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04/17/2020

McDonald’s real estate strategy girds it for tough times

McDonald's restaurant

Like all quick-service restaurant chains during the coronavirus pandemic, McDonald’s sales have been diminished as it subsists on drive-through and delivery offers only.

But its real estate strategy steels it against losses due to unpaid rent.

McDonald’s owns more than 50% of the land and 80% of the buildings throughout its chain. Last year it collected $7.5 billion in rent from franchisees, about one-third of its 2019 revenue, according to a report from National Real Estate Investor.

Most other large fast-food chains lease their store’s sites from third-party landlords, but McDonald’s strategy offers the company added protection during unforeseen crises.

“If a McDonald’s franchisee experiences a dip in sales, that franchisee still owes rent to McDonald’s. If that franchisee’s location fails, McDonald’s can try to line up a new tenant for that location, or simply sell or lease the land to someone else for a different use,” said Andrew Maguire, a commercial real estate attorney at Devon, Pa.-based law firm McCausland Keen + Buckman.