The hashbrowns McDonald’s sells are sourced from Simplot Foods. If I remember correctly, you can buy around a hundred of them for $20 or $30 or so. Insane markup, especially at the scale they must buy them at, but not surprising. How else would the C suite survive?
So I’d be interested to know how the flailing commercial real estate market is affecting McDonald’s prices right now, given that McDonald’s is a real estate company.
Former McDonald’s CFO, Harry J. Sonneborn, is even quoted as saying, “we are not technically in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is because they are the greatest producer of revenue, from which our tenants can pay us our rent.
Instead of making money by selling supplies to franchisees or demanding huge royalties…the McDonald’s Corporation became the landlord to its franchisees.
They bought the properties and then leased them out – at large markups. In addition to that regular income, the corporation would take a percentage of each shop’s gross sales.
Today McDonald’s makes its money on real estate through two methods. Its real estate subsidiary will buy and sell hot properties while also collecting rents on each of its franchised locations.
So if they’re around 30 cents at cost and 3.19 at sale, that’s about 11X markup to account for OH, G&A, and profit
Depending on the location of the restaurant, OH can be to to 400%, they have to pay a franchise fee, 45K a year, which is not significant compared to sales, but let’s its 5% of sales, that means that around 6X of the markup is profit
They can just lower their expectation of profit and still be more than ok
The hashbrowns McDonald’s sells are sourced from Simplot Foods. If I remember correctly, you can buy around a hundred of them for $20 or $30 or so. Insane markup, especially at the scale they must buy them at, but not surprising. How else would the C suite survive?
You’re also paying for rent, staffing, equipment, oil, taxes, salt, and probably a lot of things I’m not thinking of.
Still they’re only costing them maybe a buck, tops.
So I’d be interested to know how the flailing commercial real estate market is affecting McDonald’s prices right now, given that McDonald’s is a real estate company.
I wonder how much all of the price increases are due to the commercial real estate market…
So if they’re around 30 cents at cost and 3.19 at sale, that’s about 11X markup to account for OH, G&A, and profit
Depending on the location of the restaurant, OH can be to to 400%, they have to pay a franchise fee, 45K a year, which is not significant compared to sales, but let’s its 5% of sales, that means that around 6X of the markup is profit
They can just lower their expectation of profit and still be more than ok
The $45K is a one time fee, after that there’s monthly rent, which significantly varies by site