estate is then leased to the franchise owner, who pays rent based on a percentage of their sales.
The franchisee can control the lease terms and grant themselves more room for profitable expansion. McDonald’s, on the other hand, can keep a close eye on all of the franchises, ensuring that its brand and standards are applied across all locations.
This is a win-win situation for McDonald’s in a couple of ways: It can have a direct hand in the success of the franchisee, leading to higher revenue based on increased sales, and it also gives the company a lot of leverage over its franchisees.
If, for example, a franchise consistently underperforms and refuses to adapt to corporate quality control changes, McDonald’s can revoke that franchisee’s lease.
If this happens, the franchisee must vacate the location. With the ability to essentially shut them down, McDonald’s has few problems with getting the franchisee to do what the company wants.
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FAQs
McDonald's is one of the biggest real estate companies in the world. It owns or leases more than 38,000 restaurants in over 100 countries and has a portfolio worth an estimated $30 billion.
Does Mcdonalds always own the real estate? ›
McDonald's only owns and operates about 15% of locations directly. The remainder is run by franchisees. McDonald's real business is acting as the landlord of its franchisees. It sets the ground rules and provides the layout for success.
What company owns the most real estate in the world? ›
Largest Real Estate Companies Research Summary
The largest real estate company in the world is Keller Williams Realty, with a revenue of $381.4 billion. As of 2023, the global real estate industry has a market size of $4.4 trillion. Over 5.8 million housing transactions were completed in the U.S. in 2022.
Do McDonald's franchisees own the property? ›
While the brand has sold more than one billion hamburgers to customers around the world, 85% of its stores are owned by franchisees. Franchisees pay to use McDonald's brand name, its proprietary processes and trademarked menu items, but unlike other franchises, McDonald's owns the land the stores are built on.
Is McDonald's the biggest business in the world? ›
The largest restaurant companies in the world are primarily chain operations with an international presence. McDonald's Corporation is the largest fast-food chain. As of 2022, Starbucks is the largest restaurant company by revenue, with 35,000 stores globally.
What company owns the most real estate in the US? ›
The largest real estate company in the USA is Coldwell Banker. Founded in 1906, Coldwell Banker has over 100 years of experience buying and selling homes that they share with the people they work for. It has a total of 3000 offices and even exists in more than 49 countries.
Where does McDonald's make the most money? ›
While its restaurants serve food, the company makes most of its earnings through real estate. It creates revenue through franchise agreements and leasing its restaurants to owners at huge markups over the real estate market value for the property.
What ownership does Mcdonalds have? ›
Approximately 93% Of McDonald's restaurants worldwide are owned and operated by independent local business owners. The status of franchising in the markets where we currently do business is described on the specific pages identified by market below.
What assets does McDonald's own? ›
McDonald's total assets for the quarter ending March 31, 2023 were $52.014B, a 2.23% increase year-over-year. McDonald's total assets for 2022 were $50.436B, a 6.35% decline from 2021. McDonald's total assets for 2021 were $53.854B, a 2.33% increase from 2020.
What is the largest real estate market in the world? ›
Among the constituents of the MSCI Global Annual Property Index (Unfrozen; Weighting: Market Size) (see Exhibit 5), the United States remained the largest market in the index with an increase of 162 basis points in 2021.
Here are the top real estate companies in the U.S.:
- Redfin.
- Re/Max.
- Coldwell Banker Realty.
- Keller Williams Realty.
- HomeServices of America and Berkshire Hathaway HomeServices.
- Sotheby's International Realty.
- Compass.
- eXp Realty.
Donald Bren, chair of Southern California-based Irvine Company, is the wealthiest American real estate titan, just cracking the top 100 (#97) with a $17.4 billion fortune, an increase of $1.2 billion from last year.
How much money does a McDonald's franchise owner make? ›
How Much Do the Franchise Owners Make?
| Initial investment (midpoint) | % Profit margin of median franchise sales | Estimated Profits |
|---|
| $1,813,897 | 10% | $290,800 |
| 15% | $436,200 |
| 20% | $581,600 |
Mar 7, 2023
Most McDonald's franchise owner/operators have entered the corporation by purchasing an existing restaurant. To open a McDonald's franchise, however, requires a total investment of $1-$2.2 million, with liquid capital available of $750,000. The franchise fee is $45,000.
How much does it cost to own a franchise of McDonald's? ›
McDonald's franchisee applicants must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee. Those looking to launch a new McDonald's franchise can expect to shell out between $1,314,500 and $2,306,500. Existing franchise operations can cost upwards of $1 million.
Who is McDonald's biggest customer? ›
The McDonald's target audience is mainly lower to middle class consumers, who are interested in fast, cheap and convenient food. During the pandemic, the famous McDonald's drive-thru became even more popular. In 2020, the average drive-thru purchase took 349 seconds.
What made McDonald's successful? ›
McDonald's success today is largely attributed to its franchising model, consistency, and innovation. Through their franchising model, they were able to enjoy rapid growth.
Is McDonald's number 1 in the world? ›
List of the largest fast food restaurant chains
| Country of origin | Name |
|---|
| 1 | United States | McDonald's |
| 2 | United States | Subway |
| 3 | United States | Starbucks |
| 4 | United States | KFC |
103 more rowsIstana Nurul Iman Palace, the official residence of the Sultan of Brunei, Hassanal Bolkiah, is the largest house in the world, spread over 2.15 million square feet.
What is the worlds largest commercial real estate company? ›
CBRE Group runs the world's largest commercial real estate services and investment firm. Its business involves property sales, mortgage origination and servicing, property management, and other services for investors and occupants.
The Most Popular Thing at McDonald's Is…
Ever since the first McDonald's menu from when the chained opened in the 1950s, french fries have been a star. The famous Golden Arches sell upward of 9 million pounds of fries per day!
How is McDonald's successful globally? ›
Fries and shakes were easier to make and consume, which made them very popular. In essence, they made a franchise-worthy menu even if it wasn't their original intension to franchise their restaurant. The standardised system they established worked in their favour and contributed to their success.
Why is McDonald's so profitable? ›
The company makes money by leveraging its product, fast food, to franchisees who have to lease properties, often at large markups, that are owned by McDonald's. Franchisees are lured by the impressive margins that make McDonald's franchises an almost guaranteed moneymaker.
Who owns the most stock in McDonald's? ›
McDonald's Owners and Largest Shareholders
- The Vanguard Group, Inc. ...
- SSgA Funds Management, Inc. ...
- BlackRock Fund Advisors. ...
- Wellington Management Co. ...
- Geode Capital Management LLC. ...
- J.P. Morgan Investment Management. ...
- Joseph M. ...
- Ian Frederick Borden.
Richard McDonald (February 1909 – July 14, 1998) and Maurice McDonald (1902 – December 11, 1971), together known as the McDonald Brothers, were American entrepreneurs who founded the fast food company McDonald's.
Does Coca Cola own McDonalds? ›
Coca-Cola does not own Mcdonald's however the relationship and ultimate partnership between the two companies has been long and successful. Coca-cola and McDonald's have worked together since 1955 when McDonald's was first getting started and when McDonald's needed a beverage distributor.
How much is McDonald assets worth? ›
Interactive chart of historical net worth (market cap) for McDonald's (MCD) over the last 10 years. How much a company is worth is typically represented by its market capitalization, or the current stock price multiplied by the number of shares outstanding. McDonald's net worth as of June 09, 2023 is $209.38B.
How much debt does McDonald's have? ›
Total debt on the balance sheet as of December 2022 : $48.69 B. According to McDonald's latest financial reports the company's total debt is $48.69 B. A company's total debt is the sum of all current and non-current debts.
What is the asset value of McDonald's? ›
Total assets on the balance sheet as of December 2022 : $50.43 B. According to McDonald's latest financial reports the company's total assets are $50.43 B. A company's total assets is the sum of all current and non-current assets, such as inventories, cash and cash equivalents, properties and equipment.
Who sold the most real estate? ›
Caballero holds a plaque reflecting his 2020 Guinness World Record title. Real estate pro Ben Caballero is breaking records yet again. He individually sold 6,438 homes in 2020, topping his own previous world record in sales. That sales record equates to moving $2.46 billion in real estate in just one year alone.
The official residence of the Sultan of Brunei, Hassanal Bolkiah, Istana Nurul Iman Palace is by far the world's biggest home with its 2.15 million square feet of space.
What is America's largest estate? ›
Virtual Tour: Biltmore House—America's Largest Home.
Who is the richest woman in the world? ›
There are 337 women on the 2023 World's Billionaires list, including a familiar face as the world's wealthiest. T he reign of Françoise Bettencourt Meyers continues.
Who is the richest black man in real estate? ›
Roy Donahue "Don" Peebles (born March 2, 1960) is an American real estate entrepreneur, author, and political activist. Peebles is the founder, chairman and Chief Executive Officer of the Peebles Corporation, a real estate company. Washington, D.C., U.S.
Who is No 1 richest person in the world? ›
Bernard Arnault
Billionaire, businessman and the chairman and chief executive of LVMH (LVMUY), Bernard Arnault holds the crown as the richest person in the world. According to Forbes, Arnault has a fortune of $217.9 billion.
How much does 1 McDonald's make a year? ›
The average revenue per location of ALL locations is $2.9 million. The average franchisee today owns 8 locations.
Can you sell your McDonald's franchise? ›
Many franchisors, including McDonald's USA, must approve the transfer of the franchise from the buyer to the seller. Franchisors insist on buyers who have sufficient assets to finance the purchase.
How much does the average McDonald's make a month? ›
$29,376 is the 25th percentile. Salaries below this are outliers. $56,795 is the 75th percentile. Salaries above this are outliers.
How much does a Chick-fil-A franchise make in a year? ›
On average, a Chick-Fil-A franchise makes $8,072,000 in sales per year.
| Mall units | Non mall units |
|---|
| Revenue | $2,694,009 | $8,580,978 |
| Restaurants | 182 | 1,985 |
May 22, 2023
McDonald's has the franchise fee of up to $45,000, with total initial investment range of $464,500 to $2,306,500.
While operating a Chick-fil-A restaurant requires a relatively modest $10,000 initial financial commitment ($15,000 CAD in Canada), it requires a holistic commitment to own and operate the business in a hands-on manner.
How much is a Starbucks franchise? ›
The average licensing cost required to open a Starbucks is a $315,000 licensing fee and a net worth requirement of at least $700,000.
Do franchise owners make money? ›
On average, typical franchisees make about 80,000 dollars a year, not considering tax and expenses. Only a small part of franchise owners make over $200,000 annually, more than fifty percent of franchisees make about $50,000. The industry you're operating in impacts the amount of profit as well.
How much does a KFC franchise cost? ›
Kentucky Fried Chicken Franchise Cost and Franchise Requirements. The franchise fee to become a KFC franchise owner is $45,000, with an estimated startup costs totals ranging between $1.2 million and $2.5 million. A 5% royalty fee on gross monthly receipts is paid to the company.
Who is the largest real estate franchise? ›
About Keller Williams
Austin, Texas-based Keller Williams, the world's largest real estate franchise by agent count, has more than 1,100 offices and 191,000 agents. The franchise is also No. 1 in units and sales volume in the United States.
What is the 7th largest real estate company in the world? ›
Rankings by Total Assets
| Rank | Profile | Region |
|---|
| 7. | Greystar Real Estate Partners | North America |
| 8. | Wheelock and Company | Asia |
| 9. | Guangzhou R&F Properties Company | Asia |
| 10. | The Related Companies | North America |
84 more rowsOur annual ranking of America's largest corporations
| Rank | Company | 500 rank |
|---|
| 1 | McDonald's | 107 |
| 2 | Yum Brands | 213 |
| 3 | Starbucks | 227 |
Ten-X is the world's largest, online commercial real estate exchange. Our platform empowers brokers, sellers and buyers with data-driven technology and comprehensive marketing tools to expand market visibility and decrease time to close.
Who is the biggest real estate investor in the US? ›
Donald Bren. Donald Bren is one of the greatest real estate investors in American history. He is currently the wealthiest real estate investor in the country and has a net worth of $15.3 billion.
What is the largest real estate website in USA? ›
Real Estate Website Statistics (Editor's Picks)
Zillow is the largest real estate website in the United States, ranked by visitor traffic. In the last year, Zillow averaged 60 million monthly visitors.
The Biggest Landowners in the World
| Rank | Name | Locations |
|---|
| 1 | King Charles III and the British Royal Family | United Kingdom, Canada |
| 2 | Catholic Church | Worldwide |
| 3 | Inuit People of Nunavut | Canada |
| 4 | Gina Rinehart | Australia, United States |
21 more rows1. The Penthouse at Central Park Tower, New York — $250 Million. Call it a coincidence, but the most expensive home in the world is perched atop the world's tallest residential building on New York City's Billionaires' Row.
Who owns McDonald's? ›
McDonald's Corp (NYSE:MCD)
Institutional investors hold a majority ownership of MCD through the 70.58% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Restaurants industry.
Is McDonalds number 1 in the world? ›
List of the largest fast food restaurant chains
| Country of origin | Name |
|---|
| 1 | United States | McDonald's |
| 2 | United States | Subway |
| 3 | United States | Starbucks |
| 4 | United States | KFC |
103 more rowsThe Most Popular Thing at McDonald's Is…
Ever since the first McDonald's menu from when the chained opened in the 1950s, french fries have been a star. The famous Golden Arches sell upward of 9 million pounds of fries per day!
Who is McDonalds biggest customer? ›
The McDonald's target audience is mainly lower to middle class consumers, who are interested in fast, cheap and convenient food. During the pandemic, the famous McDonald's drive-thru became even more popular. In 2020, the average drive-thru purchase took 349 seconds.
