McDonald's is considering rent deferrals for franchisees • Hacker News Board

Re: McDonald's is considering rent deferrals for franchisees

#41

Post by metalchianti » Tue, Mar 17, 2020, 6:02 PM UTC

cmcd wrote: post #31

christiansakai wrote: post #14

Earlier quoted context omitted.

Why the divide? The middle class already pays most of the taxes and not getting the benefit as much as the lower income earner and now they are not getting help as well? If you want to make the divide why not just the really high upper income earner vs the rest of the population, since most people in middle class, though they have savings more than $15k are just regular people like you and me, with families and respo…

> The middle class already pays most of the taxes I'm not so sure about that. The top 1% pays 37% of federal income taxes. Meanwhile, the bottom 50% paid only 3% and 44% of paid nothing at all. Depending on the source you use the middle class in America is typically considered to top out at incomes between 100k and 122k. In either case the middle class pays less than half of income taxes. Then looking at the bigger p…

This can be misleading because it doesn't account for wealth concentration. When you realize HOW MUCH of the wealth the 1% control, 37% seems small.

Re: McDonald's is considering rent deferrals for franchisees

#42

Post by christiansakai » Tue, Mar 17, 2020, 6:13 PM UTC

brosinante wrote: post #28

christiansakai wrote: post #14

Earlier quoted context omitted.

Why the divide? The middle class already pays most of the taxes and not getting the benefit as much as the lower income earner and now they are not getting help as well? If you want to make the divide why not just the really high upper income earner vs the rest of the population, since most people in middle class, though they have savings more than $15k are just regular people like you and me, with families and respo…

Those poor middle classes, haven't they been through enough? They can't even lift themselves up through their bootstraps like those deplorable "low income earners".

Why the name calling? Nowhere we mentioned low income earners as deplorable. Fix the speck in your eye first.

Re: McDonald's is considering rent deferrals for franchisees

#43

Post by bequanna » Tue, Mar 17, 2020, 7:19 PM UTC

linsomniac wrote: post #12

I suspect basically all commercial landlords are going to have to consider rent deferrals or outright eating 3-6 months of rent. The alternative very likely could be the majority of their properties simply becoming vacant, which isn't a good business stance for coming out of all this.

This kind of thinking astounds me.

What kind of margins do you think landlords are making so that they can afford to ‘eat’ 3-6 months of rent?

Re: McDonald's is considering rent deferrals for franchisees

#44

Post by tmnvix » Tue, Mar 17, 2020, 7:37 PM UTC

bequanna wrote: post #43

linsomniac wrote: post #12

I suspect basically all commercial landlords are going to have to consider rent deferrals or outright eating 3-6 months of rent. The alternative very likely could be the majority of their properties simply becoming vacant, which isn't a good business stance for coming out of all this.

This kind of thinking astounds me. What kind of margins do you think landlords are making so that they can afford to ‘eat’ 3-6 months of rent?

Talking residential here (but probably a very rough proxy for commercial):

In Wellington NZ, a 3 bed house is almost NZD700k on average, having risen almost 15% in the past year. That property might earn a bit less than NZD3k/m. Capital gains have been outstripping income (rent) for property here for some time. Many investors have the luxury of not even bothering with the hassle of tenants for this reason. A 3-6 month rent holiday would not be an issue for many.

Re: McDonald's is considering rent deferrals for franchisees

#45

Post by bequanna » Tue, Mar 17, 2020, 7:52 PM UTC

tmnvix wrote: post #44

bequanna wrote: post #43

Earlier quoted context omitted.

This kind of thinking astounds me. What kind of margins do you think landlords are making so that they can afford to ‘eat’ 3-6 months of rent?

Talking residential here (but probably a very rough proxy for commercial): In Wellington NZ, a 3 bed house is almost NZD700k on average, having risen almost 15% in the past year. That property might earn a bit less than NZD3k/m. Capital gains have been outstripping income (rent) for property here for some time. Many investors have the luxury of not even bothering with the hassle of tenants for this reason. A 3-6 mont…

Since most commercial properties are leveraged, this would definitely be an issue.

Theoretical ‘capital gains’ don’t mean much when you have no income but still have mortgage, taxes, insurance and utilities.

Re: McDonald's is considering rent deferrals for franchisees

#46

Post by AmVess » Tue, Mar 17, 2020, 8:28 PM UTC

larrywright wrote: post #36

AmVess wrote: post #16

Earlier quoted context omitted.

You have to have a lot of money and a track record of success before McDonald's will consider taking you on as a franchisee. McDonald's franchisees are wealthy before they open their first restaurant.

It depends. A lot of them start out with a couple of restaurants and then work their way up. At least that was the way it worked years ago. But you’re somewhat correct at least, they’re picky about who they give franchises too. They’re also somewhat unique amongst the big restaurant franchises in that they limit the number of restaurants you can own. They want hands-on owners, and they actually require the owners to…

It doesn't depend. You need a lot of cash to open one, otherwise McDonald's will not consider you.

Re: McDonald's is considering rent deferrals for franchisees

#47

Post by linsomniac » Tue, Mar 17, 2020, 9:19 PM UTC

bequanna wrote: post #43

linsomniac wrote: post #12

I suspect basically all commercial landlords are going to have to consider rent deferrals or outright eating 3-6 months of rent. The alternative very likely could be the majority of their properties simply becoming vacant, which isn't a good business stance for coming out of all this.

This kind of thinking astounds me. What kind of margins do you think landlords are making so that they can afford to ‘eat’ 3-6 months of rent?

What do you think the alternative is?

What kind of margins do you think most businesses run on? I think it's a very real possibility that many or even most businesses will simply cease to exist if they have to pay 3-6 months of rent on a space they are making 0 revenue on.

My statement was not based on margins, but on these alternatives: eating 3 months of rent and getting 9 months of rent after that, or asking for (and possibly not getting) 3 months of rent, then getting 9 months of NO rent because the business is closed. 9 months of rent being better for margins than 0 months of rent.

But, I'm not of the opinion that landlords get screwed here. There's probably going to have to be this sort of deferment on a massive scale to really jump-start coming out of this. I'd imagine the landlord would also be getting breaks from their upstream.

Re: McDonald's is considering rent deferrals for franchisees

#48

Post by JadeNB » Tue, Mar 17, 2020, 10:05 PM UTC

ryanmercer wrote: post #40

JadeNB wrote: post #19

Earlier quoted context omitted.

> Now would be a good time for a general rent strike until the government steps in to help small businesses If we're talking about the US here, 'until' seems to be an optimistic presumption that our government has any intentional of helping small businesses.

>If we're talking about the US here, 'until' seems to be an optimistic presumption that our government has any intentional of helping small businesses. There are dozens of articles of Trump taking something to congress today apparently to do just this https://www.chicagotribune.com/coronavirus/ct-nw-coronavirus... >Mnuchin planned to outline that roughly $850 billion package to Senate Republicans at a private lunch,…

Ah, good point. Pandemics make even ISPs and Trump seek to be seen to be acting in the public good. (But not Charter, and not hoarders.)

Re: McDonald's is considering rent deferrals for franchisees

#49

Post by larrywright » Tue, Mar 17, 2020, 10:05 PM UTC

AmVess wrote: post #46

larrywright wrote: post #36

Earlier quoted context omitted.

It depends. A lot of them start out with a couple of restaurants and then work their way up. At least that was the way it worked years ago. But you’re somewhat correct at least, they’re picky about who they give franchises too. They’re also somewhat unique amongst the big restaurant franchises in that they limit the number of restaurants you can own. They want hands-on owners, and they actually require the owners to…

It doesn't depend. You need a lot of cash to open one, otherwise McDonald's will not consider you.

I’m not disagreeing with you, I’m just saying there’s a difference between the capital needed to buy a two store franchise, and a ten store franchise. But yes, neither is pocket change.

Re: McDonald's is considering rent deferrals for franchisees

#50

Post by elliekelly » Tue, Mar 17, 2020, 10:24 PM UTC

tclancy wrote: post #29

hef19898 wrote: post #3

If a company like McDonalds can pull it off, that will most likely give them quite an advantage. Once things go back to normal, that would mean McDonalds franchise network is likely to be in omaprativley good shape. When competitor don't implement solutios like this, McDonalds would have quite a head start! Not to speak about the franchise owners, and their employees to a certain extent.

I don't really get the question of "if" for anyone close to this size. It goes back to the old adage, "If you owe the bank a million dollars, you have a problem. If you owe the bank a billion dollars, the bank has a problem". A corporation as large as McDonalds can dictate terms to whoever holds their debt.

But in the case of rent payments McDonalds is the bank. Whether or not McDonalds decides to defer rent the number of franchisees who can afford to remit payment is going to decline. A handful of franchisees unable to pay is a problem for those franchisees. A majority of franchisees unable to pay is a problem for McDonalds. It's better for McDonalds to address the issue/uncertainty now.