McDonald’s should be said to be a business management company that understands commercial real estate and catering operations. Why do you say that?

1. First, look at McDonald’s business model:

McDonald’s: Get store opening information

McDonald’s restaurant stores have two forms, one is a directly operated store , directly-operated stores are stores invested and operated by McDonald's personally. McDonald's directly-operated stores make money from the price difference of the products.

One is a franchise store, looking for franchisees to open this store with it. As a franchisee, you need to invest in the early stage and pay royalties for the franchise, and then share the operating income from this store to McDonald's every year, which is the brand licensing fee. McDonald's will authorize you to use its trademarks and products, and give you a set of standardized operating procedures. As for franchise stores, they earn three parts of money:

The first part is the initial deposit. If you want to join, you must first give McDonald's a deposit.

The second part is the licensing fee, which is actually a percentage of annual sales. This number varies in different regions, with an average of around 4.5%. In other words, the authorized franchise store must pay 4.5% of the store's sales to McDonald's as a licensing fee every year.

The third part is more interesting, which is the majority of revenue contributed by franchise stores to McDonald's - rent. This is equivalent to McDonald's becoming a second landlord. It will first select an address for a store, and then make various preliminary preparations. If you want to join, you have to rent the store from McDonald's. Because the rent you can get and the rent McDonald's can get are completely different concepts, McDonald's can make a difference in the middle.

2. Let’s look at McDonald’s revenue structure:

This set of data comes from official data in McDonald’s 2016 annual financial report.

The first set of data is how much revenue each directly-operated store and franchised store contribute to McDonald’s. In 2016, McDonald's overall revenue was US$24.6 billion, of which directly-operated stores accounted for US$15.3 billion and franchise stores accounted for US$9.3 billion. In other words, more than 60% of McDonald's annual revenue comes from directly-operated stores, and less than 40% comes from franchise stores.

The second set of data is a comparison of the profits of directly operated stores and franchised stores. In 2016, the operating profit of directly-operated stores, which can basically be understood as pre-tax profit, was about 2.6 billion U.S. dollars; while that of franchise stores was about 7.6 billion U.S. dollars. In other words, about 3/4 of McDonald's profits come from franchise stores. In other words, although franchise stores account for only 40% of revenue, they account for the majority of profits.

In a directly-operated store, all food ingredients, store rent, staff wages, etc. must be counted as costs, so the profit will not be high after these are deducted.

In franchise stores, these are all borne by the franchise store owners, and McDonald’s collects rent and licensing fees. So the profit will be very high. The franchise store's revenue is 9.3 billion U.S. dollars a year, of which the rent is 6.1 billion U.S. dollars, the licensing fee is 3.1 billion U.S. dollars, and the remaining 100 million U.S. dollars is the deposit.

McDonald’s now has about 37,000 stores around the world, 31,000 of which are franchise stores. That is to say, 85% of McDonald’s are franchise stores.

Because rent accounts for the majority of McDonald's annual profits, some people would say that McDonald's is actually a real estate company. McDonald's fully utilizes the fact that McDonald's has a good brand and can drive surrounding benefits and even land prices. Through McDonald's site selection and follow-up operations, the land prices appreciate and then sublease them to others. It seems that this is no different from a real estate developer.

But looking back, if McDonald's did not seriously operate fast food products, did not make its own brand so good, and could not bring about an increase in popularity and an appreciation of the land in the surrounding area, then it would not be possible. No one will cooperate with it. McDonald's should be said to be a business management company that understands commercial real estate and catering operations.