McDonald's.
Americans around the world love its food, but what is it really? Most people say it's a fast food company. The smart people say it's in the real estate business.
But the real secret of $MCD's success is something NOBODY is talking about... 1/npic.twitter.com/YeMR8zO1B6
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And so
$MCD created generations of sharecropper millionaires, and billions of $ of value for its owners. But how? Was it the burgers or the real estate? Neither! Or maybe, kinda both? It's hard to explain, but I'll give it my best shot as FinTwit's expert on The Founder. 7/npic.twitter.com/D4AZOYz9DJShow this thread -
According to the SEIU,
$MCD gouges its franchisees by charging above market rents, resulting in a ROI of between 10.5% and 19.3% on its real estate, 2-3x industry norms. That puts a finger on the "real estate" side of the scale, but we're not done! 8/nhttps://www.bloomberg.com/news/articles/2017-05-02/mcdonald-s-accused-by-union-of-inflating-franchisee-rents …Show this thread -
You see, the world's premier expert on valuation, Aswath Damodaran, says that leases are really just a form of debt. And the major accounting bodies agree, now requiring operating lease commitments to be capitalized on the balance sheet as if they were a form of debt. 9/npic.twitter.com/RAmobTi71P
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You need at least $500,000 in liquid assets to be considered as a
$MCD franchisee. If leases are debt, then by signing up creditworthy franchisees incentivized by a big chunk of their savings being on the line,$MCD is creating its own high quality debt portfolio. 10/npic.twitter.com/y0p31hvtWzShow this thread -
By leasing its real estate to quality tenants,
$MCD creates its own high quality debt portfolio. Gouging those tenants with above market rent allegedly allows$MCD to earn an ROI of between 10.5% and 19.3%.$MCD's real biz? Manufacturing subprime yields from prime assets. 11/11pic.twitter.com/q9XslWbGBSShow this thread
End of conversation
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