Franchise arrangements

12 Months Ended

Dec. 31, 2022

Individual franchise arrangements generally include a lease, a license and provide for payment of initial franchise fees, as well as continuing rent and service fees (royalties) to the Company based upon a percentage of sales with minimum rent payments. The company’s franchisees are granted the right to operate a restaurant using the McDonald’s system and, in most cases, the use of a restaurant facility, generally for a period of 20 years. At the end of the 20-year franchise arrangement, the Company maintains control of the underlying real estate and building and can either enter into a new franchise arrangement with the existing franchisee or a different franchisee or close the restaurant. Franchisees pay related occupancy costs including property taxes, insurance and maintenance. Pursuant to the MFAs, the Company pays initial fees and continuing service fees for franchised restaurants to McDonald’s Corporation. Therefore, the margin for franchised restaurants is primarily comprised of rental income net of occupancy expenses (depreciation for owned property and equipment and/or rental expense for leased properties).

At December 31, 2022 and 2021, net property and equipment under franchise arrangements totaled $98,067 and $88,568, respectively (including land for $25,213 and $22,784, respectively).

Revenues from franchised restaurants for fiscal years 2022, 2021 and 2020 consisted of:


	2022		2021		2020
Rent (i)	$	160,795	$	115,418	$	89,123
Initial fees (ii)	401		321		203
Royalty fees (iii)	215		295		275
Total	$	161,411	$	116,034	$	89,601

(i)Includes rental income of own buildings and subleases. As of December 31, 2022 and 2021 the subleases rental income amounted to $132,327 and $96,756, respectively.

(ii)Presented net of initial fees owed to McDonald’s Corporation for $1,012, $739 and $493 in 2022, 2021 and 2020, respectively.

(iii)Presented net of royalties fees owed to McDonald’s Corporation for $62,360, $46,476 and $36,554 in 2022, 2021 and 2020, respectively.

At December 31, 2022, future minimum rent payments due to the Company under existing franchised agreements are:


	Owned sites		Leased sites		Total
2023	$	5,497	$	54,130	$	59,627
2024	4,712		46,960		51,672
2025	4,732		42,995		47,727
2026	4,764		38,368		43,132
2027	4,639		33,348		37,987
Thereafter	36,524		155,383		191,907
Total	$	60,868	$	371,184	$	432,052