Here's What Share Of US McDonald's Locations Are Franchisee-Owned - Tasting Table

"Franchising is the backbone of many fast food business models, and McDonald's is the company that pioneered it. While the idea of franchising - where companies sell the rights to operate stores to third-party owners - predated McDonald's, it was the burger giant that kicked off the modern craze. Ray Kroc himself started as a franchisee of the McDonald brothers, before purchasing the company and pushing its rapid expansion. Franchising is still the foundation of the company's success today."

"In fact, according to McDonald's website, around 95% of all McDonald's restaurant locations are franchisee owned. This is the case both worldwide and domestically. The vast majority of U.S. McDonald's are franchised not just for the sake of growth, but because McDonald's entire business model is based as much on land as it is hamburgers and fries."

"The breakthrough that allowed the chain to achieve such heights came from early McDonald's CFO Harry Sonneborn. In the mid-1950s, Kroc was struggling because the revenue cut that he received from franchisees was too small to fund expansion; it also wasn't reliable enough. Sonneborn recognized that the real money was not in the volatile world of fast food sales, but in the land itself."

"The CFO recommended that the company buy the land that its franchisees operate on, then rent it to them. This way, the franchisees would still own the local business but would be forced to pay rent to McDonald's as a condition of their contract. This gave McDonald's a steady source of revenue as soon as new locations opened (and more control over franchisees) because the company wasn't just their partner, but also their landlord."

Franchising underpins many fast food business models, and McDonald’s pioneered modern franchising. Ray Kroc began as a franchisee of the McDonald brothers, later purchased the company, and drove rapid expansion. Around 95% of McDonald’s restaurant locations are franchisee owned worldwide and domestically. In the U.S., franchising supports a business model that depends on land as much as on food. Harry Sonneborn identified that revenue from fast food sales was volatile, while land offered steadier returns. He recommended that McDonald’s buy the land and rent it to franchisees, giving McDonald’s reliable income and more control while franchisees still operate local businesses.

Read at Tasting Table