McDonald’s real estate strategy could help it weather storm

Fear not, America: The Golden Arches are positioned to endure the coronavirus pandemic.

The real estate and franchising structure used by McDonald’s may provide more protection from the economic downturn than those of its rivals, according to National Real Estate Investor.

The fast-food behemoth owns a good chunk of the real estate beneath its eateries, whereas competitors Wendy’s and Jack in the Box tend to lease the properties where its franchisees operate. That means the performance of those businesses is more heavily determined by sales.

As of the end of 2019, McDonald’s owned about 55 percent of the land under its establishments and roughly 80 percent of the restaurant buildings, NREI reports.

That means if a franchise 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,” McCausland Keen + Buckman attorney Andrew Maguire, who specializes in restaurant leasing, told the publication.

Although the company might be fine, its franchisees might take the brunt of the blow. McDonald’s has taken some measures to help them, including rent deferrals for three months, but some franchise owners have said they aren’t enough.

The steps could help restaurants stay open, but ultimately create more debt for franchisees.

Blake Casper, chairman of an organization he says represents around 70 percent of McDonald’s franchisees, penned a letter to company leaders saying they are not providing “meaningful” relief and should do more. [NREI] — Dennis Lynch