Hacker News new | comments | show | ask | jobs | submit login
McDonald's Real Estate: How They Really Make Their Money (2015) (wallstreetsurvivor.com)
470 points by neop on Apr 20, 2017 | hide | past | web | favorite | 259 comments

An important point about owning the franchise real estate: a rental agreement is far stronger for the landowner than a franchise agreement is for a franchiser. The McDonald's franchise agreement specifies the address the franchise must be located. In effect, McDonald's can cancel a franchise agreement by ending the rental agreement. This gives them enormous power to enforce company-wide standards on cleanliness and mandate suppliers. Other chains (eg: Burger King) do not own the majority of their franchise properties and have had more significant problems with enforcing franchise standards.

Source: McDonald's: Behind The Arches, John F. Love (July 1, 1995)

Edit: changed ie to eg, thanks for the correction all

>The McDonald's franchise agreement specifies the address the franchise must be located. In effect, McDonald's can cancel a franchise agreement by ending the rental agreement.

I don't think you are really taking a position, just acknowledging McD has power to enforce Franchise Agreements more than others Franchisors because separately they tend to also be landlord. on first reading though I thought your comment was suggesting more nefarious behavior because the dual relationship landlord/franchisor.

Just in case anyone else read your comment that way, I would just say as a lawyer I would feel pretty confident taking a case on behalf of a Franchisee who paid significant franchise fees to McD and was otherwise in full compliance with the Franchise Agreement, but my client's Franchise Agreement was de facto cancelled (and presumably Franchise fees kept by McD) because McD terminated the lease without cause.

Certainly if the Franchisee gave McD cause under either a Franchise or separate lease Agreement (failure to pay rent; using non McD suppliers; etc...) that is a different story, but legally McD couldn't just engage in the collection of Franchise fees only to evict tenants in a scam like fashion. again I don't think you were suggesting it, that was just my initial interpretation.

My interpretation of what he says was basically McD's has more leverage. Part of establishing a restaurant is establishing enough return clientele at a certain location. And a large portion of the clientele might stay with the owner if it turned into a Jack in the Box. But this number drops off a cliff if it's also across the street. So the BATNA for a non-McDonalds franchisee is just switching franchises, and taking a hit to their business. But the BATNA for a McDonald's franchise is starting all over again.

Actually, the book expands on that. Originally, McDonald's franchise agreements had exclusive territories (in fact, a franchise agreement could be for an entire region/state/country). McDonald's franchise agreements eventually specified a particular address (own by McDonald's) without any exclusive territory. If you lose the rental of that property, you lose the ability to run the franchise.

Yup, our owner/operator didn't always like to follow the company line, and was rewarded by a new franchisee an exit north of his highest volume location. Of course his agreement gave him right of refusal for the new location, but the numbers didn't add up; so Oak Brook found a willing franchisee who ended up spending a fortune for a relatively low performing store. Eventually that location paid off (20 years of growth will do that), but for the original owner/operator, he saw a 25% yoy decline in sales. Oak Brook has a huge amount of leverage to keep franchisees in line and quiet.

Point well made! The book described it as mechanism to force a negligent franchise owner to sell their franchise (not unilaterally take their investment).

Certainly noticeable in the UK, the variance between one BK and another can be huge where McD's is so consistent it's hard to tell who owns which.

McD's are masters at standardising 'generally acceptable in a pinch' food.

I thought UK McDo were a single company and not franchisees?

Most of the UK stores are owned by the parent company. There are a few franchisee stores though.

More than half UK stores are franchised.


> There are 1,200 McDonald's restaurants in the UK. 65% of which are franchised and 35% company-owned. We take great care in selecting our franchisees and once they're with us, we invest heavily in a comprehensive training programme and providing ongoing support for them.

> We actively encourage our franchisees to expand their business and this is evident in the fact that, on average, a McDonald's franchisee owns five restaurants. Our franchisees commit to operating their restaurants for 20 years so they're also often heavily involved in their local communities – for instance, being involved with local business groups, local environmental initiatives or supporting local grassroots football.

Is there a way to tell them apart?

your receipt will show you who you paid VAT to

my local is a franchise and it shows the name of the local franchise owner

> Other chains (ie: Burger King) have had more significant problems with enforcing franchise standards.

Why have Burger King in particular had this problem?

They meant to put e.g.

This is why I just go with (ex: Burger King) because everyone can understand it. When you have enough ambiguity and misunderstanding of a language/grammar syntax, it's better to avoid it in a public forum.

ie -> in example. Burger King is the only example I explicitly recall.

i.e. -> id est. Usually translated to English as "That is". Implying that subject is the definite case.

Stealing from wiktionary: "The three U.S. states on the west coast have mild seasonal variations in temperature (i.e., warm winters and cool summers)."

e.g. -> exempli gratia. Usually translated to English as "For example". Implying that the subject is simply one example of many.

Stealing from wiktionary again: "Continents (e.g., Asia) contain many large bodies of water."

Ah, right, no. "i.e." is an abbreviation for the Latin "id est", meaning "that is".

"For example" would be "e.g.", ("exempli gratia" in Latin.)

"E.g." is illustrative, whereas "i.e." is exhaustive.

I hadn't heard "i.e." expanded to "in example" before - that explains one source of misunderstanding (despite being grammatically incorrect in its own right).

Edit: It seems you've since been unfairly downvoted for explaining what you meant. Please folks, don't do that. I asked the question, and @fraserharris answered honestly.

I forget where I picked this up, but I use the following to keep them straight:

i.e. == in essence

e.g. == example given

I can never remember the Latin, but in my mind, I usually substitute i.e. to mean "in essence" and e.g. as "e.g.xample" to remember which means which.

So THAT is why many people get it so wrong. I never understood (as a non-native speaker from a 24h country, I still struggle with pm/am and have to look it up every time, so I get why other non-natives may mix it up, but I'm seeing I.e./e.g. confusion mostly among native English speakers... for whom the Latin origin must be a similar situation I now realize).

ie means id est (that is).

What impresses me most about McDonald's is the highly effective and efficient incentive structure. You have the franchise owner who is very committed financially and can make a high income, plus lots of low cost labor following a very precise process. And they seem to be able to replicate it at almost any scale.

What impresses me least about McDonald's is their ruthless child-targeted advertising.

EDIT: in sort of a quaint way the incentive structure is reminiscent of the manorial system.

you might enjoy:


from Ed Weissman (who's #6 in overall karma on HN)

Not sure I like his "back in the day" reality distortion: "It was nothing like today: high volume, fast paced, brutal hard work, low pay, and 10 other kids ready to take your job if you didn't like it."

Right, because it's nothing like that now.

I totally read that in the opposite way at first. I thought he was saying "today is high volume, fast paced..." then I read the rest of the article and was a little confused.

Why do you think this was an enjoyable read?

It's probably bad to guess Ed's personality from just one article, but most of what he says is said by the bullies in software dev who push their own tasks to "Done" on the cost of the whole team, to then say how much more efficient they are since they have closed more tasks than anybody else.

Also the goal is not to beat Mozart, but to provide regular, recurring quality background music for tv show episodes every day, if you want to earn your bread and butter with it, and not just win a price. That's done best by a cooperating team, not by a rockstar. So if he was part of the "top 5 of 60" employees it may have been an improvement to overall results if there were just the other 55 employees. The general success of today's McD is that they are open nearly 24/7 and that they are nearly everywhere you go. I bet McD makes more money now than back in his "glorious" days.

Enjoyed the read overall but one line stuck out: "- I take one bite out of my cold Big Mac and eat one cold fries and throw it all out."

You have to be a special kind of asshole to throw away meat and food instead of just saying the food is cold.

You might not want to visit a farm, processing plant, warehouse, grocery store, or restaurant. They all throw away enormous amounts of food. Throwing away a Big Mac because it got too cold is a rounding error in perspective.

That said, we produce more food than we ever have. Is there a difference to starving people whether a grain of wheat went ungrown or was wasted?

What was the author meant to do, walk the hamburger and fries (with bites missing) to his closest homeless shelter?

In kindergarten, I starred in a play that haunted me for years and years. My role was to explain the amount of food waste produced by America every year.

I wonder how it is today, but at the time it was on the order of half a billion tons a year.

Spent the rest of my childhood trying to be hyper-conscientious about the waste I produced.

Got to high school, got a job at a local restaurant, eventually moved onto large-scale corporate catering, and then went to live and work on a farm.

As I moved up the scale of food production I only saw more and more waste. It was sickening but at the same time completely understandable when you realize that there are diminishing returns. The larger your business is, the more waste becomes "not worth our time".

I just can't feel bad about throwing away half a pizza here and there anymore.

After I left the farm I took one more job in food service before moving to tech, and that was at a small-scale startup that produces healthy, fresh, TV dinner style foodstuff, and distributes them at retail locations.

I was blown away at how efficient the whole process was. One of the chief philosophies of my boss was conservation. With a business model that revolved around maintaining a supply of each meal reflective of its demand, and making dishes that could be built upon common base ingredients, we were able to exactly calculate the amount of food we needed to make each day. If for some reason there was a piece or two of chicken left, or some rice, an employee would just take it home. I just wish every place could be that committed to not wasting food, by creating a business model that incentivizes such behavior with a better profit margin.

Part of the issue with scale is that this extra profit margin becomes more and more marginal. Supporting local farms, co-ops, and cooks is probably the best thing we can do to enable less food waste across the industry.

About 1/3 of the food in the US is wasted. And this is exactly what we want!

Food is a renewable yet spoilable resource. Easy to create, hard to store long term. Having more food then we need means the system has the capacity to absorb disruptions. If we consumed 100% of the food created, any disruption such as a cold spell in Florida would cause people to go hungry.

Resources farmed is not the same as food produced. If you consumed all food produced but had stocks of farmed resources that could be used to make more food (wheat, sesame, beef, onions, say) then with excess capacity you could readily produce more food. Our supply chains are such that we can go from field to table in a day, that allows us to go field to freezer (or canning factory, or whatever) too.

This perhaps relies on non-capitalist management of food production however.

tl;dr I don't agree with your conclusion.

My head agrees with you. My mom's voice in my head fills me with guilt.

Mine too. I have the terrible habit of finishing all the food on my plate, even though 1/4 of it will be converted to fat/simple sugars. Our portions are much bigger than those our parents had.

Are you talking about in the US? Because they're much larger than most of the rest of the world too!

I was pretty amazed the first time I went - for McDonalds specifically, the US's medium size for drinks and fries is bigger than our large size in Australia! And we have no super-size or drink refills. (Our Burger King equivalent is about the only fast food chain I can think of that does free refills. It's very rare for restaurants in general here).

Time to free yourself from the moms.

Well, I guess I should give up on recycling and get a gas-guzzling car because doing my share isn't going to make a difference. Maybe I should rob a bank because banks are being robbed everyday. The author could have saved it for later or heated it in a microwave because he spent good money for it.

That still wouldn't make it useful. Most westerners consume far more calories than we need to survive. Eating beyond that is just for pleasure; from a purely practical standpoint, it's just as "wasted" as if you threw it away.

Microwave it like the rest of us

No no no, you separate out the vegetation, if any, and keep it aside. Microwave any non-vegetable remainder for 15-30 seconds, depending on the mass of the burger: just enough to warm the meat. Transfer from microwave to toaster oven in two halves, toast briefly to crisp the buns, re-sizzle the meat, and melt the cheese. Arrange vegetation back in between. Enjoy a McDonald's burger that rivals its freshly served cousin. Finally, sit back and question the life decisions that lead you to putting this much thought into reheating fast food from McDonald's.

What about the energy wasted to cook that food? There are freezing Inuit who could have used it.

It takes far more energy to create a big mac than to nuke one.

Microwaving fast food french fries is a special kind of alchemy that somehow turns them into concrete.

I worked at McDonalds and we would throw burgers after X minutes if they didn't sell. Can't remember what X was but we were throwing a lot of . Same thing with fried stuff like mcnuggets except we would wait longer before throwing it. I don't know why we were following the rules for burgers but not for fried stuff... It all seemed like waste to me because X was pretty short. But this was to ensure good quality, crunchiness and all that jazz. Mind you that it was not a franchise and it was in France (where McDonalds restaurants have higher standards).

Used to be 10 minutes. Not sure now. Fried foods like McNuggets, McChicken and Filet O Fish were kept in a cabinet, then assembled into sandwiches. They were kept for roughly 30 min? The reason for the 10 minute rule was a quality issue; after that amount of time, cheese was gross, and the various condiments were trashed.

How tightly do they manage their production rate, presumably they're more careful than just "keep 6 on the warmer" and more like "the usual rate at this time is 70 per hour, we only lose 15% of those sales by asking the customer to wait, 5% of those losses go for other products, so we'll make at a rate of 1 every X minutes unless we have more than Y on hand"? (numbers completely off the top of my head)

I worked at a franchised US Burger King in the late '90s. The shift manager would tell us how many fully assembled copies of each popular sandwich type to keep on hand. I never saw any charts or evidence of number crunching, but the numbers did vary based on expected traffic for the day of week and time of day, and the popularity of the specific item.

The sandwich wrappers had the numbers 1 to 12 printed on them, and you were supposed to mark the pre-made sandwiches to show when to throw them away. For example, if you assembled the sandwich at 12:15, mark the 5 to show that it should be thrown away when the clock's big hand is on the 5. Literacy not really required.

I worked back before they had installed microwave ovens, so the person in charge of coordinating the production rate had to be a good judge of the sales rate, the abilities of the grill team etc. We usually tried to time things so that we had the most food ready for lunch rush, and then let it tail off so that we didn't waste a huge amount. McDonalds had all sorts of little charts that averaged sales rates per hour, item rates within that hour etc, but a good employee running the "bin" was far better than someone who just used the charts.

I was in a pretty busy McDonalds so we were usually asked to do one more of X when doing X, or two more of Y, or 5 more of Z, ... depending on the rush. That's how we ended up trashing some.

That's because, when doing a big mac for example, it's almost as easy to make one or five on a tray. So better make 5 if you're in a rush, they will likely be fulfilled.

In cool periods we would only produce on command. So no waste. Fresh burgers.

Everyone used to say that Franchise didn't care too much about these rules (where they should), and the director didn't like getting employees from Franchise McDonalds because they had to re-learn all the hygiene standards. Since that day I avoid franchise restaurants and go only to the official ones.

In my experience, franchise stores were generally better run than McOpCo stores. Many of the McOpCo stores were stepping stones for their mgmt staff so they didn't care about profits as much. They ran their stores by the book, but that didn't always correlate with a well run store. I used to be able to spot a McOpCo store within a few minutes of walking in.

define better run? You mean from a business stand point? Sure. We would throw a lot of things, wash our hands all the time. From a hygienic/client point of view? I wouldn't agree.

I meant from a QSC standpoint. I'm sure this varies from region to region, but of the 200-400 stores I visited in my career, it wasn't even a close contest. Better quality food, better service, and better cleanliness. Even things like physical premises were generally kept better. I wouldn't hold this against any crew/mgmt team, since facilities maintenance was usually out of their control to a large extent.

Our stores were generally earning 4s in inspections, because Joan Kroc lived about 4 miles away from our best/highest volume store and frequently stopped in. Our worst store was probably closer to McOpCo stores, despite our efforts to improve it over time.

What is QSC?

And what you say doesn't really make sense to me, of course my personal experience and what I was hearing at McDonalds is very subjective. But the official restaurants are here to show off what McDonalds is, they are supposed to hold the bar way higher than any other McDonalds restaurants.

QSC=quality, service, and cleanliness.

McOpCo stores have to follow all the rules and policies that Oak Brook dictates to the franchisees, but they also have to be profitable. Oak Brook was often out of touch with how life was for franchisees, and would make requirements that just didn't jibe with making a buck. A franchisee would make the decision to either emphasize or de-emphasize a new policy/procedure, and deal with the consequences from their regional manager if it became an issue.

McOpCo stores weren't immune to business pressures either; having to follow (in theory) all the policies and regulations imposes a cost on their business. And one of the keys to a well run franchise was a stable management team and stable staff under that team. With McOpCo stores being a stepping stone for managers to climb the ranks, it was harder to develop the team cohesion that a good franchisee could.

What do you think they'll do with it if you complain that it's cold? If you don't want it, it's getting tossed either way.

"Eat your peas, there are starving children in Africa" only makes sense if there's a ready means to get your peas to the starving children. If the choices are eating food you don't want or throwing it away, it's wasted either way. Eating it isn't the superior moral option; it doesn't accomplish anything but making you fat.

Asshole? Why? What harm or pain did Ed cause to anyone by throwing the food away?

The temperature of food can be easily changed with the ubiquitous household appliances called "refrigerator" and "microwave oven". And it isn't as though a drop in temperature of 5 degrees changes the flavor.

It's like throwing your pants away because you spilled ketchup on them, or throwing your car away because it ran out of gas--trivial issue, easily remedied.

Besides that, McDonald's corporate considers the service temperature of their food to be deadly serious. Complaining to the management with cold food and receipt in hand would almost certainly generate an overly obsequious response sufficient to satisfy even the grumpiest of customers. If not, going to management above the restaurant would probably get everyone at the restaurant re-trained right quick.

> And it isn't as though a drop in temperature of 5 degrees changes the flavor.

Leaving aside the rest of the discussion, and not even addressing if throwing it out was good/fine, this line stood out to me.

I often feel that temperature changes the taste. More obvious in ranges > 5 degrees, but still noticeable at that range. Given how subjective taste is, it's hard to prove, though I'm sure some neurologist has hooked a pig or chimp up to try and measure the "taste" reaction. My two questions for you are:

* Do you feel temperature has no real (direct) effect on taste, or only in larger swings than 5 degrees

* Do you have any reason for your above statement than your own experiences? (not a criticism, curiousity)

It's well known that the current temperature changes the taste. http://www.huffingtonpost.com/2012/05/19/temperature-can-eff...

But, I think his comment was changing the temperature is easy, and having food get cold does not change the taste after reheating. However, there is a large food safety issue with how long food stays between 40f and 140f, which is probably the root cause of this policy.

> But, I think his comment was changing the temperature is easy, and having food get cold does not change the taste after reheating

This is as untrue as saying temperature doesn't affect flavor; cooling/reheating cycles affect flavor and texture of food.

I don't agree with your assessment of the comment, it seems very clear that he thinks temperature does not affect the flavor.

Also, maybe I'm the only one, but I think (some) food tastes entirely different after a trip through the microwave.

Off-topic: How can HuffPo not know the difference between effect and affect?

Correct. Flavor is an important component of taste and the eating experience. Temperature is a separate component. They are weakly linked, but with the temperature I envision for fresh McDonald's fries left on a tray for 15 minutes before serving the customer, there is no meaningful difference to me in flavor. The change in temperature is obvious, but as I don't value it much in my own eating experience, I have difficulty imagining its importance for others.

In my mouth, flavor is the dominant component. Temperature only matters if the food has fats or volatiles with a phase transition temperature between 25 and 40 degC. If food is too hot, I taste burning heat instead of flavor, and when it's too cold, the ice crystals numb my taste buds. But in between, my perception of the flavor is more affected by chemical composition than temperature. Room-temperature french fries are fine. You can chew them up without burning your mouth. Refrigerated fries aren't quite as good, because the fats solidify and the flavoring volatiles don't vaporize as readily. So pop them in the microwave, and they're good again.

For many people, texture is a major component of the enjoyment of fries. Room-temperature fries are limp and rubbery, and microwaving them does not restore their original crisp texture. (Though heating them in a toaster over does, and fairly quickly.)

Depends on how you use the microwave and moisture content. But, 5 minutes at 20% is significantly different than 1 minute at 100%.

> The temperature of food can be easily changed with the ubiquitous household appliances called "refrigerator" and "microwave oven". And it isn't as though a drop in temperature of 5 degrees changes the flavor.

You ever eaten a microwaved hamburger? :)

You know, that gives me an idea for a science fair project. Conduct a blind taste test for the same food prepared in different ways. I'm thinking hot dogs, though.

Seems disrespectful to poor, starving people.

1. 40% of food in the U.S. is discarded. https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf

2. Much food is never harvested. A large portion of it is also never taken to market due to blemishes. http://californiawatch.org/health-and-welfare/food-waste-rem...

3. Supermarkets discard about 1/3 of their food due to spoilage, blemishes, and overripeness. http://www.npr.org/sections/thesalt/2014/09/25/351495274/sup...

Food that doesn't make it for human consumption at the farm/factory level often finds its way as animal feed.

I'm puzzled by your response. You list some stats about waste and that justifies what the guy is doing? Of course it's probably hyperbole but people are working hard to defend this guy's statement.

It seems like a growing number of comments on Hacker News are of this virtue signalling, amplify the problem but offer no solutions variety. This is not the hacker ethos.

The hacker looks at your parent and says woah -- grocers throw away 30% of food? There's a startup opportunity. And when they succeed they accomplish more than all the hand wringing in the world about someone else not doing their part.

Multiplying together, only about 30% of the food grown is actually consumed?

Is that really true? Whoa if so.

Oddly enough, it kind of makes me feel better about food security.

I think even bigger is the 10:1 gains or more you lose feeding crops to animals. If we all went vegan we would almost instantly double our food supply.

Spoiler: I eat meat

Is this low, high or average compared to other countries?

It's fairly normal. In the first world, we waste a lot of food because consumers can afford to be picky or forgetful. In the third world, they waste a lot of food because storage and distribution infrastructure is worse.

With this kind of logic, flushing your toilet is disrespectful to people in Africa with limited access to drinkable water.

Well, it is. So don't be wasting water unnecessarily. If you spent time and money eating at McDonald's why would you throw it away? Our society wastes a lot for sure so try not to. Don't go to McDonald's in the first place.

We don't have a water shortage problem just like we don't have a food shortage problem. We have a water/food distribution problem. Throwing away a burger in the US takes nothing away from Africa.

If you bought this burger, you already gave back to society by paying for it. It has zero influence on the rest of the society whether it goes through your belly or not before being disposed.

Respectful sure, but I could argue I'm disrespectful to the world's poor every time I light a joint, kick back on my couch, pig out on taco Bell, and watch Vikings in my air conditioned condo.

Not the same. You are not throwing out your Taco Bell after the first bite.

I disagree that it's not the same.

1. Whether or not I eat the food is irrelevant to the poor.

2. The amount of food I order is completely up to me. I usually order, and eat, more than I need to survive (because I'm stoned). I revel in the decadence and my ability to buy and eat so much food I'm disgustingly full. I could argue that I do this to "flaunt" my wealth and privilege.

(really, I do it because I grew up dirt poor and hungry, so I gain inordinate pleasure from excess. Probably unhealthy, but it's my birthday and I'll cry if I want to)

This country (USA) throws away $537 Billion retail in food annually. I don't think it's just this guy.

Does trash really have a $ value? ;)

As Dave Chapelle would put it; you can't do comparative suffering.

There might be people starving in Africa, but I still want my lunch.

Do you take a bite out of your lunch and then throw it away? :D

Would it make any difference to the hungry if he ate the whole thing? They'd still be hungry.

Only if you threw it away instead of giving it to a poor, starving person. Between two choice of eating it or throwing it out, neither affects the hungry any more than the other.

Is opening a window in a too hot room disrespectful to those who are freezing on the north pole?

The article indicates he tried to suggest to the employee that his fries should not be sitting on a tray getting cold while waiting for a burger and got ignored, nor should a burger be cold if you had to wait for it. I am not even convinced he was being literal. That reads to me as possible hyperbole to emphasize the point that he only goes when it has been so long that he has forgotten how bad it is.

Plus, see other remarks here about how 40% of food goes to waste for various reasons.

Kinda OT, but that's why I never buy physically large food items at McD's: the quicker you eat it the warmer it is.

Also, the quicker you eat it, the less you have to think about it; and most of McD's food items do not bear much thinking about.

Just customize your order in such a way that they have to make it fresh. I don't eat raw tomatoes, so if I tell them not to put those on my burger/wrap/whatever I end up getting freshly made food that's even hot.

You can specifically ask for them to make it fresh; you just have to be willing to wait around for them to make it.

On a similar note, I hate the "exploit" of "Ask for fries with no salt to get them to make you a fresh batch of fries" when you can just ask them to make you a fresh batch of fries. Potatoes are about $6 per hundred pounds; they could not care less about making you a fresh batch if it means chucking the old fries out.

The other thing to hate about asking for fries with no salt is that making them has a fairly high chance of flinging hot oil on yourself. Usually the addition of salt causes the oil to soak in a bit, without the salt it doesn't soak in and gets thrown around the place.

YMMV too.

Personally, in my local McDonald's I can put an order without talking to a human, pick it up and buy some weed on the way out.

Is that representative of every McD? No.

Other than the lack of human interaction I'm sure it's representative of a fair number of them.

Wow, look at all the responses and downvotes. More privileged assholes with money to burn feel it's fine to spend $10 on a meal and just throw it away. Just because there is so must waste doesn't mean that you have to behave like you don't know the value of money.

What things do you feel it's acceptable to throw away without being a privileged asshole? Is there a way you made this decision that can be generalized beyond Big Macs?

Reminds me of the scene from the Into the Wild movie - McCandless is working in a McDonalds-alike fast food joint, and the camera lingers on a signs that says "It's O.K. to waste fries"

What do you think they're going to do at a McDonald's if you say that? They're going to throw it away and make you a new one.

The reality is most of the food McDonald's serves nowadays is served cold. It's an unfortunate side effect of moving away from actually grilling meat to just warming it in trays.

I haven't seen child-targets marketing from them in decades here in Canada. Where do you live and what do you see?

I don't know about other provinces, but "In Québec, the Consumer Protection Act prohibits commercial advertising directed at children under 13 years of age."


I wasn't aware of that. Does that include toys or child related products? One could say that movies have turned into one long series of product placements.

It seems to be pretty strict, eg.

Example of prohibited advertising: The Rappido Company is advertising a remote-controlled toy car like one seen in an animated film. The advertisement is broadcast on Saturday morning on a TV channel for children during a cartoon program. The ad is in animated film format and shows a young boy who is thrilled to be operating his high-speed car. This ad would be prohibited.

But there's no mention of product placement. I imagine that would be hard to account for.

Also in Canada, I just assumed they were still doing it -- I don't watch any children-targeted media so I wouldn't see it anyway. I think I saw an ad during the hockey game last night of a kid eating a McMuffin at night. But a quick look at their youtube channel and it seems they're still at it: https://www.youtube.com/watch?v=JWMQt_-w75Y

>I just assumed they were still doing it

Can't really confirm that assumption, even outside of Canada where there's no regulation in place. Last time I remember McDonald's specifically marketing to children was in the 80's, since then they've changed their marketing approach several times focusing more on how "healthy" the food supposedly is or how it's locally sourced.

> What impresses me least about McDonald's is their ruthless child-targeted advertising.

I don't have any of the kid-centric television channels, so from the radio and television spots that I've experienced, I would have to say that McDonald's advertising appears to be heavily marketed towards the black community.

For instance, this one has been on heavy rotation in the past few months: https://www.youtube.com/watch?v=ASqC809WaHs

What is wrong with advertising to children? They don't have any money, the parents can always say no or the kids can learn quickly how to determine if they should do what ads tell them to do. They will greatly need that skill in modern America. Teach them early haha.

>the kids can learn quickly how to determine if they should do what ads tell them to do.

The problem is they can not do this at all. Children are extremely easy to manipulate, and that is pretty much what advertising is.

As a kid I quickly learnt to distrust ads, so I'm not sure why you think kids can't do this. They may not be adults, but they're not robots either.

Somehow I don't trust your own judgment of your ability as a child, especially when it is in contrast with the experience of most people and the findings of researchers.

I recall it exactly. When you start to trust theory over reality I'm sure you've taken a bad turn.

Anecdotal evidence is not evidence! Especially anecdotal data reported by the subject. All you are showing is a fundemental misunderstanding of scientific process.

Anecdotal evidence is evidence (hence the name). You just can't apply the usual statistical methods that assume the evidence was sampled perfectly randomly from an effectively infinite population. Empirical evidence rarely lives up to the theoretical requirements, either, but that doesn't stop science from progressing.

Would you also say you're exceptionally modest?

You personally might not be able to, but there is a lot of research that shows children can't always understand that they are watching an advertisement, and what that entails. That's why the US has lots of regulations regarding advertising to children.

> That's why the US has lots of regulations regarding advertising to children.

We have regulation on advertisements to children? That's a little surprising.

This one is more on the data collection side of advertising, but I'd say it's still relevant: https://en.wikipedia.org/wiki/Children%27s_Online_Privacy_Pr...

I remember at that age understanding that ads are not truthful at a deep level and filtering them. I find it's much harder for me now. Everything seems like an ad now a days and I may not believe the message but having the money to pay for so many ads on expensive platforms gives me a different message. If a company can afford a superbowl ad it gives me the impression the product has resources behind it and I can assign a level of trust.

Kids are better at filtering in some ways.

You're talking about the demographic who believes in Santa Claus, right?

In a Country that largely believes virgin birth and one very specific zombie.

One crazy belief is not sign of universal insanity. Perhaps though it is a sign of susceptibility, which is what we seem to be talking about.

I just knew some smartass was going to liken Santa Claus to God.

Both make a list of the naughty and nice boys and girls. One substitutes brimstone for coal, nebulous "eternal happiness" for toys, but they seem pretty similar to me.

I think that's excessively reductive and there are other differences, like incontrovertible proof there is no Santa (as opposed to merely a lack of evidence), the fact that Santa often has the exact same handwriting as Mom and Dad, the fact that no supernatural powers are attributed to him and yet he would need them to do what he supposedly does, etc. Besides that a debate about Christian apologetics kind of takes us away from the point I was making.

Santa Claus is Saint Nicholas, in order to become a Saint you have to performed miracles in the eyes of the Catholic church. He certainly does have super power, at least the ability to resurrect childre, if he is real.

I think we can safely say that Santa Claus the children's character is almost completely divorced from the guy who punched Arius at the Council of Nicea.

Both are fictional, believed by a large demographic and don't instantly signal insanity, just gullibility.

Gullibility, which is what we were talking and why advertising to children is bad. If we started teaching our kids to do things like try to test for Santa they would be more likely to come to correct answers for the rest of their lives, and in general be less gullible.

Whatever you say.

Im certain you just don't see the value in your new perception.

Good ads work on an emotional level. They work regardless of whether you know you can't trust then.

That sounds like nonsense.

You will not find a single person in America who believes advertisements are a good neutral source of information, yet they still run them. They run them ever for products everyone has heard of and probably tried at some point. Why do you suppose that might be?

I'm not saying ads are worthless, I'm saying they don't have control over you.

I don't see how this is a response to what I said.

It's all about name recognition. Ads work because they stick the advertiser's brand in your brain, along with some warm and fuzzy feelings. The next time you're hungry on the road, and there's a McDonald's across the street from a Burger King, whoever has your warmer and fuzzier feelings will win.

Sure, in some ways, we all did - though I think most of us just got disappointed in a product or two or finally realized the ads weren't realistic.

This wasn't the case with other things, though. I remember really liking Care Bears back in the 80's. My father was appalled when he took me to a movie - he said it was basically an add to get kids to buy the new line of toys. My brother, 11 years younger than I, had the same sort of thing with Power Rangers and then Pokemon. I don't have children and am not quite sure what the current modern version of this is, but I'm sure it is there. Adult versions abound. These aren't the things we can spot so easily, especially as children with little world experience.

Do you interact with any kids lately? They're all absolutely obsessed with the latest thing that is being pushed on them.

Minecraft, Pokemon Go, Star Wars...

To be fair you're describing a significant portion of the user base here as well.

> the parents can always say no or the kids can learn quickly...

The parents need to spend a lot of time to counteract those evil forces and you cannot teach a kid to not like the amazing toy he/she is watching on TV. You can teach them that they can receive presents on specific date though.

You can also get rid of your TV and not expose them to ads at all.

TV is only one source of ads, YouTube, games, and other web/mobile resources are full of ads. I cannot get rid of all of them without creating creatures from another planet.


> Research has shown that young children—younger than 8 years—are cognitively and psychologically defenseless against advertising. They do not understand the notion of intent to sell and frequently accept advertising claims at face value. In fact, in the late 1970s, the Federal Trade Commission (FTC) held hearings, reviewed the existing research, and came to the conclusion that it was unfair and deceptive to advertise to children younger than 6 years. What kept the FTC from banning such ads was that it was thought to be impractical to implement such a ban.

In my view, conducting a psychological campaign at an intensity that is known to be far beyond the ability of many people to withstand, is unethical.

On the other hand, I do teach my kids about advertising. They are quite skeptical about it.

As a friend of mine explained (his Master's Thesis used this topic), the idea that the marketer is trying to get them to spend money on something is simplistic and misguided. What's actually happening is they're trying to create a brand awareness, and a (subconscious) positive association, so that the child will grow up to feel positively toward the business or product.

About 10 or 15 years ago, there was a McDonalds ad that had parents dressing up. The kids exclaimed "The black suit! You know what that means!" "McDonalds for breakfast!" Cut to the kids smiling and happy while eating at McDonalds.

Positive associations are simple to create, particularly in those unaware of what you are doing.

Haha, thanks buddy, I didn't know websites could trigger nostalgia. Brings back memories from twenty years ago, amazing it's still around with the exact same layout.

IKR? The Rotten Library is a great time capsule of the early 00s. Atlas Obscura has a similar style of writing but is a little but too "normal" for my taste :-)

It's not healthy food.

Watch The Founder,


for an entertaining and educational dramatization of the McDonald's story, including the franchising and real estate leasing aspects.

Really glad you brought this up. It was indeed an interesting movie but I didn't really have the time to compare it with the facts. How much of what we saw was actually accurate?

Most of the overarching premise is correct along with most of the general details of how it unfolded. Some of the darker stuff is he-said / he-said that is still debated to this day (specifically in the relationship between Kroc and the McDonald brothers).

I happened to have read the book a month or two before watching the movie. They were very different. In Ray's biography, he passes himself off as a "My word is as good as a contract" and "When I say I'll do this, I'll stick to it." The movie interpretation has him much more ruthless.

"If any of my competitors were drowning, I'd stick a hose in their mouth and turn on the water. It is ridiculous to call this an industry. This is not. This is rat eat rat, dog eat dog. I'll kill 'em, and I'm going to kill 'em before they kill me. You're talking about the American way - of survival of the fittest." - Ray Kroc

The language is obviously graphic, but what he's describing is what every company would do. Why would they help a competitor? They have a responsibility to the shareholder to grow the business.

Well, entrepreneurs are humans, not robots, and humans have this instinct to help each other. At least here in Germany I hear from time to time about (SME) businesses helping their competitors.

I came here to suggest this. It's a must-watch if you are an entrepreneur or want to build an empire.

I Second that. The Founder was a very intriguing movie.

I just bought this movie yesterday. One of the things in the trailer was exactly this point of owning the real estate.

It was an eye-opener for me when I was a teen and bought a gallon of soft drink syrup from a McDonald's for use at a party. It worked out to about 5 cents a cup for the drink in a soft drink, which sold for 75 cents (if I remember correctly). McDonald's doesn't make money selling burgers, they make money selling the soft drinks and the fries.

The same goes for any restaurant, it's why they ply you for drinks.

Look at movie theaters. They make all their money to a first approximation from popcorn and soda. The movie is just the loss leader that gets people in the door.

It's also where the now much-mocked "super sizing" comes from. They can up the revenue per meal while upping the cost by almost nothing.

> Look at movie theaters.

I don't think it was like that in the beginning. Running a cinema (movie theater) was a normal business until Hollywood milked it to the extreme. They created their own chains of multiplexes in many countries to push their idea of how the business should work.

These days modern cinemas are built like tourist traps with customers having to either walk through/past chain restaurants or having to find some weird side door to enter directly. It's quite a difference to even the 80s or 90s when cinemas had impressive/glamorous lobbies.

> customers having to either walk through/past chain restaurants or having to find some weird side door to enter directly

Having lived in NYC & LA, I've not had to walk through some weird side door to enter movie theaters. Theaters are straightforward: a lobby for tickets, a station where a person checks your ticket, the concession stand (overpriced food & drinks), and the theater doors.

Oftentimes theaters are located in crowded shopping areas with dining options, but you don't get lost since the theater physically takes up so much space and has signage everywhere directing you to the prominent entrance.

I've not once been to a movie theater like you describe. All of the ones around here are like you indicate disappeared in the 90s. Where are you located?

UK. Modern cinemas are built with multiple restaurants often with an entrance inside the restaurant itself.

In extreme cases you have to walk from the entrance to the back of the complex (passing by maybe a dozen bars and restaurants), get to the end, hop on an escalator to the next floor and walk all the way back past more outlets. It's only then you reach the cinema.

Over here (Israel), cinemas are usually inside shopping malls. Sometimes the theaters are separate but have a "shopping center"around them.

Personally, I find it very convenient - you can eat before/after the movie, and sometimes do a bit of light shopping. I like having more options. I certainly wouldn't consider it a bad thing, and I feel perfectly free to not shop if I don't need to.

I'd agree if you are talking about the 'movie industry' -

While yes, what you describe is true - part of this has to do with the film rights pricing which is mandated by the studios/distributors, so even if a theater wanted to structure things differently, they could not..

Of course many of the major theatre chains are also related to the studios, so it gets a bit hard to see which end is up..

but I digress

>Of course many of the major theatre chains are also related to the studios, so it gets a bit hard to see which end is up.

As far as I can tell, not in the US. Open Road Films is a joint venture of AMC and Regal, but Open Road only has about 1% of the film market. National Amusements has a controlling interest in Viacom, which owns Paramount Pictures, but National Amusements only has about 1% of North American movie theaters. None of the big US studios own any of the big 3 US theater chains.

The studios have an incentive to not overcharge as well - if the theaters go bankrupt then distribution just got a whole lot harder.

But yes, the accounting in the entire movie industry needs to be taken with a pinch of salt, and perhaps some mind-altering chemicals.

> many of the major theater chains are also related to the studios

No, at least not in the US. In one of the key anti-trust decisions, the Supreme Court declared in 1948 that it was prohibited monopolistic behavior for a major studio to own a theater chain.[0]


That business model is heavily influenced by negotiations with the soda company.

I've always assumed the costs surrounding a cup of soda (machine, CO2, ice, cups, lids, straws) are actually much higher then the cost of the syrup itself.

The up front cost of icemaker/dispeners?carbonator is high but the cost of electricity, water, and CO2 tanks is basically nothing on a per drink basis. Just think about everything that went into the factory which makes that syrup, the factory that makes the syrup bag, and all the logistics that deliver the finished product to the store. Then remember that costs pennies per drink. Even if all the other costs associated with that soda cost as much on a per drink basis, we're still talking ~10-20 cents per drink. Assuming every input cost is on the same scale also makes for a huge overestimate.

When I was a teenager I heard 17c for the cup, < 1c for the soda.

Of course they go for like $1.50 so no matter how it breaks down, it's a nice ROI.

I've heard stories of fast food places which say you can drink as much from the soda machines as you like, just don't put it in a cardboard cup.

The Founder is a movie that tells the story of the birth and growth of McDonald's (https://www.rottentomatoes.com/m/the_founder/), and it covers much of the ground covered in this article.

In addition to being a very well-done movie, it does a superb job of describing the relationship between the visionary founders of a startup, and the sales guys and bean counters who turn it into a successful business. It doesn't matter that the McDonald brothers were revolutionizing burgers, the telling of this part of the story captures perfectly the same sort of activity that goes on at any startup with a new idea, (emphasis on new). It also captures very well how the suits recognize a good thing when they see it, buy into the vision (but for very different reasons from the founders), and finally take over and render the founders obsolete.

Really great movie for anyone involved with startups.

I watched that the other day.

Kroc was just as visionary, if also greedy and manipulative and ready to succeed at all costs. He's clearly not afraid to steal a business or wife. He's also somehow easy to relate to (thanks Keaton).

You can see him lying to himself and justifying his actions. Got the feeling that Kroc wasn't all that different from many SV founders. You don't go to SV to make a burger stand, you go there to make an empire. There's a reason Kroc is discussed in business schools.

On a side note, reading about the founding of Twitter there's a lot this kind of back and forth.

Can you recommend any reading on the founding of Twitter?

I've been listening to:

"Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal"


As you can tell, it's the kind of thing meant for the best seller list and isn't a scholarly work or anything, but the preface stresses it's based on lots of interviews.

If nothing else, it's a fun read and the background of the founders is pretty interesting.

I hope this isn't like The Social Network which is mixed with a lot of fictions.

Kind of OT but the company I work for has more locations than McDonalds, and Walmart. Not combined but separate. Which baffles me. When I first started here I never knew what went into a retail store, from architecture, construction, store layout, buying, merchandising, it's insane... We call our headquarters the 'Store Support Center' because our mission is to support all 16,000 if our stores nationwide and a few in Canada.


No. Dollar Tree, we recently acquired Family Dollar which is how our store count is so high.

Hey, sorry to leave this here, but didn't see any contact info in your profile.

Would love to chat with you about the dollar store industry, if you'd be so inclined. I'm particularly curious about Dollarama in Canada, if you're at all familiar with them. My email is in my profile.

The basic question: why is Dollarama so much more profitable than everyone else?

Don't they sell seconds and then cheap generic Chinese crap?

Misleading. Sure, technically McDonald's doesn't make much money from selling burgers because most of the burgers are sold by franchisees. But by the same argument, Amazon doesn't make any money from selling EC2 instances -- those are sold by Amazon Web Services Inc.

When people talk about McDonald's "selling burgers", what they mean is McDonald's and its franchisees.

Amazon Web Services Inc. is wholly owned by Amazon, Inc.

That is not true of the franchisees. That's a pretty big difference.

The fifth sentence of the article is Peel back the layers and you’ll find that the corporate entity is actually one hell of a real estate company.

I don't think it is trying to mislead (or doing it by being sloppy), it's examining how McDonald's is structured (both the branded operations overall and the corporation).

I just watched "The Founder" last night. I had always assumed Ray Kroc was the genius who pivoted to focusing on real estate for their expanding franchise model when really it was Harry J. Sonneborn who convinced Ray that was the way to go. Worth a watch.

That model was only viable because Kroc found a way to scale the franchise, which the McDonald brothers had previously failed to do. Pretty much everyone involved in the early days seems to have contributed something to the ultimate success of the business.

A good startup movie, by the way.

One of the things I really liked about the movie is that Kroc didn't actually come up with many of the ideas at all. He was just very successful at recognizing good ideas, good talent, and synthesizing them together.

Traits of a good founder.

Plus one on it being a good startup movie.

Ideas are a dime a dozen. It's implementing them that matters.

+1 on the movie. I thought it was going to be bad but it turned out to be really good.

Well now I'm pretty curious, how does McDonald's operate all of their distribution channels with the whole franchise/renting model? Most of the Micky D's I've seen have tons of freezer food that they put through various machines to make all of the food items quickly. I can't imagine they let owners get their primary products from anything other than a distribution center. Do the owners need to buy those products separately? Can they buy from alternate distributors? Do they franchise their distribution somehow? Maybe I'm overthinking all of this. But I am genuinely curious how that factors into the franchise model since that means McDonalds is still very liable for food production.

The owner/operators purchase from approved vendors; I've been out of the game for awhile, but we bought everything through two distributors; bread products from an approved vendor, and everything else from a second vendor.

It is all through one distribution vendor with regards to product now. Only plant(equipment) purchases are outside of the primary distributor now.

It's killing me that I can't remember the distributor! Sixteen years of working through them and my mind is a sieve. This was in SoCal, and they had the contract for almost all of the region.

I will guess that it was Golden State Foods. They are a supplier to McDonald's, and California is The Golden State.

Ah yes, Golden State Foods! TYVM.

In Ohio and upstate NY in the early 2000's, the distributer we used was named M&M.

This has been well know for a long time. However the fact is the only reason that McDonalds is able to collect rent (in the dollar amount that they do) is if their product and service, the franchise, is able to sell hamburgers to customers. As such the value of the real estate (if the franchise fails to operate) is nowhere near what it is with a profitable operating restaurant. While the locations are valuable if you have ever seen a vacant McDonalds, and who typically rents those, you will know that the rent received and royalties is nowhere near what it is with a McDonalds restaurant.

So I think it's a bit misleading and hyperbole to say 'how they really make money'. The only reason the can make that money is because of the product and the customer base that patronizes the McDonalds. So in the end it is because of the product. "How they really make their money" is because of that product.

McDonald's business model of renting premises to their franchisees sounds similar to the way many pubs are operated in the UK.

Breweries (and "PubCo's") typically own the premises, which is leased to a tenant (publican) who is required to purchase the brewery's products.


In a pub setting the pub owner is free to select food and furtineture and such. Breweries will assist, but there's a lot of freedom.

In franchise you have to stick to the branding and menu offers and in practice you have to follow the prices (legally they can't force independent franchise companies to sell a burger for the same price, but there are ways) giving very little freedom.

There is no freedom in a UK pub franchise that will help you, because if you do well they will screw you the month after on tied beer prices.

One of the core arguments of article is misleading, since it claims McDonald's is a real estate company based on the share of Net Income coming from owned versus franchised restaurants. The share of Net Income is a misleading comparison, because (1)it fails to account for the cost of capital associated in owning real estate (2) over 85% of McDonalds are franchised, the remaining 15% produce all of that income, so even on this misleading basis of just considering net income, the profits are more balanced than the article makes it appear.

- percent franchised vs owned https://www.fool.com/investing/general/2016/04/03/what-perce...

- quote from article that is misleading"Of that $18.2 billion generated by company-operated stores in 2014, the corporation keeps just $2.9 billion. Of the $9.2 billion coming from franchisees, the corporation keeps $7.6 billion."

I remember watching a documentary a few years back where Ronald was talking to some uni grads telling them that in reality he's one of the largest real estate owners globally since the trend is to OWN the space they occupy and not just rent.

Well, if one thinks of how many of these burger joints..

And yes the burgers also make some good money ;)

I assume you mean Ray.

I prefer the image of Ronald McDonald turning up in full clown gear to give a hard nosed business lecture.

20 years ago when I did some consulting for the Gap, I saw inside their data systems and realized they were a large real estate organization. It was the first time I witnessed the dynamic nature of corporate America.

How does the work with malls?

At a guess the company owns a long lease on the space in the mall and sub-lets it to the franchisee.

Sure, but the burgers are a critical component of the whole picture.

It's almost like saying that grocery stores are not really in the grocery business, they are in the business of accepting cash and credit card payments. True, that's where they "make their money", but that business would dry up pretty quick if they didn't stock groceries.

Yes, it's how they "really" make their money in the sense of how precisely the money goes from franchise owners to them, rather than anything surprising about how the money is made.

"Retail-as-Real-Estate" plays don't always work. e.g. Sears, KMart.

Losses are useful, too! McD's has been renting a lot in my town(85331) for 5+ years now, and yet to break ground. ~6 months ago the local "fish wrapper" ran a story on this very topic.

As an aside, back when oil was >$100/barrel Exxon/Mobile had numerous boarded up properties around Phoenix with For Sale/Lease signs that were neither for sale or lease, as the losses/write downs were valued to dilute the windfall profits they were raking in at that time(my source was an agent for CBRE).

That makes no sense. Sure, you can make a $1 loss to save 50 cents in taxes. Or 5 cents, in the US. But why would you?

Also, real estate investments don't actually have a direct impact on profits when reporting on accrual basis (as all larger companies are required to). Those costs can only be deducted over time (something like 10 years for buildings).

Forgoing revenues, potential profits and taxes on selling/leasing the property(@ pre-2008 market highs); writing off loses of rental income; property depreciation; betting on rising real estate prices(all were still chanting "buy RE, it will only go up" pre-2008). Those are some some possibilities I can think of, but IANAL or CBRE agent, but when I asked one why the blighted corners owned by the biggest earners on Wall Street during the skyrocketing RE bubble were sitting vacant for years, the answer was there was no expectation to sell or lease. And it was not a tank problem, the tanks were removed as the boards went on the windows.

edit: rewording & added last point.

Sure, but McD is more distributed. Sears and KMarts are generally at malls or strip malls, so any change which negatively affects those things will affect Sears/KMart.

Yeah you need a profitable business to pay the rent with.

Off topic: I've trained myself to look for a McDonald's first when in a pinch and need coffee. This vs looking for a Pete's or a Starbucks.

If all you need is a basic drink, they get it more or less right for several hundreds of a percent lower.

McDonalds is surprisingly not bad at coffee these days. They overtook Costa and Starbucks in the UK in terms of cups sold.

Also the new self service kiosks make ordering a bit less grim http://burgerlad.com/2015/02/mcdonalds-touch-screen-ordering...

Ahhh, London. When I spent some time there 30+ years ago, I bought coffee from the McDonald's across from the Warren Street tube station (still appears to be there according to Google Maps).

But it was of necessity. It was very difficult to get a good cup of coffee from other UK fast food outlets. Has coffee caught on in the UK? At the time, coffee seemed to be mostly an after dinner drink.

I dunno man. Peet's has never failed me latte wise or even coffee wise. Starbucks can be a little burnt. And straight coffee at McDs is watered down for the senior citizens.

If you're ever at a meetup, and the presenter dances around the question: "How does your company make money?" then ask yourself, is it possible that this company is in marketing/advertising? More generally, ask yourself: Does this company's operations give it high quality information about a particular market?

The takeaway: Don't dismiss a useful service that you can't directly monetize. It's possible that you can gain high-quality information which can be monetized indirectly. It's all about getting better information about a particular market than everyone else.

While this is true, it is extremely hard to do in practice. You have to get good information, make sure it is good information, convince a market that it is good information, and then prevent your competitors and your clients from simply replicating your process.

You have to get good information, make sure it is good information

Yes, but often much of this can happen largely as a consequence of your doing something else, and you may not realize it.

convince a market that it is good information

Which is just basic Marketing.

and then prevent your competitors and your clients from simply replicating your process

Which is also a common issue with startups in general. Good word of mouth can keep you ahead of competitors, and you can make it cheaper for clients to just pay you than it would be to do it themselves. All basic things.

Some people have done sorta ok with this as a fallback position when their business model failed. I think it's a pretty dicey proposition. Foursquare did it after failing at everything else, and while they're ostensibly 'profitable' they're deeply in the red with little hope of a return to their investors. They're surviving to fight another day, but... eh.

Some people have done sorta ok with this as a fallback position when their business model failed. I think it's a pretty dicey proposition. Foursquare did it after failing at everything else, and while they're ostensibly 'profitable' they're deeply in the red with little hope of a return to their investors.

Sounds like they are deeply in the red because they were chasing something else? What if they realized this much sooner and didn't get so deeply into the red? Then they'd just have a solid and profitable business. I wouldn't discount this kind of business model. That kind of "sorta ok" is only a disappointment if you were hoping to be the next Facebook. Isn't that just greed clouding people's vision? A goose that lays copper eggs is still pretty darn nifty.

Well, the data comes from a substantial investment, which much be returned, or the business will be a failure. This is not a public service-- if you did some cool shit, but ultimately the bottom line is turning a dollar invested into fifty cents returned, you have explicitly and decisively failed in your work.

"They used to hold the promise of good fast-food but now the food is neither fast, nor good. In fact, in 2014, the average drive-thru wait time was over three minutes (the longest it has ever been in about 15 years)."

Nobody goes there anymore. It's too crowded.

I know it's a serious worry, but seems like one of those good problems to have.

Sorta, except that it is at the expense of places like Olive Garden, Macaroni Grill, etc.

The problem is that if those customers continue on their downward trajectory, it's going to hit McDonalds too ...

> Nobody goes there anymore. It's too crowded.

Then why is it crowded?

It's a Yogi Berra-ism.

The site is getting slow, so here you go : http://webcache.googleusercontent.com/search?q=cache:http://...

I thought about this recently when a new cafe opened up in a prime location (replacing another cafe). The rent must be enormous, and it occurred to me that no matter how good or efficient the cafe operates, the rent will probably simply rise until the cafe is merely earning at average market rates.

I found that rather depressing. All those people struggling to improve their business are merely struggling to increase the income of the property owner. (I guess if I had the money and inspiration to become a property owner it would be less depressing).

I heard a professor tell a story about the founder of McDonalds going to a business class as a guest. He asked the students "What business am I in? Can anyone tell me?" and they all laughed, "why hamburgers of course". Then he corrected them. They're not just in real estate but they are very, very good at selecting franchise locations. The professor also claimed that Burger King's primary consideration on where to put their stores is the relative distance to McDonalds.

>During the 2008 recession, McDonald’s leaned heavily on this facet of their business as they capitalized on an anemic property market – buying up more of the land and buildings where it operates.

I think a lot of why real estate works for them is that the business is not affected by recessions - they may even sell more burgers if people can't afford fancy places. So they can buy real estate cheap when others can't.

This doesn't preclude McDonalds from holding risk. For a long time people said "Buy Kmart and Sears because the value of their real estate is more than their stock values." Then the real estate market tanks.... Real estate is an illiquid investment.

Also - when people choose to eat less burgers, or there is less innovation in the menu, the stock price dips.

Reminds me of the story of Family Video: https://www.forbes.com/sites/noahkirsch/2017/02/21/the-last-...

Along similar lines... with Donkin Donuts


Many times I get cold and cardboard crispy chickens. It sucks. And 99% of the time it's from the drive thru..

I've been to multiple understaffed McDonald's and man does the quality suck. When they have staff things are decent but now I can predict when a McDonald's will be bad.

This is somewhat false. McDonalds amassed all of this real estate during the normal course of doing its main business. It would be like saying Walmart is in the shelf business because they have a lot of shelves. If amassing large amounts of real estate is the end goal, selling burgers for 50 years is probably not the best way to do it. I think McDonalds fears that if it spins off its real estate holdings, those properties will have no loyalty to McDonalds and could become a Starbucks or whatever. The value that McDonalds provides is that it is everywhere and at low prices. If it isn't everywhere, then it can't provide low prices and the whole thing crumbles.

When Starbucks went public, they explicitly told the investment community "don't invest in us because of coffee, invest in us because of real estate, we are a real estate company that happens to sell coffee"

Perhaps that explains why their coffee tastes awful.

Their coffee tastes awful for the same reason that McD's makes awful food: it's optimized for standardization/consistency.

Starbucks roasts all their coffee to relatively exorbitant degrees to cover up the inconsistency brought about by their very-multi-origin sourcing.

Some Starbucks locations sell "single origin" coffee which tastes quite a bit better, if only because they don't have to hide the variance in taste and can afford not to roast it to hell.

That consistency is worth a lot.

I can grab a coffee and sit down with my laptop in Portland, Boston, or Yuma, and I will have the exact same mediocre experience. I don't care about having a transcendent coffee journey; I care about getting a predictable cup of coffee, a kinda-comfortable space, and wifi to check my email. That's it.

I can hunt for some coffeeshop that might be great or might be awful, or I can head into the local Starbucks and know exactly what I'm going to get.

So, instead of taking the 50/50 chance of something being great, you'll accept downright poor instead.

I'm not actually poking fun of you, one of my friends has the same attitude - something that I just can't understand. I'd rather try and find something that was decent than something that's not.

Sounds like for the OP the coffee isn't the product, but rather a space to work and think.

Having to choose a coffee show, see if they have wifi, charging, not to noisy etc. is an inconvenience if you want to just get started on something quickly. You might only have an hour before a meeting if you are travelling for example.

That is interesting. Thanks.

So it takes some effort to make it taste that bad. Keep up the good work SB!

You're missing the point - they make most of their profit from rent, not burgers.

Already seen in "rich dad poor dad" 20 years ago !

Same was true for Tesco for a while - they did very well on land speculation.

This has nothing to do with land speculation.

Another one is Wawa. They seem to be everywhere now.

I wish this were true and not hyperbole. It's the part of the mid-atlantic that I miss most in the midwest.

There is a danger here. McDonald's system = Windows

Franchisees = OEMs

Franchisees not doing their best = laptop filled with crapware

I wonder why this is sitting at the stop when the MS critique with less votes in less time in at the bottom of the page?

Hacker News story placement can be confusing at times. I would understand if they have some tech centric metric somehow, but this isn't even tech?

From the rules:

> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.

Personally, anything that is counterintuitive or surprising gratifies my intellectual curiosity. "You thought that X was important for this business, but you've been bamboozled this whole time! It's actually Y!"

The discussion has introduced a couple of great documentaries as well as anecdotes from people who have worked in similar circumstances in retail, (i.e. the business is important, but the valuable real estate that they're sitting on is even more important) so I don't have a problem with this sort of submission.

Makes sense, more curious about the opaqueness of voting and what shows at the top!

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact