{"id":161345,"date":"2023-10-30T12:48:42","date_gmt":"2023-10-30T18:48:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=161345"},"modified":"2024-02-16T08:19:01","modified_gmt":"2024-02-16T15:19:01","slug":"how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate","title":{"rendered":"The Lesson Real Estate Investors Can Learn From WeWork and McDonald&#8217;s"},"content":{"rendered":"\n<p><span data-preserver-spaces=\"true\">In a time when investing in real estate is as hard as it\u2019s been in a long time, it\u2019s easy to forget how powerful real estate can be for&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/money-451\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">building wealth<\/span><\/a><span data-preserver-spaces=\"true\">. No better example can be given than comparing WeWork\u2019s legendary collapse in 2019 with McDonald\u2019s incredible rise to become a mainstay of American corporate giants (although it\u2019s probably wise to avoid eating there more than once in a great while to avoid a WeWork-like collapse in your general health).<\/span><\/p>\n\n\n\n\n\n\n  <div class=\"lg:block\" x-data=\"{ ad_block_block_bebb83711eeb5c63a567d0ae13229266: popAds(1) }\">\n      <template x-for=\"ad in ad_block_block_bebb83711eeb5c63a567d0ae13229266\">\n        <a\n          :href=\"ad.linkURL\"\n          class=\"no-underline text-black\"\n          x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate', ad.sponsor, ad.title, ad.id, 'blockAdClicked', 'blockAd', '')\"\n          target=\"_blank\">\n          <div\n            class=\"py-4 border-b flex flex-col flex-nowrap text-sm border-t px-0 rounded-none\"\n            x-init=\"\n              analytics.track('blockAdLoaded', {\n                referrer: 'https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate',\n                sponsor: ad.sponsor,\n                ad_title: ad.title,\n                ad_page_location: ''\n              })\n            \"\n            x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate', ad.sponsor, ad.title, ad.id, 'blockAdViewed', 'blockAd', '')\">\n            <div><span class=\"text-xs text-slate-light block bg-slate-50 p-1 inline-block rounded-md\">Sponsored<\/span><\/div>\n            <div class=\"flex items-center text-sm space-x-4\">\n                <img :src=\"ad.imageURL\" :alt=\"ad.imageAlt\" class=\"h-10 w-10 object-cover rounded-full\">\n\n                <div clas=\"text-sm\">\n                    <span class=\"font-bold block\" x-text=\"ad.sponsor\"><\/span>\n                    <span class=\"text-slate\/80\" x-text=\"ad.description\"><\/span>\n                <\/div>\n            <\/div>\n\n            <div>\n                <span class=\"font-bold\" x-text=\"ad.title\"><\/span>\n                <p class=\"mt-2 text-slate\/80\" x-text=\"ad.body\"><\/p>\n                <span class=\"mt-2 text-themeBlue block mt-2 underline\" x-text=\"ad.linkTitle\"><\/span>\n            <\/div>\n          <\/div>\n        <\/a>\n      <\/template>\n  <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The WeWork Disaster<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">WeWork was a good, albeit simple idea: Create a high-end, co-working space for startups and entrepreneurs. While a solid concept, it\u2019s hard to see how this was much better than Regus, a long-established (albeit less modern and chic) co-working space company.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Yet somehow, WeWork was able to finagle its way into being valued at $47 billion in 2019. After one of the most disastrous IPOs in corporate history, the company&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.ft.com\/content\/ebf46c04-cb7c-4af7-bd3d-cf3543c00952\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">lost 99% of its value<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in four years and is now worth a mere $503 million. Somehow, though, it&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bustle.com\/entertainment\/does-wework-still-exist-who-owns-it-now\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">is still limping along<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;with a new CEO and modest goals.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But back to the collapse. A lot of things happened to make WeWork a word that commonly appears in sentences with the likes of business failures like Pets.com and Theranos.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For one, the company grew way too fast. WeWork was founded in 2010, and by 2019, it had grown to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.rubyhome.com\/blog\/wework-stats\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">590,000 members<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in 111 cities. In 2017, it was barely over 150,000. The number of locations went from 275 in 2017 to 850 in 2019!&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In 2013, WeWork added 231,682 sq. ft. of space. In 2018, it added 4,441,954. And in 2019,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.vox.com\/recode\/2020\/1\/8\/21052001\/wework-growth-us-new-york-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">it added 7,704,684<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;sq. ft.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This kind of exponential growth is a rather unwise strategy.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Regardless of the wisdom (or lack thereof) behind the decision to base its business plan on how a cancerous cell functions, WeWork was only able to grow so fast after Masayoshi Son\u2019s Softbank invested a whopping $4.4 billion in the fledgling startup.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fastcompany.com\/90426446\/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">According to then-WeWork CEO Adam Neumann<\/span><\/a><span data-preserver-spaces=\"true\">, \u201cWhen Masa chose to invest in me for the first time, he only met me for 28 minutes.\u201d<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">(On a side note, if you happen to have $4.4 billion sitting around, take at least half an hour to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">vet any potential investment<\/span><\/a><span data-preserver-spaces=\"true\">).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Masayoshi Son would live to regret this decision.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Had he done a bit more research, he would have learned that Adam Neumann and his wife Rebekah ran the company almost like a cult. Indeed, the stories were so strange that a book on WeWork was titled&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.amazon.com\/Cult-We-Neumann-Startup-Delusion\/dp\/0593237110\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">The Cult of We<\/span><\/em><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">From throwing wild, mandatory, alcohol-drenched, and drug-laden&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.businessinsider.com\/employees-inside-adam-neumanns-wework-reveal-a-wild-culture-2019-9\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">employee retreats<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to having a live tiger roam one of their mansions, WeWork was not your typical company, to say the least. It was really more of a for-profit cult.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As an offshoot, the company created apartments called WeLive (rented almost exclusively by WeWork employees) and WeGrow schools (whose students were almost exclusively WeWork employees).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The staff lived, worked, and breathed WeWork. Slowly but surely, many of them would only hang out with other WeWork staff. In the documentary&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.imdb.com\/title\/tt11188154\/?ref_=tt_ch\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">WeWork: Or the Making and Breaking of a $47 Billion Unicorn<\/span><\/em><\/a><span data-preserver-spaces=\"true\">, one former employee&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.theverge.com\/2021\/4\/2\/22358602\/wework-documentary-adam-neumann-hulu\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">notes<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;that if you ever had friends from outside WeLive visit, \u201cthey came over once and never returned.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Given this cult-like vibe, it shouldn\u2019t be surprising that Rebekah Neumann was into all sorts of spiritual mumbo jumbo that she tried to pass on to the staff.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Adam Neumann\u2019s eccentric style and mad rush for growth cost a fortune and was bleeding cash. WeWork had a net operating loss of $933 million in 2017, which skyrocketed to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.rubyhome.com\/blog\/wework-stats\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">$3.78 billion<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in 2019 when WeWork desperately needed money. When SoftBank turned them down, they decided to launch one of the most catastrophic (and hilarious) IPOs in corporate history.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The IPO&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2019\/08\/27\/wework-is-the-most-ridiculous-ipo-of-2019\/?sh=3418a6bb1ad6\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">all but admitted<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;the company had no corporate governance structure whatsoever and made the most rosy and unrealistic predictions imaginable. But more ridiculously, the IPO acknowledged the company had made multiple loans at the somewhat generous rate of 1% to CEO Adam Neumann and, best of all, that Neumann would also be charging $5.9 million to WeWork to use the \u201cWe\u201d trademark.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In spite of this obscene self-dealing, the IPO was also full of language that might as well have come from some college sophomore\u2019s&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/mashable.com\/article\/wework-documentary-hulu-review\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">bad attempt at poetry<\/span><\/a><span data-preserver-spaces=\"true\">:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cIf you take the &#8216;me&#8217; and you flip it, and you get the &#8216;we,&#8217; you understand that we&#8217;re about to change the way people work, and the way people live, but more importantly, change the world.&#8221;<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As one business columnist sarcastically retorted: \u201cFor God\u2019s sake, you\u2019re renting f\u2014ing desks.\u201d<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The IPO fell flat, and WeWork\u2019s stock collapsed by over 99%.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">WeWork Rents<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are a lot of lessons for entrepreneurs in WeWork\u2019s collapse: don\u2019t grow too fast, build systems, drop the cultist nonsense, don\u2019t let employee retreats become degenerate brothels, stay above board, and avoid self-dealing.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But there is another lesson that is rarely discussed: It\u2019s much better to own than to rent.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">WeWork was so obsessed with expanding that it went with the cheaper option of renting on virtually all of its properties. Furthermore, the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2019\/08\/27\/wework-is-the-most-ridiculous-ipo-of-2019\/?sh=3418a6bb1ad6\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">average lease they signed was 15 years<\/span><\/a><span data-preserver-spaces=\"true\">. This created an enormous recession risk because WeWork\u2019s rent payments were fixed. But during recessions, they would lose many of their tenants, causing their income to plummet.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Plummeting income means access to credit would dry up. And since they didn\u2019t own the real estate, they couldn\u2019t tap into any&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-home-equity\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">equity<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;because they didn\u2019t have any.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In hindsight, it\u2019s absolutely incredible that WeWork was valued at $47 billion, whereas Regus, which operates under the IWG name, is only at&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.cnbc.com\/quotes\/IWG-GB\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">$1.6 billion<\/span><\/a><span data-preserver-spaces=\"true\">. (I should note that many of Regus\u2019 entities&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/en.wikipedia.org\/wiki\/IWG_plc\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">went bankrupt in 2020<\/span><\/a><span data-preserver-spaces=\"true\">, primarily due to Covid, although the company has since recovered).<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">WeWork had 850 locations and was hemorrhaging money, whereas&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/sites\/forbestechcouncil\/2019\/06\/14\/how-did-wework-beat-regus\/?sh=7fbc9ace4303\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Regus had over 3,000<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and was (at the time) making money. Furthermore, Regus&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.coworkingresources.org\/blog\/wework-vs-regus-franchise-model\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">owns many of its buildings<\/span><\/a><span data-preserver-spaces=\"true\">, whereas WeWork rented (<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2019\/08\/27\/wework-is-the-most-ridiculous-ipo-of-2019\/?sh=3418a6bb1ad6\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">sometimes from Adam Neumann himself<\/span><\/a><span data-preserver-spaces=\"true\">, in another conflict of interest the IPO brought to light).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Somehow, Wall Street viewed WeWork as a technology company, not a real estate company, which allowed its meager earnings to be inflated into Facebook-like potential by many analysts. But in the end, it went up in smoke.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In the meantime, Regus continued along and, despite the struggles of the pandemic era, is back on its feet (in large part thanks to its real estate equity) and was expected to break even in 2023.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">McDonald\u2019s is a Real Estate Company, Not a Burger Company<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">An even better example than Regus when it comes to the power of real estate is McDonald&#8217;s. While WeWork was a real estate company (that exclusively rented) confused for a technology company. McDonald\u2019s was a real estate company whose founders originally confused it for a burger company.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In 1954, Ray Kroc convinced Richard and Maurice McDonald&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fmsfranchise.com\/history-of-the-mcdonalds-franchise-system\/#:~:text=The%20pivotal%20moment%20in%20the,potential%20for%20franchising%20the%20concept.\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">to franchise their successful San Bernardino McDonald\u2019s restaurant<\/span><\/a><span data-preserver-spaces=\"true\">. Ray Kroc began finding franchisees to start up new locations but was constantly hamstrung with cash flow issues. As Inc.com&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.inc.com\/jeff-haden\/64-years-ago-ray-kroc-made-a-decision-that-completely-transformed-mcdonalds-rest-is-history.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">notes<\/span><\/a><span data-preserver-spaces=\"true\">:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cIn 1956, Ray Kroc was a couple years into a business agreement with the McDonald brothers. He had opened his first franchise in Illinois. He had added a few more. But he struggled to bring in enough revenue to make a reasonable profit, much less generate funds for further expansion. Nor could he attract franchisees with sufficient capital to purchase their own land and build their own stores.<\/span><\/em><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">He faced the classic entrepreneurial dilemma: Rapid growth was needed to grow revenue per fixed costs and overcome tiny operating margins. But he had no money to fuel that growth.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This problem was resolved when Harry Sonneborn approached Ray Kroc to explain that his entire approach to McDonald\u2019s was wrong. A scene from&nbsp;<\/span><em><span data-preserver-spaces=\"true\">The Founder<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.youtube.com\/watch?v=uxCL2RqCuiY\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">depicts a (simplified) version<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;of what happened.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Harry Sonneborn starts off by saying:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cTo summarize, you have a minuscule revenue stream, no cash reserves, and an albatross of a contract that requires you to go through a slow approval process to enact changes if they\u2019re approved, which they never are.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">He then asks Ray Kroc how their process worked up until that point. Kroc responds:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cFranchisee finds a piece of land he likes. Gets a lease, usually 20 years. Takes out a construction loan, throws up a building, and off he goes.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Then Kroc asks, \u201cIs there a problem?\u201d To which Sonneborn replies, \u201cA big one.\u201d And then, the most important line of the movie,<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cYou don&#8217;t seem to realize what business you&#8217;re in. You&#8217;re not in the burger business. You&#8217;re in the real estate business.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Sonneborn continues:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cYou don&#8217;t build an empire off a 1.4% cut of a 15-cent hamburger. You build it by owning the land upon which that burger is cooked. What you ought to be doing is buying up plots of land, then turning around and leasing said plots to franchisees, who, as a condition of their deal, should be permitted to lease from you and you alone.&nbsp;<\/span><\/em><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">This will provide you with two things. One, a steady, upfront revenue stream. Money flows in before the first stake is in the ground. Two, greater capital for expansion. Which in turn fuels further land acquisition, which in turn fuels further expansion, and so on and so on. Land. That&#8217;s where the money is.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">After this fictionalized account of a real conversation happened, Ray Kroc eventually brought&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/en.wikipedia.org\/wiki\/Harry_J._Sonneborn\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Harry Sonneborn on board in 1959<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to serve as McDonald&#8217;s first CEO. In 1957, they set up&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.restfinance.com\/restaurant-finance-across-america\/ray-kroc-not-the-founder-but-a-financial-engineer\/article_a3d94b01-60db-5a81-9ac9-6e1ec10d8d28.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Franchise Realty Corp<\/span><\/a><span data-preserver-spaces=\"true\">. to help finance new franchisees, which almost immediately solved Kroc\u2019s cash flow issues and allowed McDonald\u2019s to expand rapidly.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">(As an aside, this is one of the major factors that ended up leading to Kroc\u2019s break with the McDonald\u2019s brothers and subsequently buying them out in&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.mashed.com\/147897\/the-tragic-real-life-story-of-the-mcdonald-brothers\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">a wildly one-sided deal<\/span><\/a><span data-preserver-spaces=\"true\">.)&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As of the second quarter of 2023, McDonald\u2019s owns a whopping more than&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fool.com\/investing\/2023\/10\/01\/yes-mcdonalds-franchise-fee-hike-is-a-red-flag\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">40,000 properties<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in over 100 countries, which represents $28.4 billion in real estate. They pay a 4% to 5% franchise fee. In addition,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/qz.com\/965779\/mcdonalds-isnt-really-a-fast-food-chain-its-a-brilliant-30-billion-real-estate-company\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">85%<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;of McDonald\u2019s restaurants are franchise-run locations.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As real estate investors also know,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-831\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">depreciation<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is a huge advantage to owning real estate. McDonald\u2019s reported over $1.7 billion in depreciation in 2022. Although, as&nbsp;<\/span><em><span data-preserver-spaces=\"true\">QZ<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;again notes, \u201cit\u2019s unclear what portion of that was depreciation of real estate rented to franchisees.\u201d<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As of this writing, McDonald\u2019s has a market cap of $186.7 billion, which makes it the 50th-largest company in the world and the largest restaurant chain.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Or, perhaps more aptly put, McDonald\u2019s has become the largest real estate company in the world.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Simple Lesson for Real Estate Investors<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are a lot of things that went into both McDonald\u2019s success and WeWork\u2019s spectacular failure. But the long-term power of owning real estate is a major one that should not be overlooked.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In a time when real estate investing is extraordinarily challenging, it\u2019s important to remember that despite the current market, in the long run, the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/12-benefits-of-real-estate-investing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">benefits of owning real estate<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;make it the place to be.&nbsp;<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_6411b8f32652b368578567b48712a662\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_5d14169f3b84e51575019566b29abcb0\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_a297cfa177c8c8d28cb19ea7bf93afd8 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/how-wework-failed-and-mcdonalds-did-everything-right-with-real-estate&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>McDonald&#8217;s is more than just a fast food joint\u2014It&#8217;s a real estate company. Here&#8217;s how WeWork failed and how McDonald&#8217;s supercharged its success with property.<\/p>\n","protected":false},"author":1689,"featured_media":161348,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7358],"tags":[],"class_list":["post-161345","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-stories"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/161345","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1689"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=161345"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/161345\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/161348"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=161345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=161345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=161345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}