Franchising

McDonald's is not really a burger company. It is a real estate and licensing company that happens to sell burgers. Ray Kroc did not invent the McDonald's system, but he invented the mechanism for scaling it without owning every restaurant or hiring every cook. The local operator pays an upfront fee plus royalties on sales, funds the location, and carries the labor. McDonald's gets paid no matter what the operator earns. By the early 2020s it owned or controlled the real estate under roughly 55% of its locations and leased it back at a markup, making the landlord business nearly as valuable as the royalty business.

For founders and operators, franchising promises capital-light, recurring revenue off someone else's risk, which is exactly why Subway, Planet Fitness, and Anytime Fitness all run it. But it buries a structural conflict in the contract: the franchisor profits on revenue, the franchisee profits on profit, and one bad operator can damage the brand for everyone. Before you can sell the system, it has to actually be replicable, and managing the operators is the hardest ongoing problem in the model. The conditions that decide whether your system can be franchised at all are what the app holds back.