McDonald's has sold many high-value real estate assets over the last 10 years.
One thing most people don't realize is that these situations usually happen one restaurant at a time, so they rarely get any attention. Most franchisees never hear about them unless they know the operator involved. But over the last 10 years, these sales and redevelopments have become more common and, collectively, have wiped out hundreds of millions of dollars in franchisee equity that operators spent decades building.
Sometimes the franchisee loses the location at the end of the franchise term and all of the equity they had built in that business. Other times McDonald's sells the property, redevelops it, and the franchisee goes back into the new building paying substantially higher rent and operating costs, often with less volume than the previous premium location and lower profitability.
Then there are the relocations, where McDonald's sells the existing property, keeps the proceeds, and builds a new restaurant down the road. None of the money from the sale goes toward helping the franchisee with the significantly higher cost of the replacement restaurant. In many cases, even if sales increase, the store's operating income is lower because of the much higher investment and occupancy costs.
The next concern is sale-leasebacks. We know this idea has been discussed by influential shareholders over the years, and I believe it's only a matter of time before it becomes a broader strategy. It may start slowly, but if history is any guide, it's something franchisees should pay close attention to. Sale-leasebacks have contributed to the decline of several well-known retail and restaurant chains by replacing owned real estate with permanently higher rent obligations. The people who benefit the most are often the shareholders in the short term, while operators are left with higher costs and less flexibility for years to come.
Sometimes the franchisee loses the location at the end of the franchise term and all of the equity they had built in that business. Other times McDonald's sells the property, redevelops it, and the franchisee goes back into the new building paying substantially higher rent and operating costs, often with less volume than the previous premium location and lower profitability.
Then there are the relocations, where McDonald's sells the existing property, keeps the proceeds, and builds a new restaurant down the road. None of the money from the sale goes toward helping the franchisee with the significantly higher cost of the replacement restaurant. In many cases, even if sales increase, the store's operating income is lower because of the much higher investment and occupancy costs.
The next concern is sale-leasebacks. We know this idea has been discussed by influential shareholders over the years, and I believe it's only a matter of time before it becomes a broader strategy. It may start slowly, but if history is any guide, it's something franchisees should pay close attention to. Sale-leasebacks have contributed to the decline of several well-known retail and restaurant chains by replacing owned real estate with permanently higher rent obligations. The people who benefit the most are often the shareholders in the short term, while operators are left with higher costs and less flexibility for years to come.
7/31/2026