Say you want to open your own McDonald’s branch. You pass their financial vetting, get on their waiting list, go through McDonald’s boot camp, then McDonald’s corporate builds a new McDonald’s restaurant on land they own (or acquires land before doing so), then they lease the land to you, sell you all the equipment for the kitchen, the furniture for the dining area, and all the food and other supplies you need.
The prices are set according to their rules, the food is provided to you by them, the recipes are all very simple (you learn them at boot camp), all you do is hire and train the staff and operate the restaurant. You pay McDonald’s for everything, your profits are entirely based on sales, they own the land your restaurant sits on. If you decide you want out they’ll find someone else to take over.
Just as residential real estate has skyrocketed in price, so has commercial real estate (even more so). If you decide you’re out and McDonald’s corporate decides that location is no longer profitable then they sell the property with a large return on their investment.
Single establishment commercial space may be pretty expensive still but there’s an awful lot of bigger buildings starting to feel the burn from work from home. I wonder how many of the big buildings would have to fall before the commercial real estate industry takes a serious dive and they lose a crap ton of bank?
A lot I think. McDonald’s doesn’t just build restaurants anywhere. They conduct rigorous market analyses to determine where they want to buy real estate. They don’t buy unless they expect a place to be growing.
They have the benefit of all the data from their restaurants. They can compare that with publicly available data from local city councils. This is one of the reasons big companies seem to be immortal. They just have so much data, experience, and understanding of exactly how the business works at a local level.
Of course what they can’t anticipate (and few can) are global economic slowdowns and other major trends or even sudden events.
Say you want to open your own McDonald’s branch. You pass their financial vetting, get on their waiting list, go through McDonald’s boot camp, then McDonald’s corporate builds a new McDonald’s restaurant on land they own (or acquires land before doing so), then they lease the land to you, sell you all the equipment for the kitchen, the furniture for the dining area, and all the food and other supplies you need.
The prices are set according to their rules, the food is provided to you by them, the recipes are all very simple (you learn them at boot camp), all you do is hire and train the staff and operate the restaurant. You pay McDonald’s for everything, your profits are entirely based on sales, they own the land your restaurant sits on. If you decide you want out they’ll find someone else to take over.
Just as residential real estate has skyrocketed in price, so has commercial real estate (even more so). If you decide you’re out and McDonald’s corporate decides that location is no longer profitable then they sell the property with a large return on their investment.
Thanks for the detailed response.
Single establishment commercial space may be pretty expensive still but there’s an awful lot of bigger buildings starting to feel the burn from work from home. I wonder how many of the big buildings would have to fall before the commercial real estate industry takes a serious dive and they lose a crap ton of bank?
A lot I think. McDonald’s doesn’t just build restaurants anywhere. They conduct rigorous market analyses to determine where they want to buy real estate. They don’t buy unless they expect a place to be growing.
They have the benefit of all the data from their restaurants. They can compare that with publicly available data from local city councils. This is one of the reasons big companies seem to be immortal. They just have so much data, experience, and understanding of exactly how the business works at a local level.
Of course what they can’t anticipate (and few can) are global economic slowdowns and other major trends or even sudden events.