Fast food chain or Real estate???
Million Ray Kroc, the founder of McDonald’s once asked a group of MBA students to tell him what business they thought he was in. The Burger business of course, they told him. No he replied, “My business is real estate.”
McDonald’s serves more than 69 million customers daily in over 100 countries, and they all love the wide variety of Products-
Burgers, Chicken Products, French fries, Soft drinks, Wraps etc.
This post will let you understand How McDonald’s achieved success as a real estate company?
In 1950 CFO Harry Sonneborn recognized that the real values for McDonald’s would be found in its real estate, not its hamburgers. Therefore this model is also called Sonneborn model. Sonneborn Proposed that McDonalds should venture into real estate business and charge rentals for the franchisees. Sonneborn proposition had led to one more revenue stream from McDonalds. Approximately 93% of all McDonald’s locations worldwide are franchises. The Margins of the McDonalds are such that it makes McDonalds franchises an guaranteed money maker.
Almost 80 years later the enterprise has 40k Restaurants globally that serve 69 million customers in over 100 countries in a day. IN 2022,Mcdonalds once again ruled as one of the most valuable fast-food chains around the world with a valuation of around 40billion$ just behind Starbucks. McDonalds has consistently been among the leaders who rule this Segment along with KFC, Domino’s Pizza, Starbucks and Subway.
***How does Previous Year Financial Figure show?
Its total Property, Plant and Equipment shows $38,273million$ as on 31/3/21.
McDonalds has a track record of Paying Dividends for 46 Consecutive years.
McDonalds operating margins are around 40%(usually much more than others in industry),Because some food and drinks are quite inexpensive to prepare, and then sold for a few times their Price.