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Why Mac Donald is a real estate giant, not a fast-food.

MC DONALD
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MacDonald became a fast-food empire. But we often forget that it is one of the largest real estate companies on the planet! How did Ray Kroc get to this point? In this article, I decided to tell you about Ray Kroc. A milkshake machine salesman who was not very successful in his business in the 50s. Ray observes that many of his customers. Drive-ins, a restaurant concept where food is served directly in the car, is inefficient. The waiting time is long, and there are often mistakes in the orders. One day, an unusually large order of milkshakes will change his life and drive him directly to the home of brothers Richard “Dick” and Maurice “Mac” McDonald.

They are the owners and inventors of the revolutionary concept of: “McDonald’s”. A catering concept that is the opposite of what was available at the time: The system is fast, efficient, inexpensive, and family-friendly. Mac gives Ray a tour of the kitchens and notes the strong work ethic of his employees. Dick explains that high-quality food and fast service are the cornerstones of their restaurant. Kroc was successful in convincing the brothers to franchise their concept and give him the job. The McDonald’s brothers will accept on the condition that they sign a contract that gives them total control over any developments or changes proposed by their new partner. This contract will allow the restaurant chain to expand in the United States and then around the world. Behind the success of large global corporations is often a successful real estate strategy.

The McDonald’s fast-food chain is a textbook case. By taking over the company in the 1960s, Ray Kroc was able to transform its business model from a simple sale of hamburgers to the management of a global real estate portfolio leased to its franchisees. Today, it is valued at $40 billion, while the group’s sales are less than half that. “For example, we are working with a retail giant,” explains Julien Amar, director of corporate clients at Société Générale.

It is an ensemble of a real estate strategy to finance the company. It identifies a piece of land, becomes the owner, builds a store on it and, once the work is completed, proceeds with a sale-leaseback transaction. “The principle consists of a company that owns a business property selling it to a bank (lessor), simultaneously re-letting it and becoming a tenant. Each month, the company pays rent and, after 10 to 12 years, it becomes the owner again by exercising its purchase option.

Corporate tax reduction is one of the advantages of sale-leaseback is the possibility of deducting the rent paid. “Let’s take the case of a company with a net profit before tax of 300,000 Dollar. . If it owns its assets acquired through a property loan that is still outstanding, the amount of the repayments is not fully deductible. On the other hand, if it rents it – and this is the case of a sale-leaseback transaction – it will be able to deduct the sums related to the rents excluding the share of the land. For example, if they amount to 100,000 USD per year, the company will be able to save nearly 30,000 euros per year or approximately 360,000 USD over a 12-year period.

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