Its 1:52 AM, and I left my home on a Friday night and drove to a McDonald’s location near to my home. At 1:54 AM I drove into McDonald’s and proceeded to the drive through. There were four cars in front of me. At 1:55 AM I gave my order, two(2) Fish Fillet sandwiches. While the 4 cars in front of me were served, I reached the first stop. The payment section. I paid by debit, and immediately drove to the next window where my two fish fillet sandwiches were promptly given to me. It was 1:56 AM. With four cars in front of me, it took 2 minutes, or on average 24 seconds per customer from start to finish for our orders.
That was the original idea of the two McDonald’s brothers who pioneered the fast food system that was to become known internationally as McDonald’s. Originally set to 30 seconds from start to finish for an order, at least from my experience, it just seemed to get faster.
Ray Kroc, a failed milkshake machine salesman who’s largest order of milkshake machines came from the McDonald’s brothers, was awestruck by this system, and by tactics not necessarily to the liking’s of the two McDonald’s brothers, he ultimately bought over the name and the restaurants and gained full control of that system.
However, that’s where the money stops. Even with multiple stores, much money was not coming in and debts were beginning to pile up.
On the advice of his financial backer, Ray Kroc changed tactics on how his restaurant was to function. Instead of having the new franchises purchase the land on which the new restaurants were built, The McDonald’s Corporation purchased the land, built the building, and then leased that piece of real estate to new franchisees.
McDonald’s was now into real estate, and the burger sales were just a means to an end. It is real estate, not food, that provides the main source of income to the corporation. Every month, franchisees have to pay leasing fees for the building, and then royalties on the food sales.
If these rents are multiplied by the thousands, then millions of dollars every month will begin to flow. At the time this article was written, McDonald’s was worth 134.46 Billions dollars with over 37000 locations.
In the major cities of the world, at almost every major intersection, the salient yellow “M” of the McDonald’s corporation can be seen. At every prime location for real estate reasons, the McDonald’s corporation makes its presence by buying out/ owning/ leasing land or buildings and the sub-leasing to franchisees.
The McDonald’s Corporation makes most of its money from real estate transactions, not burger sales.