Coalition of Franchisee Associations

April 7, 2018

Better Hope That High Volume Store Isn't Too Valuable

In Washington DC McDonald's is selling the land under a store for $31 million. 

It's hard to get a rewrite if McDonald's Corp. sells the property

JBG Smith pays $31M for NoMa McDonald's - Washington Business Journal


Richard Adams said...

Don't let that road sign picture throw you - whoever runs their website wouldn't know what that maple leaf means - they just grabbed a picture of the arches.

Anonymous said...

Works out great for McDonald's Corp they pocket $31million go acquire a leased site for relocation then very little money out of their pocket maybe a couple of million in development costs then get a higher rent win, win for McDonald's operator builds a new store and probably has at 6%-9% higher rent lose, lose for franchisee.

Richard Adams said...

There's no guarantee there will be a relocation store, especially in a real estate market like the nation's capital. McDonald's can afford to lose a store here and there when there's that kind of money involved.

There could be a good reason why this deal has dragged out and the store won't close for a few years - McDonald's may have to let the franchise run out. Then the Operator just leaves with their old equipment and inventory.

This is why I've always urged Operators to do some research on the actual real estate status on stores they are operating and especially on stores they are buying. Traditionally Operators have just taken the word of corporate. But, the way McDonald's does real estate has changed over the years. Their motivations are very different than when McDonald's was a growth company.

Pretty much everything veteran McDonald's Operators know about McDonald's real estate has changed.

This kind of transaction will happen more often in the future. We real estate guys like to talk about "highest and best use" of a property. There are many, many McDonald's stores sitting on property that should be occupied by a huge multi-story building or high end retail, not a drive-thru selling $1.00 hamburgers.

Anonymous said...

It's scary that we could lose our equity in a store because it's in a great location.