MC DONALD’S BRILLIANT REVENUE

McDonald's serves billions and billions of customers, but the bulk of their profit isn't made from food sales. McDonald's serves enough food to serve more than 70 million people per day and approximately 75 burgers per second. But the majority of their revenue isn't earned from food. So where is their money coming from?

"We are not basically in the food business," former McDonald's CFO Harry J. Sonneborn reportedly told investors. "We are in the real estate business. The only reason we sell 15 cent hamburgers is that they are the greatest producer of revenue from which our tenants can pay us rent."

So how does McDonald's make its money?

McDonald's has around 38,000 restaurants in 118 countries and territories across the world, serving more than 69 million people every day globally. Out of these 38,000 restaurants McDonald's owns only 5% and the rest are franchised out. Franchises are when individuals run the restaurants but McDonald's has contracted to operate them. The franchisee is responsible for all the expenses of running the restaurant while also paying McDonald's for rent.

McDonald's doesn't have to pay a single penny towards the cost of running the restaurants, this helps them to cut down on their expenses massively. The franchisee also has to pay McDonald's a franchising fee.

The land in which the franchise runs the restaurant is owned by the fast-food giants. McDonald's owns these lands and leases it out to their franchises. The company keeps about 82% of the revenue generated by franchisees.

So not only does the company have a steady flow of income form their franchises paying them rent but also a part of the revenue generated by them from selling burgers. McDonald's has $30 billion in real estate and annual profits that float around $4.5 billion, according to company financial disclosures. The number of franchises McDonald's locations has been steadily expanding. This brilliant revenue model of McDonald's has helped them to bring in billions of dollars annually.

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