Dear Reader,
When you hear the word “McDonald’s,” one thing likely comes to mind: cheap, mass-produced food, available at a moment’s notice.
And with nearly 37,000 locations worldwide, it’s no wonder. If the company didn’t invent fast food, it certainly optimized and perfected its production and sale.
The golden arches and the McDonald’s (NYSE: MCD) menu have, for better or worse, been synonymous with American culinary and popular culture since the 1950s.
One of my own favorite fun facts about the restaurant chain goes back to my own roots. The biggest McDonald’s restaurant in Europe is located in Moscow’s Pushkin Square.
Opened in 1990, it served over 30,000 customers on its opening day, which not only set a record for the company but also, in my opinion, signaled that the Soviet Empire was dead, even in the eyes of its own citizens.
A big win for American corporate culture, and a huge loss for communism. Sorry, Bernie.
McDonald’s: One of the World’s Greatest Land Owners
But as familiar as Ronald McDonald and the golden arches are to us, there is one aspect of the company few people are aware of.
McDonald’s isn’t primarily a restaurant company. It’s a real estate company that just happens to specialize in commercial properties engaged in the business of food sales.
Anybody who’s seen the 2016 Michael Keaton movie The Founder, about the man who transformed McDonald’s from a single hamburger joint into what it is today, knows what I’m talking about.
When Ray Kroc first approached the McDonald brothers in 1954 with the intent of investing in their business, he saw the potential in the hyper-efficient, super-fast, price-optimized method of production and distribution that the brothers had perfected through years of trial and error.
But it wasn’t until later, when Kroc brought on board the company’s eventual first CFO, Harry J. Sonneborn, that McDonald’s took on its modern form.
The focus shifted from food to the management of a growing portfolio of branches, owned primarily by franchisees (more than 31,000 of the company’s current 36,900 locations).
Sonneborn was quoted as saying:
We are not technically in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is because they are the greatest producer of revenue, from which our tenants can pay us our rent.
Burgers Are Small Potatoes
McDonald’s buys up land parcels that have potential as future branch locations, it sets and enforces product and service standards, and, of course, it owns the all-important brand that carries the promise of those standards.
And it’s precisely that mechanism — not cheap burgers and over-salted fries — that turned the single burger joint into the $138 billion corporation it is today.
Land ownership, brand cultivation, and the enforcement of world-famous standards.
That’s what McDonald’s is, and that’s why nobody else comes close to its level of success.
This business model has immense power thanks to its infinite adaptability and near-finite scalability, and it can be (and has been) applied to many industries where independent owners can operate as franchisees.
The most recent application of the McDonald’s method emerged from one of today’s newest industrial sectors: cannabis.
After all, prime real estate, proper, well-maintained facilities, and standards of operation are just as important in the business of plant cultivation and processing as they are in food service — perhaps even more so.
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A Winning Business Model Applied to Another Winning Product
A company I recently discovered, based in the capital of North American legal cannabis production — British Columbia — has taken this exact system and turned it into one of the world’s first cannabis multinationals.
This company owns land and facilities in multiple U.S. states, Canada, and Europe, and it now carries close to 20 individual cannabis brands in its growing portfolio.
It owns and leases the land and facilities. It plays a key role in product development. It enforces standards. It spends much of its time looking for and investing in new opportunities.
It’s even hired a former Coca-Cola exec to work on a cannabis-infused soft drink.
It doesn’t just grow weed, just like McDonald’s doesn’t just sell burgers.
Cannabis today is still an emerging industry. Federal prohibition has kept the supply side of the sector in the shadows for decades, but thanks to a recent slackening of those age-old restrictions (Trump’s signing of last month’s farm bill legalized hemp, a huge step forward), companies like the one I just described are getting ready to kick into high gear.
Between medical and non-medical applications, we’re looking at a projected growth factor of close to 400% over the next six years — and many analysts think that’s conservative.
When this industry does inevitably hit the mainstream, it’s not going to be your run-of-the mill growers and dispensaries that will do the bulk of the expansion… It will be the highly scalable, rapidly evolving businesses like the McDonald’s-modeled firm I’ve been talking about.
Just imagine investing in McDonald’s when it only had 20 branches in its portfolio.
Now, imagine you have the opportunity to do that very thing today.
Read up on this company, get the full story, and learn its stock symbol and who’s behind the whole thing.
Fortune favors the bold,
Alex Koyfman
Check us out on YouTube!His flagship service, Microcap Insider, provides market-beating insights into some of the fastest moving, highest profit-potential companies available for public trading on the U.S. and Canadian exchanges. With more than 5 years of track record to back it up, Microcap Insider is the choice for the growth-minded investor. Alex contributes his thoughts and insights regularly to Energy and Capital. To learn more about Alex, click here.
