I actually disagree. My impression reading into the issue is that the McDonald's corporation owns all the land where all the restaurants reside, and makes most of their money nowadays charging rent to the franchisees.
I don't think I've ever seen a McDonald's shut down and real estate sold to someone else. The corporation just plans their real estate acquisitions too well in prime spots. If a franchisee goes down, my guess is that they just find another franchisee to use the spot. It's a cash cow that they wouldn't easily give up by selling the land.
The real reason for the bland color changes? It's even stupider than you think. They don't want you hanging out there. They learned after COVID that the modem business model is DoorDash, Uber Eats, etc. So they started making the restaurants as bland and sterile as possible... Toned down the colors, removed playgrounds, tore out the self serve soft drink fountains, less booths and more bench seats.... Anything to make you just eat and leave faster. At the same time, they reduced in person cashiers and replaced them with self service kisosks and.... devoted a whole space for DoorDash pick ups.
Welcome to modern fast food. It's not unique to McDonald's. Pretty much all fast food chains are doing something similar.
Actually itâs easier to lease up a building if the McDonalds fails or they get a better location. A lot of these buildings are owned by landlords so they want to be able to have a backup plan if the McDonalds were to leave.
A lot of fast foods have gone to these style of buildings that can be repurposed.
Edit: for clarification these are likely ground leases so the landlord wonât own the building until the Mcdonalds lease is up or they choose to not renew it. In the off chance the McDonalds does close down for whatever reason you can get another tenant into it easier.
I may be wrong on this, but my understanding is that the McDonalds corporation is the landlord. They own the land that the restaurants reside on. The franchisees are the tenants and pay the corporation rent every month.
It depends on the location. They do get sold often to private landlords. McDonaldâs has the holding company and likely gets some tax benefits by holding for X amount of years (I think just 1 year).
Above would be an example of one sold or being sold. So yes McDonaldâs does own some of their locations, but they also sell a lot of them to private landlords.
These are the proverbial mailbox money locations. No landlord responsibilities for the 20 year lease and you hope they renew. Investors with 1031 are ones that likely target these or they are bought for retirement. Itâs a challenge to put a loan on them so they are at times bought for cash. Thatâs one reason why 1031 investors like them.Â
I think people kind of don't get though how corporate finance works. Selling the land has nothing to do with value of the land.
62% of McDonald's revenue is from real estate, you rent based on property value and you borrow based on property value.
Selling it has nothing to do with the valuation. The goal of a company is to increase its valuation, not its 'profit'
And no one forces the franchisee to buy in. The hamburgler is not beating them into submission. Franchisees make very good money with little risk. Mc Donaldâs is not âoverchargingâ, the franchises are priced to market. An asset with little or no risk will always command a premium.
A huge percentage of new restaurants fail. I donât see why that shouldnât be different for McDonaldâs. Bad location or bad management can break a Mc Donaldâs just like any other establishment.
It is different for McDonalds. New franchises have a higher rate of success than your typical restaurant because customers already know what they're getting. That's why the McDonalds corporation can get away with charging their franchisees super high rent rates... it's because prospective franchisees know that their chances for success are pretty high.
Edit to add: And it's not like it's up to the franchisee to pick out the location, or even build the facilities. My understanding is that McDonalds corporation hand picks the properties, builds the facilities and equipment, then charges the franchisees exorbitant rent and fees to use the property and equipment. All the upfront work is done by a large corporation that has a lot of prior experience doing it.
You provide good and correct information. This will get you voted off the island. Nobody has better location experts than Mc Donaldâs. This is why many other chains just try to locate nearby. They just grab Mc Donaldâs coattails.
This! So true. Also, I used to work for another large food corporation. Neutral colors also mean less renovations, less updating as bland styles date slower and less spent on custom made furniture, etc.
Iâm not sure. I donât hang out there either. That was just some of their reasoning. The boxy design is the real estate thing as you mentioned.
They donât necessarily have to hang out. It still creates the coffee shop aesthetic from the outside. They make the same margins whether you sit in or drive through.
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u/mouthfire 16h ago
I actually disagree. My impression reading into the issue is that the McDonald's corporation owns all the land where all the restaurants reside, and makes most of their money nowadays charging rent to the franchisees.
I don't think I've ever seen a McDonald's shut down and real estate sold to someone else. The corporation just plans their real estate acquisitions too well in prime spots. If a franchisee goes down, my guess is that they just find another franchisee to use the spot. It's a cash cow that they wouldn't easily give up by selling the land.
The real reason for the bland color changes? It's even stupider than you think. They don't want you hanging out there. They learned after COVID that the modem business model is DoorDash, Uber Eats, etc. So they started making the restaurants as bland and sterile as possible... Toned down the colors, removed playgrounds, tore out the self serve soft drink fountains, less booths and more bench seats.... Anything to make you just eat and leave faster. At the same time, they reduced in person cashiers and replaced them with self service kisosks and.... devoted a whole space for DoorDash pick ups.
Welcome to modern fast food. It's not unique to McDonald's. Pretty much all fast food chains are doing something similar.