This same concept is also true of McDonalds historically - they own the land, lease it to franchisees, and realize the appreciation themselves. McDonalds are fairly economically valuable, so the capital gains by the time they're cleared and resold as development often dwarfs the value of the franchise fees.
As someone once put it: "McDonald's is a real estate company with a hamburger hobby"
Reminds me of the similar one about Harvard with a hedge fund and a little school.
Or quite a few religious organizations.
The whole reason why the Catholic Church doesn't allow priests to be married anymore was because it used to be that the individual churches were mostly the property of the priest, and would be passed down generationally (with some restrictions). The church phased in the ban on marriage so that over time, the churches would all in up in the estate of a priest with no heirs, where they'd become the property more formally of the Catholic Church proper. Today the Catholic Church is the single largest landowner in the world, with about 170 million acres.
More recent religious organizations have taken note of that, with LDS owning about 2.4M acres.
Your comment dragged me into a rabbit hole, which is always a welcome surprise.
From my readings, one can always debate whether this reason for celibacy is whole or not (of course, more holy reasons were given, like purity of the ritual among others), but avoiding inheritance from father to sons was certainly a big factor. By barring heirs from the equation, it solved the whole dispute over inheritance. Yet, when it comes to clerical office and priesthood, "property" is not quite right, since it's mostly about usufruct and benefices, moreso. Which can be significant assets, that goes without saying, hence the Church did everything it could, for holy and not-so-holy-reasons, that traditional generational transmission does not apply. No next generation, no problem.
Quite importantly to the Roman Catholic Church, they wanted to avoid dynasties of priests that would grow in importance and out of their control, so they did whatever they could (ban marriage and fatherhood) so that a mis-aligned priest would only be a temporary nuisance to the Institution.
A lot went into this short burst of investigation, like the fact that early Churches were private property of land-owners, building churches for indulgences and power, reinforcing their ties with the Church, and I may dig deeper. Thanks for your comment again, if you have some references you recommend, I'd appreciate you share them!
The original LLM agents
I don't understand what you mean. Do you mean I or the GP used LLMs?
If you mean I did, yes, I have, to begin with, to get an overview and links. But to do any of the reading or to write my comment? No. What's wrong with that?
That does not sound correct. Priests in Eastern rite Catholic churches get married, but they do not own the land in which their parish chirch stands and they do not pass that land on to their children. Note that the Catholic Church itself does not own that land, either. As I understand it, in most cases the parish land is owned by a Catholic episcopal See or eparchia, as in Latin rite Catholic Churches, in which the diocese owns the land.
Duke: A healthcare system with a little University.
The thing is, they rarely sell the properties. At least from what I've seen. It's all unrealized appreciated value.
Cashflow from renting to a franchisee must be fantastic. You pick the locations and the decor. If the business does well you prosper, but if the business does poorly you're insulated from the downside, the rent is due either way! If the franchisee can't hack it you repossess the building and rent it to some other suc^H^H^Hfranchisee.
McDonald's is invested in franchisee's success, it wouldn't be a great business otherwise.
It's actually hilarious sometimes. The business models that generate most scorn and incredulity on HN are the straightforward ones. They convert labor pretty much directly to a very basic product with a clear demand by society, that can't possibly be profitable, are we sure it's not actually a front for Real Estate or AI or Tax Evasion?
I'm sure real estate is the primary business model of McDonald's but franchisees wouldn't be paying the rent and fees if the restaurant model itself wasn't very profitable.
Most restaurants in Europe generate an average of 250k in net cash flow per average restaurant, that's few years of work before ROI.
It's very easy to lose money running a McDonald's (or any restaurant) if you do not keep a very close eye on all your controllable expenses. Most franchisees need multiple stores to cover all the overhead and actually be profitable.
McDonalds's Corp, the landlord, is in a better position but they also don't want to see stores fail, it's bad for their image.
They don't have to ever sell the properties. Property can be assessed by a third party and then function as collateral against a low-interest loan, which is real money.
Not that I think McDonald's will ever really find themselves in a pinch, but if they did, they would additionally be able to liquidate selected properties for cash. When you are rich enough, the promise of having money in the future is just as good as actually having money. It doesn't work like that for most of us, but that's the nature of risk assessment in finance.
Rent is the realization of value appreciation - value is just the NPV of future rents
Still looks good enough on financial statements if you’re ig enough to care about them, and it makes for great collateral in the process of buying the next one.
But no one is selling the McDonald’s when prices appreciate (even if they did own the underlying land).
Same is also true of DJT's various casino gambits. Pilloried in the media but rather sound (though high risk) from a land speculation perspective.
You're saying that bankrupting a casino was actually 4D chess? Ok, buddy, whatever you say.
Did I say that? Since they failed, they were obviously bad business. But they were a rational thing to attempt to do - taking on a massive loan to speculate on land and using a (potentially) high cashflow, quick to setup, easy to market business to offset the high initial interest rates. i.e. the same thing being discussed in this thread
FWIW “Gambit” without elaboration strongly invokes the “the bankrupcies were on purpose” to me, so, did you say it? Strictly no, but it was very suggestive.
AFAIK, Trump used investor money and rented his brand - he would have upside if the business succeeded, but had no downside for him - he was paid anyway.
As for the suckˆHˆHˆHˆHinvestors, they had a bad day.
Eh. I wanted to be provocative because I've heard a lot of educated but economically naive people assume 'highly leveraged hotel-casino project' is dumb a priori, even though it's (an example of a) a sensible and common business strategy available to the wealthy. I didn't mean to imply bankruptcy was intentional though.
As to whether Trump did this better or worse than others, I have no idea as I haven't studied it but would assume the latter given the outcome.
A certainty though - plenty of undeserving people you would consider contemptible have successfully played this hand many a time. Yet more reasons to tax land
A rational thing for a competent person to attempt. Given the theoretical structural advantages of the idea, the 6 failures are even more embarrassing than failing at something that was actually a bad idea.
Bankruptcy is great actually, you don't have to pay the money you owe but if you play your cards right you can still keep the benefits.
Well it's not like it didn't work out very well for Trump. Idk if it's 4D Chess but a huge part of the expense that lead to bankruptcy was licencing of the Trump brand. Can't pay all the other vendors because we first had to pay to license the name. OK, bankruptcy.