⚠ Owning Property Is Capital-IntensiveModerate threat

The landlord model's great advantages come at a cost: owning and controlling real estate is capital-intensive and carries the risks of property. McDonald's has an enormous amount of capital tied up in land and buildings, and while that portfolio generates rent and control, it also exposes the company to the property market's cycles, to rising construction and financing costs, and to interest-rate sensitivity — both in the cost of financing new sites and in the valuation the market assigns to a real-estate-heavy income stream. Assembling and maintaining the portfolio is expensive, and the capital locked into real estate is capital not available for other uses.

There is also a strategic tension: the real-estate model is part of why McDonald's carries significant debt, having leveraged the stable rental and royalty cash flows to fund buybacks. Higher interest rates raise the cost of that leverage and can pressure the valuation of the real-estate income. None of this undermines the fundamental advantage — the irreplaceable locations and the control they confer are worth far more than the capital cost, and the rent income is high-quality — but it does mean the real-estate pillar is not free: it ties up capital, adds leverage, and carries the cyclical and rate exposure inherent to owning property at scale. It is a cost worth bearing for the control and income it buys, but a real one — visible in the rising interest expense¹.