How McDonald's Was Able To Make Money From COVID Relief Funds

When the coronavirus pandemic hit the United States, the restaurant industry was thrown into disarray. People decided against eating out for obvious reasons. So, the government initiated the Payback Protection Program (PPP), which would be a loan to encourage businesses to continue paying their workers.

However, The Counter and The Intercept reported that McDonald's franchises used the money to pay the rent they owed McDonald's. This was despite the fact that the corporate side of McDonald's could simply not collect rent. In fact, as Reuters covered in April 2020, the company even denied a two-week reprieve during the first chaotic month of lockdown. This effectively forced individual franchises to use the money raised by taxpayers to pay a multi-billion company rent, instead of ensuring their workers can receive paychecks when they got sick.

When asked for comment by The Counter, Joseph LaPaille, McDonald's global communications manager, said McDonald's "never asked for assistance from any government entity." It should be noted that this is not the point. A similar issue occurred when the Restaurant Revitalization Fund was given out. Nation's Restaurant News noticed that McDonald's franchises received $10 million grants.

McDonald's is a real estate company

The fact that a lot of PPP went to the paying of rent when McDonald's refused to waive payments during extreme circumstances should illustrate how McDonald's is not a food company. Rather, just as Domino's is a tech company that sells pizza, McDonald's is a real estate company that sells burgers.

1851 Franchise explains that while McDonald's is like most other franchises in that it makes a deal with independent business people to brand their burgers as McDonald's burgers, it differs from all others in that they own the actual land upon which the restaurant stands. McDonald's does make money by selling food. The greater amount, however, is from the rent collected for running a business on their land.

The piece nods approvingly to the explanation offered in the McDonald's movie "The Founder." "You don't build an empire off a 1.4% cut of a 15 cent hamburger, you build it by owning the land on which that burger is cooked," Harry Sonneborn says to Ray Kroc in a decisive scene (per YouTube).

In 2015, Nation's Restaurant News wrote that before deprecation, McDonald's owned $28.4 billion in land and buildings. Locations could pay more than $14,000 per month in rent. In other words, the business model of McDonald's is to extract money from operators. It's in the operators' interest to make money by selling burgers to pay for the rent. That said, if the rent actually comes from tax-paid loans, McDonald's doesn't really care.