Everyone knows that McDonald’s is a global QSR leader. Whether you are, or are not, a fan of their food isn’t what we’re talking about here. The fact is, McDonald’s makes a lot of money. And it makes far more money on rent than it does on burgers. So really, when it comes to it’s core business, McDonald’s is a real estate mogul.

With sales reaching close to $30 billion, the company has claim to some of the hottest real estate on Earth. It can afford this kind of property because the rent that pays for it comes from the sale of burgers and fries. Think of is as a 40,000 unit apartment complex spread around the globe.

The Golden Arches Real Estate Trend Dates Back to the 1950s

This trend began long ago - back in the 1950s. It was then that the company’s leadership saw the potential for real estate ownership - and the McDonald’s Franchisee Realty Corporation was born. From the very start, the company gobbling up property along high-traffic roads that would eventually be turned into franchised locations.

What started out as a simple markup on the land and building lease turned into flat-out mortgages that created outright ownership on the part of the company. The theory was simple: get franchisees set up and running and let their rent pay off the cost of the building and property while also turning a profit. Once a location was paid off, anything that came in that was considered rent, was almost all profit.

McDonald’s Made it Easy for Franchisees to get Started

Back in the golden days franchisees paid as little as $950 to get started with a location. This meant that profit was quick and sustained for McDonald’s. Most of the property is secured with fixed rates but franchisees pay variable rates based on a number of factors - the most important being profitability. Of course, low sales doesn’t mean low rent - thinking ahead, McDonald’s set out a minimum rent and included an advertising royalty fee of 5% to hedge themselves against low sales and other slumps that would otherwise impact their real estate profit.

For investors in McDonald’s stock it means that, with one share purchase, you’re immediately diversified across two industries: real estate and fast food. For McDonald’s, it means that they rely on their products to pay the rent instead of individual renters. For over a half-century, it seems to have worked.

What do you think about McDonald’s being more of a real estate company than a burger restaurant? Do you see it as a good thing? Do you think they are too focused on one side of their business than the other. Let us know in the comments!