Do you think the main income source of the brands you stop by for a hamburger when you buy coffee or want to have a quick bite is the products they sell? You will want to think again after this article.
McDonalds Almost everyone in the world knows it. The most famous products of the company are hamburgers. such that Big Mac Index There is even a concept called (I will explain this at length later, basically it evaluates the economic conditions over the Big Mac). So, is McDonalds’ main business selling hamburgers? Or KFC? Is Starbucks just a coffee shop?
One of the names that make McDonalds McDonalds Ray Kroc A story told about the. in 1974 In the last incident, a group of University of Texas Business Administration doctoral students were having a drink and chatting with Ray Kroc, who came to the school to give a speech. Ray students “What am I doing?” he asks. The students, on the other hand, think that the man is making fun of them and laugh. Ray, on the other hand, repeats his question without being serious. One of the students “Is there anyone in the world who doesn’t know you’re in the hamburger business?” he replies. on the rail “I knew you were thinking that. Ladies and gentlemen, I’m not in the hamburger business, i do real estate business“ he replies. So why did he say that?
Today, McDonalds generates about 80% of its billion-dollar net profit through rental income from its properties and franchising.
In very valuable regions all over the world, especially in the USA McDonalds It is possible to see restaurants. A similar situation applies to other fast food and beverage manufacturers. KFC, Pizza Hut, Taco Bell The owner of three giants like Yum! Brands owns over 54,000 restaurants in more than 155 countries. The return of all these real estate investments is a very important source of income for companies.
Let’s look at the reasons for this situation:
First of all, let’s understand what franchising is:
In very simple definition franchiseis the use of a brand for a certain price. Here, what the franchisee can do is limited, he acts as determined by the brand. In return, it uses the power of the brand.
In practice, this is much more complicated. When a brand will give a franchise, it scrutinizes it and chooses it accordingly. to use your brand allows. Even if you spill the world’s money, they will not allow you to open a branch in a location that will damage the brand’s awareness and image. Many franchises also set restrictions on how your shop should look, even hiring their own architect directly.
Large chains are generally present when a franchise is to be opened. real estate they buy on their own. Then they go to lease this real estate to the franchisee. In other words, in addition to the fees such as brand license, marketing and advertising, the franchisor company also seeks to receive rental income.
Every company has different strategies.
McDonalds generally buys the land or buildings in which its franchisees are located whenever possible. When you go to eat a Big Mac today, that restaurant building 70% chance belongs to the company. The rest are malls etc. are long-term rental shops in places such as
Starbucks, on the other hand, is a company that follows a different strategy. A site will be built somewhere, a shopping mall will be built, investment will go, etc. Starbucks is one of the first companies you will see there. Today in Istanbul or other big cities gentrification (Removal of the local people as the upper class started to settle in the places where the low-income lived) Starbucks goes, then other shops follow. Of course, Starbucks does not stay away from important centers, that is. (Starbucks also has a banking side, which would be the subject of an article on its own.)
Another striking aspect of the business is the number of stores in the future plans of almost all chains. through franchise branches there is an increase. In other words, these companies will try to burden the real estate sector even more in the future. So in the future, these “food and beverage giants” may turn into real estate firms that only allow their tenants to pay the rent.