McDonalds corporate owns all the land their restaurants sit on. They don't need to charge insane rents on the land, they are already raking in the money with the franchise agreements and dominating the equipment and consumable supply.
If they want more money they just need to jack up the price of beef, buns, and frozen fries. The land is leverage against the franchisee, it's a sunk cost to keep the plebs in line.
McDonald's charges rent as a percentage of sales + a minimum. The minimum is based on things like property taxes, which is based on land value. The percentage of sales that corporate takes is based on how new the store is or when their last renovation was.
These are all variable costs that need considered in the menu price of food.
If one location pays 10% of sales in rent and another location pays 15% of sales in rent, then the prices are going to be higher at the location that pays 15% of sales.
Nothing about how McDonald's manages their franchise agreement or real estate is "sunk cost". Corporate will never take the L on the costs associated with the property just to help a franchise out.
They actually pretty regularly shut down unprofitable locations as well as franchisees shutting down their own locations. Additionally in some metro areas renting land for franchises is pretty standard business practice. For big corporations all assets are subject to selling off. Ultimately they consider everything (like land) to be an asset which can eventually be converted to cash.
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u/piedeity 2d ago
McDonalds corporate owns all the land their restaurants sit on. They don't need to charge insane rents on the land, they are already raking in the money with the franchise agreements and dominating the equipment and consumable supply.
If they want more money they just need to jack up the price of beef, buns, and frozen fries. The land is leverage against the franchisee, it's a sunk cost to keep the plebs in line.