Glamor Economics

Chapter 4

Chapter 1 Section 3 Is McDonald's operating fast food or real estate
The famous McDonald's is actually a real estate company, I am afraid many people will find it difficult to understand.If you understand its business operation mode, you will not be surprised.The success of McDonald's, in the eyes of economists, can be regarded as an excellent business case.

In 1974, McDonald's owner Ray?Crocker, who was invited to speak to the MBA class at Texas State University.After a rousing lecture, the students asked Ray if he would join them for a beer at their hangout, and Crocker happily accepted.

When the group got their beers, Crocker asked, "Who can tell me what I do?" Most MBA students thought Crocker was joking.Seeing that no one answered his question, Crocker asked again: "What do you think I can do?" The students laughed again, and the last bold student called out: "Everyone knows you, Crocker. They make hamburgers." Crocker laughed, "I expected you to say that." He stopped laughing and said quickly, "Ladies and gentlemen, I'm not actually in the hamburger business. The real business is real estate."

It was McDonald's chief financial officer Sang Naben who came up with the idea.Crocker has become a successful entrepreneur in the United States, famous at home and abroad, but Sauna, who is a first-class hero, hides behind the scenes.To this day, many McDonald's employees don't know Sauna himself.

Sang Naben established a real estate company outside of McDonald's, called a chain real estate company, which is responsible for finding suitable locations for opening stores and leasing land and houses from owners.After the chain company leases the land and storefronts from the owners with a 20-year contract, it then leases the storefronts to the franchisees to earn the difference.

Generally, the sauna rents the storefront from the owner at a price of 500 or 600 US dollars a month.When subletting out, he added 2% to 4%.When making the terms, he never allowed the landlord to add such a clause as "regular price increases year by year" in the lease.Of course, when Sang Naben rented the same property to the franchisee, he had already added everything such as the other party's insurance premiums and taxes.

In this way, as long as the leased franchisees can survive, McDonald's can earn at least 40% of the real estate profits.What's more profitable is that the price of goods has risen year by year, and the rent charged by McDonald's has also risen.McDonald's justifiably collected funds for the price increase, but the money it paid to the original owner remained unchanged according to the contract.

According to the analysis of professionals in the United States, McDonald's has been using the business method of "making money in two completely different directions".In addition to the privilege income of 4% of sales collected through franchising, when the restaurant business reaches a certain level, each store must also pay a certain percentage of turnover to McDonald's, which is called "value-added rent".

In this way, McDonald's not only earns a certain percentage of profits, but also can control the franchisee's complete attachment to the headquarters through real estate.According to statistics, 1/4 of McDonald's income comes from directly-operated stores, 3/4 comes from franchise stores, and 90% of the total income comes from rent.

It can be seen that although McDonald's is a world-renowned fast food company, its headquarters basically does not specifically operate fast food business.What McDonald's headquarters does the most is to figure out which location will be the most crowded place in a city in the future.After the argumentation is completed, buy the fancy land and build a fast food restaurant, then find a franchise partner, lease the fast food restaurant to them, and charge them a franchise fee and the rent of this commercial land.The choice of McDonald's store location is also a crucial condition.Shi Wenzhe, president of McDonald's East China region, expressed it this way: The reason why McDonald's opened a family is the first location, the second is the location, and the third is the location.

The first branch opened by McDonald's in China is located in the prime location at the junction of Dongdan Avenue and Chang'an Avenue in Beijing.Later, when Wangfujing was rebuilt, McDonald’s made a lot of money just because of the land compensation for the demolition. At this time, people knew that McDonald’s had a sharp vision for investing in real estate.

Today's McDonald's has summed up a set of scientific and reasonable fast food management procedures, store layout rules, and secrets of store location selection, and has used the famous McDonald's brand to expand by franchising, which has become a business to a large extent. real estate business.McDonald's, which has tens of thousands of prime locations in more than 100 countries around the world, is a master of real estate operations.

(End of this chapter)