How McDonald's Became a Real Estate Company Disguised as a Burger Chain

When you buy a burger at McDonald's, you're paying for more than just the food — a significant part of McDonald's overall business involves owning or leasing the land and buildings under many of its franchised restaurants, and collecting rent from the franchisees who actually run them. A typical McDonald's franchise arrangement layers several revenue streams for the corporation: an upfront franchise fee, ongoing royalties based on the restaurant's sales, and often rent on the real estate itself, if McDonald's owns or controls the property.

Harry Sonneborn, an early McDonald's financial executive, is widely credited with the strategic insight behind this model — recognizing that controlling the real estate underneath franchised locations could provide a more stable, predictable revenue stream than relying on food sales and royalties alone, which are more exposed to swings in consumer spending and food costs.