A McDonald’s – Jio connection! How these two companies really make money?
on Monday May 8th, 2017, By Kairav shah

What comes to your mind when you hear McDonald’s?

A similar kind of image forms in your mind, right?

So, why do you go to McDonald’s?

Good Hamburgers, tasty fries, right?

Let me ask you one last question. 

So how does McDonald’s as a company make money?

By selling these food items, right?

Well, I am sorry to say thats not the correct answer.

Okay, before I go ahead and let you know how McDonald’s actually makes money, allow me to shed some light on ‘How McDonald’s actually came into existence?’

  • McDonald’s was founded by Dick and Mac McDonald. Their simple menu and assembly-line efficiency soon attracted the attention of the milkshake machine salesman Ray Kroc. 
  • Ray asked Dick and Mac to hire him as their franchise agent in 1955: in exchange for licensing the name to him, the brothers would get a percentage of sales.
  • It was a massively profitable arrangement all around. With Ray Kroc opening franchises across the country, McDonald’s became the most successful fast food operation in the world.
  • In 1961, Ray Kroc bought the company and exclusive rights to the McDonald’s name from the McDonald brothers, who asked for $2.7 million and the right to control their original restaurant, which they renamed “The Big M“, having sold “McDonald’s” to Kroc.
  • Perhaps smarting from the high price, Kroc opened up a McDonald’s right across the street from The Big M and ran the McDonald brothers out of business in six months.
  • The net worth of McDonald’s is currently $104.2 billion.

You may ask one question here : How the hell did a food company come to be valued so high and has net worth in billions?

One word : Real estate!

McDonald’s is not into food business, they are into Real estate business!

Shocked right! Let me elaborate:

  • For some time after he was hired in 1955, Kroc was struggling to make the business profitable. He wasn’t bringing in enough revenue from his franchised restaurants.
  • Part of the trouble was getting the funds to pay for the land and the building for the restaurant.
  • That all changed in 1956 when he hired Sonneborn, who convinced him that the real money was in real estate.
  • Sonneborn’s idea was to have the McDonald’s company lease a plot of land and the building for each restaurant. The company would then sublease to the franchisee who would run the restaurant.
  • This business plan gave Ray Kroc the success and leverage he needed to get the loan to buy out the McDonald brothers in 1961. By 1963, Kroc opened his 500th McDonald’s restaurant.

McDonald’s is into Real estate but do you know which Indian company has their presence in all sectors except real estate?

Reliance! Yes the big Indian giant has its arms spread in every sector except real estate. 

You might have heard of Reliance power, reliance entertainment, reliance oil industries, reliance supermalls, Reliance transportation (Metro), so why not enter the real estate business?

You know what is the most valuable thing in the world right now? Oil? Nah!

Will real estate help them make money faster? Nah!

Well, this is not me saying, this is what Mukesh Ambani feels.

The most valuable thing in the world right now is..

DATA! 

And by data, I don’t mean net pack or data pack, the term which is generally used by us. 

Mukesh Ambani had realised this way too early than other biggies in India.

Well, there you go!

In the near future data will be worth millions and Mukesh Ambani has cracked this puzzle way before others!

So Reliance Jio might be a Telecom company but DATA is what they are aiming to make money from!

The only difference between McDonald’s and Reliance Jio is that the latter know ‘What business they are in!

So the next time you buy a happy meal or see cricketers dancing to Jio tune, burgers and free internet will not be the only thing that comes to your mind!

Lastly, if you still buy a happy meal at McDonalds, you are jewel of a person!

Kairav shah

Co-founder at TEN LLP

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