Major ClientsWide moat

McDonald's serves tens of millions of people a day and the corporation's customers are not those people. About 95% of restaurants are franchised, so the company's revenue comes from the operators: $16.5 billion of franchised revenue — royalties plus rent — against $9.7 billion from the shrinking minority of restaurants it runs itself¹.

That structure makes the franchisee the customer, and an unusual one. A franchisee buys the right to use the brand and the system, pays a percentage of sales for it, and in most cases rents the building from McDonald's as well — a customer who is simultaneously a tenant, a licensee, a distributor and the operator of the asset. The moat pages examine why that arrangement is so profitable; these pages examine it as a set of customer relationships, which is what it is.

Two other groups matter and are rarely discussed. The developmental licensed markets — including some of the largest countries McDonald's operates in — are customers of a different kind, contributing about $3.0 billion of revenue on a royalty-only basis with no capital and no real estate from McDonald's. And the suppliers, who are contracted through McDonald's system but paid by the franchisees, occupy a position with no obvious parallel elsewhere in this collection.

The number that governs all of it is systemwide sales — about $139.4 billion against $26.9 billion of corporate revenue. Every one of these relationships is a claim on that first figure, and the corporation's share of it is set by contract rather than by negotiation.