Need for more space creates real estate challenge

Need for more space creates real estate challenge. Industrial tenants ‘need to be creative’. By: Ryan Thorpe Posted: 03/5/2018 3:00 AM | Comments: Tweet; Post; Reddit; ShareThis; Print; Email. From True North Square to the city’s southwest quadrant and the industrial real estate market, 2018 will prove to be an exciting

What’s keeping McDonald’s from robotizing the whole business?

Simple. The bulk of McDonald’s cash flow do not come from their restaurant business. The majority of their stake lies in real estate. By sitting on valuable real estate for years and years, waiting for the land value to appreciate, while leasing out spare spaces to other businesses/franchise to collect rent, they run a very lucrative business. Making money from selling food is just the sweetener.

Hiring staff creates jobs and draw people to the area. Additionally, the halo effect of having MCD in the vicinity, the iconic yellow arches, improves visibility of nearby businesses and creates wealth for said businesses, which helps MCD’s rental business in an intentional quid-pro-quo.

Joshua Engel has already made a fine point of robots being unsuitable for the food business. I’m not fully inclined either way. Technologically, it is a mixed bag of challenge levels. Given the seasonal/cyclical changes in McDonald’s menu, though, they would need to consider whether mass production of a rapidly changing recipe is worth the trouble and the cost as reprogramming the actuators every time R&D wants to ship a new food arrangement to the public. Robots plain don’t have the versatility of human workers to self-reprogram and self-rearrange to make new food styles without additional costs.

Robotizing anything at the scale of McDonald’s would be 100 times the cost or more of running, say, Uber, purely because mechanical actuators don’t come cheap in relation to pure software.

Replacing human chefs would be a lot of trouble for very little gain. The executives if they are smart should know the capex sink caused by buying and maintaining complex machinery would be hard to recover. Their annual report do not include replacing human chefs with machines, rather, their expansion plans lie in building more chains in Japan and other countries.

Edit:

Adding chart for clarity.

Source: Mcdonald’s Real Estate: How They Really Make Their Money – Wall Street Survivor Blog

 

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