Now that McDonalds is trying to open 10,000 new stores until 2027

Member since 2019 · 7k+ posts · 4k+ votes

Folks, McD has announced they want to open new 10K new stores til next three years.
So question for you professional folks in NNN space, what do you do to grab this opportunity ? is it even possible ?

Converting large area of office building to McDonald store ? :-)
Building mcD warehouses ?

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Bjorn AhlbladPro Member

Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes

Years ago we shared a campfire with a man and his son, they were being offered an exclusive contract to fabricate kitchens for McDonalds. Exciting perhaps, but high volume, low margin contracts. Hard to imagine doing that today when you can't get folks to even show up let alone work all day. He and his son spent all their time herding squirrels 24/7-poor management? Who knows?

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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
2y
Years ago we shared a campfire with a man and his son, they were being offered an exclusive contract to fabricate kitchens for McDonalds. Exciting perhaps, but high volume, low margin contracts. Hard to imagine doing that today when you can't get folks to even show up let alone work all day. He and his son spent all their time herding squirrels 24/7-poor management? Who knows?
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
2y
The high risk high reward play here, for those with the deep pockets and appetite for risk.
- Try to figure out where McDs likes to build. This is probably the easiest part.
- Look for stale listings of cheap vacant lots that tend to fit that criteria.
- Buy a bunch of them.
- Lose out on most (now you're stuck with that vacant lot that, if you go sell it, will be a stale listing with little/no interest), win on a few, and hopefully the wins offset those losses.
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Michael K GallagherBusiness Member
Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
2y
You're basically going to be going hunting for hard corner vacant lots, and tying them up to either sell or ground lease to MCD's. Most of the grocery anchored centers are unlikely to parcel off an out parcel and sell it so there's probably not a play for those types of sites where MCD's goes. If there is knowlege of what their trade area demographics are you could theoretically use that to hone in on specific markets where there is no MCD's currently, but that would mean overlaying the current competition map as well to find those holes in their overall location strategy.
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 805 votes
2y
If I had deep pockets I would snag up all the Ruby Tuesdays, Fridays, etc that are going out of business. Same thing happened when Truist bank and BB&T Merged. These were redeveloped into drive thru starbuck locations in the mid atlantic.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
2y
Mcdonalds most are franchised owned and not corporate. Mcdonald's hits their franchisees with tons of fees and has garnered it's easier to offer support and collect than to manage tons of employees store to store.
There are a few parent corporate owned stores but not many.
Mcdonald's doesn't pay very much rent most of them sell for 2 million or so. The real money is in Chick Fil A or Raising Cane's where they pay tons of rent and usually do more sales than Starbucks, Mcdonalds, and a Subway store put together.
Now of course the diamond tenants that pay lots of rent want the best locations as it's not really about the rent they pay it's more about how much sales per foot they think they can generate and profit for the site.
Example a restaurant could pay 100k in rent but do 1.5 million in sales for 7.5 percent rent to sales ratio. Conversely a restaurant could pay 200k in rent but do 5 million in sales for 4 percent rent to sales ratio.
Typically lower rent and B to C sites only attract the smaller tenant off name franchisees. The diamond tenants often do not care about low rent their focus is the best site.
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Kristi KandelPro Member
Developer · Fort Myers Beach, FL · Member since 2018 · 383 posts · 195 votes
2y
Quote from @Carlos Ptriawan:

Folks, McD has announced they want to open new 10K new stores til next three years.
So question for you professional folks in NNN space, what do you do to grab this opportunity ? is it even possible ?

Converting large area of office building to McDonald store ? :-)
Building mcD warehouses ?

I've completed ground leases for McD in California where the dirt is very expensive and Tenants like McD are ok just leasing not owning the dirt. That scenario does not apply in cheaper markets where McD would prefer to own the dirt. Just like ALDI, just like most national Tenants who are in the biz of RE and just happen to also sell burgers, groceries, etc.
In ground leases, typically a developer is going to have control of a much larger piece of dirt and will build out entire shopping centers/developments. Those projects will then have "out parcels" where the developers will ground lease the dirt to McD for the McD team to then develop the lot and building. The developer will perform per the workletter in the ground lease that details out HOW the out parcel pad is delivered to McD. Things like the timing and completion of the necessary roads, utilities, and overall infrastructure for the overall development and how those are stubbed into the lease parcel. Sometimes that could also include providing a "certified pad" that the future building will be built on.
For cheaper markets where McD will own the dirt you can reach out to McD real estate managers and their brokers to see what their plan is in your market. Then you could potentially try to identify land and essentially wholesale it to the McD team once you have the land tied up. It you found THE location and McD can't go anywhere else in a cheaper market (not typical) then you could try to ground lease but that's more of a risky gamble and I'd have many exit strategies.
While the national tenants and NNN seem enticing they aren't as great as they seem the more you get into the weeds. When adding McD to a larger development sometimes that can help you secure other Tenants who are willing to pay more rent b/c you have National Tenants going into the development. That's generally the larger play when working with the big guys. They are harder negotiators and typically get closer to what they want so you want to leverage their brand to build the overall development and make the real profits/margins.
However, EVERYONE's strategy is different and my career started with developing locations for CVS and Family Dollar so partnering direct with national tenants works well too. It's just a completely different biz model that typically only the preferred developers are able to do.
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