McDonald’s From Happy Meals To REITs

When you hear the word McDonald’s the first thing that comes to your mind is french fries, happy meal, milkshake, or even if I told you it is a financial thing you are going to think about Bigmac indicator. While not in your dreams you can imagine that McDonald’s is a real estate company with a wide portfolio of assets. Want to know how? Keep reading this article to know everything about the relationship that ties McDonald’s with the real estate business and its $40 billion dollars portfolio.

McDonald’s History

The whole story started with an order that came to a milkshake machine salesman named Ray Kroc with 4 of his milkshake machines that make 8 milkshakes in one go. Ray was curious as to who will need to make 32 milkshakes at one go and how is he even selling them. He immediately jumped in his car and headed to the place he was told to find a long line of people outside a burger joint called McDonald’s which had an average wait time of fewer than 5 minutes.

Ray stood in line and got one burger and it was awesome. After he finished his burger and met the McDonald brothers, Dick and Mac (the real Mcdonalds) they explained to him how their super-fast burger supply chain system was going as it was a modified kitchen that churned out delicious hamburgers in less than 30 seconds per burger. Each one of the sandwiches come with the same taste and flavor as the process was so efficient and standardized, and Ray was amazed by that.

Ray was actually a businessman with a mastermind in business and investment, he convinced the two brothers to sell their revolutionary Mcdonald’s outlet concept and expand it as a franchise model in no time. The deal was that he do selling and get new partners, and they lend him their brand name with a 0.5% cut of all sales. Over the next five years after signing the deal, Ray created 228 across America.

The beginning of McDonald’s REIT’s portfolio

Ray’s plan was to make McDonald’s the American family place of eating. All of that success didn’t bring Ray profits at all as he was in deep debt and had to put his home up for mortgage while the number of McDonald’s kept growing every day. And then when his smart lawyer had drawn his attention to something that changed the whole scene, as he noted to him that he is in the business of real estate, not the business of burger sandwiches. From that, Ray got the idea triggered to own the lands and the buildings of most locations while the franchise pay the rent.

They started leasing out to franchisees, charging a 20% markup but increasing it to 40%. They minted a lot of money from that idea. The brand also made an arrangement in the lease agreement that if the outlet was doing well, the markup raise. With that plan and strategy, the range kept growing and expanding to reach more than 35,000 outlets in more than 100 countries.

Get on Nawy and start making your own real estate investment portfolio and be the next Mcdonald’s.