Famous for their ‘Dollar Menu’, the fast food chain became synonymous with ‘Happy Meals’ and happy foods. Reaching into every market imaginable, McDonald's has leveraged all areas of growth over the decades to outperform their closest competitor Burger King and a host of others.

With respect to superior credit, brand strength, and solid operational revenues, net leasing investors can almost always expect a positive experience when performing due diligence. For the aforementioned reasons, one can also expect higher prices per property, especially when factoring in lower purchase price points and low supply side offerings. Combine this with corporate guarantees behind each franchisee with prime real estate selections, and it’s easy to see how they have become a textbook operation; specifically on “how to build and brand a company successfully”.

McDonald’s typically requires from 0.75-1.15 acreage to build, selecting top notch real estate to do so. When net leases for a high demand McDonald’s property occurs, they usually prefer ground leasing with standard twenty year terms, alongside three to five separate options to renew.

Prior to current times, they would allow rent bumps upwards of 10-15% every five years; now they’ve cut back the percentage to ten at best. They now provide standard flat rates appropriated for the first ten years of the initial lease. Tenants are also highly unlikely to vacate, due to the fact that each franchisee pays up front costs for the building.

Tenant Description

As one of the most successful franchises in history, the McDonald’s Corporation serves a whopping 47 million consumers per day, spanning 36,000 locations in 100 countries with their signature fast food menus.

Besides being the world’s largest QSR (quick-service restaurant), nearly 90% of the 14k locations throughout the U.S.A. are owned and operated by affiliates and franchisees. The remaining portion of restaurants are corporately owned.

Daily revenues are generated from a combination of sales from company owned properties, in addition to royalties, fees, and rental costs incurred by franchisees and affiliates.

Since 2003, McDonald’s began new strategic initiatives to maximize growth to stay abreast of evolving consumer demographics, spending habits, food choices, and started to incorporate healthier menus.

They continue to build on previous successes by understanding the novelty of current times, and how maintaining ‘king of the hill’ status will demand both fulfillment and recognition of consumer needs.

In the future, McDonald’s plans to create growth through franchising approximately 4,000 new locations by 2018.