Global Rent excess at the World’s Largest Franchisor

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See the United States section of this report
McDonald’s Corporation, SEC Form 10-K, Feb. 24, 2015, calculated by dividing franchised revenues (p. 18) by
franchised sales (p. 19), since globally almost all franchised revenues consist of royalties and rent (p. 40). McDonald’s
reported franchised and corporate sales in Europe until the end of 2014: McDonald’s Corporation, SEC Form 10-K, Feb.
24, 2015, pp. 18-19. McDonald’s no longer reports Europe system wide sales as from 2015, as it reorganized its
segments into “U.S.”, “International Lead Markets”, “High Growth Markets” and “Foundational Markets & Corporate.”
Archangles SARL, Comptes Annuels, 2015, pp. 5, 19; Archangles SARL, Comptes Annuels, 2014, pp. 5, 18; Archangles
SARL, Comptes Annuels, 2012, pp. 5, 18; Drive le Pontet, Comptes Annuels, 2014, pp. 5, 19; Drive le Pontet, Comptes
Annuels, 2012, pp. 5, 18; Arches Avignon, Comptes Annuels, 2014, pp. 5, 18; Arches Avignon, Comptes Annuels, 2012,
pp. 5, 18; Chatorest, Comptes Annuels 2015, PDF pp. 5, 19; Chatorest, Comptes Annuels 2014, PDF pp. 8, 23; Chatorest,
Comptes Annuels 2012, PDF pp. 8, 22; Cristole, Comtes Annuels 2014, PDF pp. 20, 35; Comptes Annuels 2012, PDF pp.
16, 30; Foncorest, Comptes Annuels 2014, PDF pp. 16, 31; Foncorest, Comptes Annuels 2012, PDF pp. 16, 30; La
Cerisaie, Comptes Annuels 2015, pp. 5, 18; La Cerisaie, Comptes Annuels 2014, PDF pp. 5, 27; ; La Cerisaie, Comptes
Annuels 2012, PDF pp. 5, 19; L'Oseraie, Comptes Annuels 2014, PDF pp. 20, 35; L'Oseraie, Comptes Annuels 2012, PDF
pp. 16, 30; Realrest, Comptes Annuels 2014, PDF pp. 21, 36; Realrest, Comptes Annuels 2012, PDF pp. 17, 31; Com 2,
Comptes Annuels 2012, PDF pp. 9, 21; JBM, Comptes Annuels 2012, PDF pp. 9, 27; Nynon, Comptes Annuels 2012, PDF
pp. 9, 22.
Sample of Italian franchise agreements, including Dadina Srl (16 to 21% as rent), Gemar Srl (13 to 15% as rent),
Eurostar Srl (13 to 16% as rent), Molko Srl (12.5 to 15% as rent). In addition to the rental fees, franchisees are required
to pay a 5% service fee and a 4% advertising fee.
Julie Jargon, “Discontent Simmers Among McDonald’s Franchisees,” Wall Street Journal, June 2, 2015, http://www.wsj.com/articles/discontent-simmers-among-mcdonalds-franchisees-1433272884
Mark Kalinowski, Janney Capital Markets, “MCD: Franchisee Survey Leads to Street-Low June U.S. Comp Estimate”,
July 16, 2014; see also Lisa Baertlein, “McDonald’s is testing a new custom burger program,” Reuters, Apr. 29, 2015,
available at http://uk.businessinsider.com/r-mcdonalds-tests-custom-burg er-program-with-drive-thru-option-2015-4?r=US&IR=T
Leslie Patton, “McDonald’s is Pushing Out the Small Fries,” Bloomberg, Sept. 1, 2016,
https://www.bloomberg.com/news/articles/2016-09-01/mcdonald-s-is-pushing-out-the-small-fries; Leah Goldman, “A
Tour Inside McDonald's Big $550,000-Per-Store Renovations,” Business Insider, May 13, 2011, http://www.businessinsider.com/remodeled-mcdonalds-photos-2011-5,
with McDonald’s contributing about $220,000 of the total cost
Julie Jargon, “Discontent Simmers Among McDonald’s Franchisees,” Wall Street Journal, June 2, 2015
McDonald's Corporation Investor Meeting Transcript, Dec. 10, 2014
McDonald’s France, “UN PROGRAMME DE RÉNOVATION AMBITIEUX,” http://www.mcdonalds-donneescorporate.fr/-
construction-architecture/un-programme-de-renovation-ambitieux
Erica Shaffer, “McDonald's Germany embarks on remodel initiative,” Meat + Poultry, July 2, 2016, http://www.meatpoultry.com/articles/news_home/Busi
ness/2016/07/McDonalds_Germany_embarks_on_r.aspx-
?ID=%7B5A715698-5CE7-4C78-A0C1-B0EF27419985%7D&cck=1
Euromonitor passport data, 2015
McDonald’s U.S.A. Franchise Disclosure Document 2016, Exhibit A, p. 6
McDonald’s U.S.A. Franchise Disclosure Document 2016, Item 1, p. 1; McDonald’s Corporation, SEC Form 8-K, July 23,
2015, Exhibit 99.2, pp. 10-11.
Calculated by dividing the number of franchised stores in the U.S. by the number of franchisees. McDonald’s U.S.A.
Franchise Disclosure Document 2016, p. 1; McDonald’s Corporation, SEC Form 8-K, July 23, 2015, Exhibit 99.2, pp.
10-11.
For example, McDonald’s states in its 2015 Franchise Disclosure Document that base rent is “based upon the total
amount invested by McDonald’s in the acquisition and development of the land and the building as well as monthly
rent paid in the first year to a third party landlord.” Meanwhile, McDonald’s also provides a table clearly implying that
percentage rent is also tied to its real estate costs. The table associates each percentage rent level, from 8.5 percent to
15 percent, with a range of McDonald’s “Acquisition and Development Costs.” McDonald’s Franchise Disclosure
Document 2015, Item 6, Other Fees, p.13.
Steven Mark Adelson, “McDonald’s and the new franchising paradigm,” Financial History Magazine, Summer 2012,
http://www.moaf.org/publications-collections/financial-history-magazine/103/_res/id=File1/McDonalds.pdf
Patrick J. Kaufmann & Francine LaFontaine, “Costs of Control: Economic Rents for McDonald’s Franchisees,” Working
Paper #689, University of Michigan School of Business Administration, July 1992, p. 6, Table 1, http://www.-
jstor.org/stable/725738. According to this table and notes to it, combined royalties and rent were 11.5 percent of gross
sales, while royalties were 3 percent, implying percentage rent of 11.5 percent – 3 percent = 8.5 percent.
McDonald’s Uniform Franchise Offering Circular, 2000, Item 6, Other Fees, Fixed Percentage Rent table
McDonald’s Franchise Disclosure Document 2016, Item 6, p. 15
Julie Jargon, “Discontent Simmers Among McDonald’s Franchisees,” Wall Street Journal, June 2, 2015
McDonald’s U.S., LLC, Franchise Disclosure Document, 2016, p. 79 (Exhibit A, p. 11)