Harry Sonneborn came up with a solution, he thought McDonald’s could make money by leasing or buying potential store sites and than subleasing them to franchisees initially at a 20% markup, and then at a 40% mark up. Under this plan, McDonald would scout out sites and sign 20 year leases at fixed rates. Franchisees would pay McDonald’s either a minimum rate or a percentage of sales, whichever was greater. As sales and prices inevitably rose over the years, due to inflation and consumer price index, the company would collect more and more rent as its cost remained virtually constant.
Kroc set up a subsidiary, the franchise realty Corporation, to execute this strategy, flying around the country in a small airplane scouting suburban neighborhoods dotted with tract housing, schools, and churches which he regarded as fertile ground for the planting of new “Golden Arches.”
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