Ray Kroc is widely known as the man who turned McDonald's into the fast-food giant we know today. However, the key to the company's success wasn't just the burgers and fries they served. In fact, it was the real estate that McDonald's owned that helped them grow into the empire they are today. Harry Sonneborn, who worked with Kroc, was the mastermind behind this real estate strategy.
Sonneborn was an expert in finance who recognized that the real money was in owning the land on which the McDonald's franchises sat. In the early days, Kroc and the McDonald's brothers had tried to make money by selling franchises, but they weren't making enough profit. Sonneborn suggested that instead of selling franchises, they should just lease the land to the franchisees and charge them rent.
This way, McDonald's would not only make money from selling the franchise, but they would also receive a steady stream of cash flow from the rent. Additionally, they could control the quality of the locations and ensure that only the best franchisees were selected.
Sonneborn's idea was a game-changer. McDonald's could now grow rapidly without having to invest a lot of capital. They could buy up land in prime locations and then lease it to their franchisees. This meant that they owned the land, which was appreciating in value, while the franchisees were responsible for the day-to-day running of the business.
In conclusion, While Ray Kroc is often credited with the success of McDonald's, it was Harry Sonneborn's real estate strategy that truly led to the company's growth. By leasing land to franchisees, McDonald's was able to become a real estate giant while still maintaining the quality of their locations. It's a lesson in business that still holds true today: sometimes it's not about the product, but about the strategy behind it. Thanks for watching.
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