The Seeable and The Unseeable

One of the three fundamental principles is giving up the seeable income to earn the unseeable income.

McDonald’s is divided into the company and the stores. Everyone thinks McDonald’s is a food and beverage company but McDonald’s is really a management company that helps companies manage the McDonald’s franchise stores. If McDonald’s makes money from food and beverage stores alone, it will have to spend a lot of money to buy shops or rent stores, furnish the stores the hire the workers.

McDonald’s has about 38,000 stores worldwide. Of these, it owns fewer than 5,000 stores and the number is decreasing. More than 30,000 stores are franchised out to others. McDonald’s makes money through its supply chain and because the number of McDonald’s stores is increasing, one day, a real estate company offered McDonald’s the usage of its properties free of charge. This is because whenever McDonald’s opens a new store, the traffic in the area increases. Although McDonald’s get the properties free of charge from the real estate company, it rents the free-of-charge properties out to its franchises.


Later, McDonald’s owned all the shops in a street and as the street became crowded, they could charge rental after stores opened up there. As a result, McDonald’s has become one of the largest real estate companies in the United States. In the end, the daily turnovers of all the stores are managed by McDonald’s, and the money is used to generate more income.

McDonald’s signature product is the Big Mac, but the Big Mac does not really earn a lot. The real income is made by the wide selection of snacks and side offerings, such as the apple pie, fries and ice cream.

The most profitable item, however, is Coca-Cola.

Why? Because McDonald’s get it at zero cost.

In summary, we must give up the seeable profit to earn the unseeable profit.

Extracted from Shark Tank by Bill Teh