Bob O'Connell, Retired Associate Director of Real Estate at McDonald's

Guest: Bob O'Connell, Retired Associate Director of Real Estate, McDonald's

Host: Chris Hatch

Listen on Spotify

Summary

Chris Hatch sits down with Bob O'Connell just weeks after he retired from a 32-year McDonald's career, most recently as associate director of real estate over territory that stretched from Northern California and the Pacific Northwest to Alaska, Hawaii, Guam and Saipan. Bob traces his path from White Hen Pantry and a Chicago shopping center developer to McDonald's, where he helped open the 25,000th restaurant. He explains how McDonald's shifted to a broker-centric model, how a real estate manager takes a site from investigation through the Real Estate Committee (REC), why McDonald's is the benchmark the whole industry checks first, and why relationships and keeping your word matter most.

Key Takeaways

• "Think about the customer": stand on the other side of the counter and understand where customers come from. The real estate follows.

• Dedicated local brokers help a lean team (about 50 real estate managers nationally) cover huge territories. They were a key driver of McDonald's recent development success.

• Data is world-class at McDonald's, but people who don't spend time in the field don't succeed. "It's not a job you can do at a computer."

• Bob's trick for remembering dozens of sites on a tour: always ask what's next door.

• Process improvements sped up approvals: early budgets for surveys and traffic studies, plus a REC (legal, finance and real estate) that only reviews deals that miss ROI or impact metrics.

• Ray Kroc's principle still drives the math: the operator has to make money first, or there's no reason to be there.

• Your word is your bond in a small industry. Tell landlords exactly what you'll do and how long it will take, and pick up the phone.

Transcript

Editor's note: Some names are spelled from the audio and are shown in brackets for confirmation.

[01:45] Chris Hatch: Welcome back to the Dirt Dog Pod. Today we've got Bob O'Connell, who recently retired as associate director of real estate for McDonald's. So, yeah, thanks for joining us. I figured I would dress in my favorite Hawaiian-theme shirt.

[02:06] Bob O'Connell: Thanks, Chris. Good to see you again.

[02:12] Chris Hatch: Got my glasses on, I'm ready for retirement, you know.

[02:16] Bob O'Connell: Well, I hope it's a little warmer there than it is in Chicago because it's rainy and 59. That's why I got a quarter zip on.

[02:23] Chris Hatch: Listen, I'm just jealous like many others that after ICSC here that you were enjoying your ICSC down on the beach in Florida, right? Yeah.

[02:34] Bob O'Connell: Correct. Yes. Yeah. I took a little bit of time, played some golf down with some friends down there. It was a good diversion from thinking about all the things that I was missing out in Vegas. So, so yeah.

[02:42] Chris Hatch: Yeah, there you go. That's fun. So you just retired and you were with McDonald's for just a minute. So how long were you with McDonald's, Bob?

[02:50] Bob O'Connell: So next month it would have been 32 years. Yeah, so yeah. As I've talked to people over the years, it's one of those places, a very special place. Nice touch on the McDonald's cup too, by the way. You know, it's a real special place. I mean, when I first came on board I met a bunch of people and I couldn't believe how long people had already worked at the company, people that were in their 40s and early 50s and things. People came to the company, they liked what they were doing, they liked the support they were getting, and they stuck around. I like to think of myself as kind of an anomaly, but I really am not an anomaly because there are plenty of people out there who have put 30 plus years in with the company. So it's been great.

[03:41] Chris Hatch: I think what's so wild about that in our industry is it's just so frequent that you see people move from one company to the next. And it seems like the average duration usually is like three or four years.

[03:52] Bob O'Connell: Yeah, I mean, I think I was listening to and I'm sorry, I forget his name from Wendy's on one of your recent podcasts. And he was talking about some of the people that he had worked with over the years, some of whom I had also worked with. Think you mentioned a couple of names in there. But I mean, I think it was very common at some point in time is, you learn a trade and you learn your trade, you perfect your trade and then you take your trade and your skills onto the next guy. And, there have been a lot of know, intertwining of people within the quick service, the quick service industry.

So, everybody's looking to grow. I think McDonald's has always been a great spot to grow from. Your premiere guest was Dan Batty. And I, I knew Dan a long time and Dan came, he did a great job for us went on. He's had a great career with a bunch of other companies. My friend Don Ikeler, it was great to hear your conversation with him. So it's always great to hear from those people and how successful they've been knowing that we've kind of helped them along the way a little bit, getting their feet wet in the business.

[04:59] Chris Hatch: You know, I think one of the most interesting things is just what a great fraternity and sorority commercial real estate is. It really is a lot of fun and, we have a lot of friends and, obviously it's coming back from an ICSC and it's a chance to catch up with a lot of those people.

[05:14] Bob O'Connell: Yeah, I mean, the woman that runs the booth for us, she used to kind of keep score of the alumni, if you will, of McDonald's who used to stop by in any given year. It was always kind of fun. You know, if you weren't at the booth to know that those people stop by looking for you or to say hello or whatever it is it's a small it's a small world in our business and I think one of the things that we talked a lot to the people at McDonald's about is is exactly that is whether you're working here or you're working somewhere else, at some point in time, you're going to represent the brand as a place that you started or place that you're going to end your career.

[05:51] Chris Hatch: Yeah, well, you're a couple weeks into retirement. And so it might be too early to ask you the question, but is there are you missing anything yet? Is there anything you woke up week two and you're like, man, I really needed that. I really needed that zoom or that attempt to get into the team's call that takes you 20 minutes or whatever.

[06:05] Bob O'Connell: I mean, there's a couple of things that, and I've talked to a couple of people. I mean, it was interesting that I got a text from John Wendell, who's a senior director, and he had texted me, I don't know if it was on Tuesday night or Wednesday night, saying, Miss you at ICSC, hope retirement's going well. So it's that kind of camaraderie that you spoke about that I really miss. So, as far as the day to day, yeah, I miss being out on the road. I was having a conversation with someone and they said, well, what's going to change in your life? And I said, well, I'm having more dinners at home.

You know, I'm not on, I'm not in the airport every week. So, but I got a little taste of it last week when I was coming back from Florida. And so, but, I miss being out on the road and, I had such great territories when I worked at McDonald's that it was kind of like I'm driving through the Redwoods in Northern California. I'm driving along the Colorado River to go to Grand Junction from Denver. So that was kind of the best part of the job is being somebody from the Midwest with the flatlands and everything. I didn't have exposure to that stuff as a kid. Just traveling the territory was the best part of my job and the people I worked with along the way.

[07:26] Chris Hatch: You know, a big part of how we came up with the name Dirt Dog is just spending that time behind the windshield and some of the fun things that you experience where you're out on the road. It always just blows me away. Some of the most random experiences you encounter while you're out there and about looking for sites.

[07:42] Bob O'Connell: Yeah, yeah. I mean, as we talked we've been trying to do this for a bit of time and I got a little delayed after I told the company, when I really felt like I needed to get some stuff done. And, to your point on being being out on the road and behind the windshield, my last business trip, my official retirement date was noon on May 2nd. Not that I'm forgetting that date or whatever. My last business trip, I walked in the house at 2 AM on Thursday the 1st. I caught an 8 o'clock flight home from San Francisco because I committed to helping my replacement get trained and everything. And so it was like I did it to the end. So I go out with my head held high in that one.

[08:25] Chris Hatch: You know, that is the one thing every time you see a new restaurant go up. The one thing that I think the common consumer has really no clue about is the amount of sacrifice and energy that it took out of people to get that restaurant built, approved, financed, plans drawn and nobody really thinks about that flight where you've arrived home on basically a red eye at 2 a.m. from San Fran. And inevitably you always end up at like 29B, right? Like wedged in between two people, right?

[08:57] Bob O'Connell: Not this time. But it really as you and you've dealt with folks from McDonald's it's really all about the team. I mean, it's a team putting it together. It's not just it's not just the construction manager. It's not just the area construction manager, the real estate manager or the director of construction or the director of real estate. It's really the whole team. There's a lot of people working on this stuff for a long period of time.

[09:27] Chris Hatch: Yeah. You had some stuff you wanted to dive in on here at the start.

[09:32] Bob O'Connell: Yeah, I mean, I just it hasn't only been McDonald's for me, which is, the other part of who I am is who I've worked for. You know, it was kind of interesting. The first job in real estate I ever had was for a local regional convenience store chain by the name of White Hen Pantry. At the time I joined them, they were part of Jewel Companies who owned a lot of Osco and Star Markets and lots of brands around the country. And I really learned the business from two guys named Ed Fuss and Dave Crackle, who really kind of You know, took me by the hand and kind of showed me around and taught me how to do real estate.

And back in the day because we had Jewel, which is big grocery store chain. We had a lot of money to do stuff. We had franchisees who want to grow. That was really a great learning experience coming into the business, learning in the grocery store business. And the interesting thing, a part of that story is I was joking about it is I finished on May 2nd. And the first thing I did on Monday morning was I went, like all retired people, I went to a funeral and unfortunately happened to be the guy who was the president of White Hen Pantry. And I went up to the widow and I said, you don't remember me.

I worked for Bob. He was great guy. And, I just retired on Friday. So I owe a lot of my career to the folks at White Hen Pantry. You know, from there, I went to work for a developer in the Chicagoland area who they built community anchored shopping centers. And they were responsible for Target's entry into the Chicago market. So got a lot of exposure and got to sit around the table as those guys were putting those deals together. And then always wanted to work for McDonald's. So, I moved from from the corporate side to being a broker and then back onto the corporate side, which always gave me a little bit of warm fuzzies for brokers, because I know brokers, how much they do, how much they work.

It's all on their dime. So we got to work together and we had to work together. And I always encouraged that partnership. So that really helped us as we moved down the road. In the latter years of McDonald's, the chief development officer came in, Tabassum [Zalotrawala] came in from Chipotle and they had a model where they worked a lot with brokers. And we really didn't have dedicated brokers. But in the last couple of years, we took that on and it really has led to a lot of the success of McDonald's in the last couple of years. So, kind of grew through McDonald's, was a real estate manager.

You know, was a, we used to call them real estate reps back in the day. I was a real estate rep for a while, became a manager of one of our, at the time we had 43 offices and over time McDonald's shrunk that down. And then went over to the corporate headquarters and worked in site development training. You know, we used to have training classes. We'd bring 200 real estate construction people through at a time. Cause we had these 43 offices, every single one of them had four or five real estate people. Four or five construction people. We were building a lot of restaurants back in the day.

From there, I got an opportunity to lead that team on the training side for a couple of years, and then had the opportunity to go and support our development teams in Europe, which was, again, a lot of training, rolling out new tools and stuff. But again, it was just another cool experience. Then came back to the US side and worked on a lot of single projects, And then I really worked with some people who really wanted to improve the process at McDonald's. And so, a lot of people putting their heads together, got the team to, leadership to kind of change the way that we were doing business.

The old way of doing business at McDonald's is these regional offices had an executive in there and they had to approve the real estate. So you'd have to fit in on their schedule and do all these other things. So the real estate process was extremely long. And we were able to take that process and move it to the real estate center of expertise and really reduce that time over the last couple of years. Everything has changed. It's like the weather: just stick around, things will change. But I think McDonald's is really poised right now to really to grow based on the new system and the people that they have in place. That's kind of the Bob O'Connell story of my resume.

[13:39] Chris Hatch: No, that's good. What a storied career, right? And some diversity in there. How do you think those initial years working for the convenience store, drug store, kind of grocery store, and then over to the developer side, how did that help you as a corporate real estate executive?

[13:56] Bob O'Connell: You know, it's interesting because I've hired several people who have come from the convenience store industry, Kum & Go and a couple other places. When I did that, Ed and Dave always used to say, think about the customer. And so think about being on the other side of the counter and seeing where customers are coming from. And that's really kind of the model for McDonald's is looking at where the customers are coming from. And so early in my career, that was kind of planted in my brain in terms of understand your customer and you'll figure out the real estate piece of it later.

[14:35] Chris Hatch: Yeah, no doubt. And how fun to bring Target into Chicagoland. I mean, that had to be amazing. They're obviously, I mean, to this day, they're still an amazing anchor.

[14:43] Bob O'Connell: Yeah, I mean, and it was the company was Tangway, Burke, Stratton, and, they were a couple of former real estate guys from Jewel Companies and a couple of developers and brokers who had been around Chicago for many, many years. And yeah, I mean, they it was like these guys were running and gunning and buying all the big tracts of land near the shopping centers and building community centers alongside them. So it was a great run. That was like in the late 80s here in Chicago. And then like I said, I had the opportunity to join McDonald's in the early 90s. And really that's where I wanted to be. So that's where I went.

[15:21] Chris Hatch: You know, you mentioned something about brokers and how you've watched McDonald's shift the focus to be more broker centric and how that was a positive. Walk us through that for a minute. What is it that you see when you get a dedicated area like I don't know, take the Cincinnati area. I know Mike [Hellinen] with Edge is your broker there. You know, here in Utah, it's Matt Harlan with our Legend Partners Group. How does that help you when you have a Matt or a Mike that's engaged for you in an area?

[15:52] Bob O'Connell: Well, I mean, I think there's a better focus. If you recall, I said when I first started, we had 43, we had 43 regional offices, then we went down to 21, then we went to 10, and then we moved away from being part of that structure to have our own structure. When we had those 43 offices, we had 200 real estate people running around and so it was really more about personal accountability. And learning your market and doing all those things. As we've changed that model, or as McDonald's has changed that model, I should say, it's really gone to about 50 real estate managers out there today.

And there's nine or 10 associate directors. And that's really kind of the core of the real estate team. So those people, where they live in their market, so when I was working in the Northwest, I had a person in Seattle, had a person in Portland, and then I had a person who covered Northern California and one that covered the Central Valley. They all lived in the market, but how do you keep track of all that real estate? And especially in some of those markets it's like the Denver market in Denver, it's Denver, Salt Lake City it's up into Boise, Montana, the Dakotas all the way over to Minneapolis.

So people can't be everywhere. And so I think highlighting the fact that we were able to engage and find good brokers. The company never forced particular brokers on a real estate manager. It was really up to the real estate manager to go out and find people. We've worked with Matt for many years in Salt Lake City. Matt's a great guy, always brought stuff to the table. So that really worked well. And then there was a lot of kind of legacy brokers that were out there from the old days who just kind of came forward and said, hey, I used to do a bunch of work in Seattle.

You know, I know the system, let me help you out. And I think doing that and having a system where they can kind of report into the real estate managers and keep track of things, I think that's really been helping the team have great success in the last couple of years.

[17:58] Chris Hatch: You know, I don't know if I had as much respect for the broker, real estate manager, director relationship until we started hunting for sites for some specific retailers in new markets. And all of a sudden, I kind of sat in your shoes for a minute because I would sit in a car and we'd drive sites and boy, that's a whirlwind. How in the world do you keep everything straight in your head when you're in city number three on a third day of a three or four day tour and you're looking at site number 65? How do you remember 65 from 64?

[18:34] Bob O'Connell: Yeah, I mean, I don't think that I ever got to the point where a 65 from 64, but it surely was 10, 11 or 15. It's like playing the word association game. You can show me a piece of real estate and describe it. It's like, OK, well, I got it. My question to all my managers was what's next door? Because I always used to kind of keep track of what was next door. And so, we go back and we'd be on the phone. We'd be having a conversation. I'd say, well, what's next door? And they'd say, the little strip center they had, the Murphy's Pizza in it or whatever.

I was like, okay, now I remember the site. And I would, I mean, in all honesty, I have a notebook and I would take some notes, just some general notes of where I was in the area and stuff like that. But again, it was really more of a word association game with me is tell me what's next door and I can kind of remember where I've been. So and again, and over time, I mean, as we've turned over real estate managers. You know, a site doesn't go away. A site doesn't die until it really dies. So there's a number of these sites that I've seen a few times over the years. So, yeah.

[19:40] Chris Hatch: Yeah, good point. I'm sure McDonald's leading the burger industry, leading the QSR industry has got to have unbelievable analytics to point back and come up with projected volumes. What is it though that you would do? How do you figure out if that's a store that you should say yes to or give a recommendation to REC on?

[20:01] Bob O'Connell: I mean, think part of it is just it's the experience of being out on the street. You know, as we move from kind of again, from being dirt dogs and being out on the street all the time and hunting real estate to starting to do analytics. I was telling some of our newer people when I first started doing real estate at McDonald's, we used to be out on the street. We'd make a copy of a map. We'd come back. We draw a trade area on it. We'd fax it to a company and then next morning I'd come back and the demographics would be there. You know, so it was really getting into understanding the real estate from that level.

And then moving forward as we moved into analytics, which we, to your point, we had, we have the greatest analytics of anybody out there because we're looking at where our customers are coming from and where they're going to and how they're shopping us. And we use that to determine along with some other tools that they have. Where our next location should be. But again, I think a lot of it is just being around and driving the markets and understanding the traffic patterns, understanding where people live, where they work, where they shop what are the reasons why they're coming into this trade area? I really think that's kind of the basis of it.

And I can say with certainty, the people who have worked for us who haven't done that have not been successful at McDonald's. If you don't spend the time in the field, it's not a job you can do at a computer. It's not a job that you can just rely on your broker. You got to put your eyes on it.

[21:39] Chris Hatch: In addition to putting your eyes on the new sites, it feels to me like it's almost just as important looking at the existing stores and understanding how they're performing and why.

[21:48] Bob O'Connell: Sure. Oh, absolutely. I mean, I think that has been one of the tools. We've used a comparable restaurant approach for years. Let's look where we've been successful. Let's take that information and see if we can replicate it. Absolutely. It's kind of the same thing as when you go out and buy a house. You're going to do some comparables to figure out are you in the right price range in that same neighborhood you're in? So we definitely use that as a tool. And again, all of these tools are rolled into the portfolio of tools that we use at McDonald's.

[22:22] Chris Hatch: I had a random Southeast Florida site presented to me earlier this morning. First thing I did, I went into restaurant trends and I went into Placer.ai. I found the closest McDonald's and I checked their volumes. And I find myself 99 times out of a hundred going to McDonald's first. And it is interesting how McDonald's has really become the barometer. It's become the litmus test for the whole fast food industry.

[22:47] Bob O'Connell: Yeah. And again, I mean, I think it's more than lore that several of our competitors over the years have looked for the spot next door to us. It's they know we're doing the homework and, because of the way that we set up our business and our model and the way that they do theirs, they figure they're figuring, well, if their company could spend this much money, then I can make this investment and probably be pretty successful.

[23:13] Chris Hatch: Yeah. And I primarily am hunting for beverage retailers, but it seems like a good McDonald's is generally a good correlation with a high projected volume on a Dutch Bros. Seems like there's good correlation there. And there's a lot of brands that have had the same. All right. So you've done hundreds of deals. Do you know how many stores you've helped open?

[23:23] Bob O'Connell: I was thinking about it. And when I was the real estate manager in the Chicago office, we opened the 25,000th restaurant in the system. And so that was I want to say that was in the late 90s or whatever. And right now we're thirty four thousand, thirty five thousand internationally. So I've been around for, I've been around for a few of them. You know, I had a territory I was very fortunate. I had a territory in Chicago. That I really didn't work very, very long because there was opportunities for me to grow into a management role. And so I went from being within a couple of years of being at McDonald's, from being a deal maker to being a manager.

And then I've kind of always been on the management side. Two years ago, my territory got shrunk from 13 states to just really having the central California up through Oregon, Washington, Alaska, Hawaii, Guam, and Saipan territory. So I had 13 states, we were working on a lot of deals. And you know how many deals we were doing with Matt out there. So that was just a small sample of it. But I have probably, with the team, been involved in a couple of hundred deals over the years.

[24:47] Chris Hatch: Bob, I spent a fair amount of time with people like you, and I don't think I've ever had anybody describe that they shrunk my territory and then went ahead and added a bunch of countries in the Far East. That is...

[25:00] Bob O'Connell: That's where we do business. They're part of our U.S. system over in Guam and Saipan. And, we have an operator out in Guam and Saipan, a great family been with us forever. And, we've had an opportunity. We opened a restaurant out there last year. And then there's another one that's under construction right now. It'll probably open a year and a half from now. Fitting with your Hawaiian shirt, They're definitely on island time there. But we got a great family that. That's running our business out in Guam and Saipan.

[25:32] Chris Hatch: So because it's a US territory, it's treated as US. Interesting. Yeah. And what is it? I mean, that's to your getting in at 2 AM comment. I mean, that's a hop, skip, and a jump to get there.

[25:35] Bob O'Connell: Yes. Correct. Yeah. Correct. Yeah. So I had my last trip there was a couple of months ago. I was out to dinner on Saturday night. I came home, I slept for a couple hours. I left my house at three o'clock in the morning, caught a five o'clock flight to Houston, landed in Houston, got on a plane, flew to Honolulu, flew from Honolulu to Guam. And I was standing at the check-in at the Hyatt in Guam at 7 p.m. on Monday night.

[26:14] Chris Hatch: It's wild. Truly wild.

[26:15] Bob O'Connell: Then I left on I left on Friday morning at 7 a.m. Did the reverse trip and I was back at O'Hare in Chicago at 1 p.m. on Friday afternoon. I'd spent 40 hours on an airplane that week. Spent 40 minutes in Hawaii. So it's not all glamorous.

[26:25] Chris Hatch: Boy, that's a quick turn. Yeah. All right. There you go. You know, we had four children and then we chose to adopt our fifth, our caboose. And he was born in American Samoa. And so maybe somewhat similar to Guam. We lived there for about a month with my family and it was interesting. There's McDonald's there in Pago Pago, American Samoa. And what's so fascinating to me when I have visited McDonald's elsewhere on earth is just the different menu items that they come up with. I assume Guam is the same. They have some kind of unique menu offerings that exist there that may not exist other places.

[27:15] Bob O'Connell: Yeah, they have a unique breakfast platter that includes a spam-like pork product. Other than that, it's pretty much the same standard menu. People would ask me when I was working internationally, when I go to McDonald's, I would probably go to a couple of McDonald's during an average trip or whatever. But my first thing off the plane was just getting a plain old hamburger. I just wanted to see how it compared. Because you kind of have that taste bud and being there a long time, that was kind of my standard. Obviously, I did see a lot of different menu items across the globe.

[27:57] Chris Hatch: Yeah, interesting. What do you think the hardest part about doing business is in Guam versus mainland US?

[28:03] Bob O'Connell: You know, I just think I think it's just the time element. You know, it's just so long to get engineers and vendors lined up getting getting materials. You know, we had a it was interesting when our restaurant that just opened was under construction. We were out doing a site inspection and they were doing some concrete work up on the ledges and things like that. And because the military is doing so much work there, you can't even get a cement mixer. And these poor workers were hauling concrete up in five gallon Home Depot buckets to kind of set all the lintels and stuff up on the edge of the roof and stuff. So I mean, think a lot of those things, materials and supply chain are probably the biggest issues.

[28:51] Chris Hatch: Yeah, I think that's one of the most amazing things, especially when you go to the smaller island environments and communities, right? Forget the Hawaii's, right, where there's population base there. But when you get to the smaller ones, it's just a limited supply of everything, right?

[29:06] Bob O'Connell: Yeah, I mean, we've got a great construction team and they, know again, it's one of those things where our construction manager who covers that area he's up in the middle of the night having conversations because of the time difference and everything. So, but again, it's those are some of the great places that I've had an opportunity to visit while while being at McDonald's.

[29:26] Chris Hatch: Yeah. Well, have fun. So in all those deals that you've opened there's got to be some memories that stick out. A fun deal, a bad deal, one that makes you cry when you drive by it to this day, whatever years later what are some of the deals that stick out in your brain and why?

[29:43] Bob O'Connell: Well, there's a couple. I think on the high side of things not only at McDonald's, but the first real estate deal I ever did was for this convenience store chain. And the chain over time was private ownership. It went from Jewel Companies to private ownership and then from the private ownership. There's a couple other changes in there and eventually 7-Eleven bought it. And a couple of months ago, I was out in that neighborhood and I just kind of drove down the street and the store is still there. And that was 1983 or '84 that that store opened up. So somebody's been making a lot of money off that over the years.

But, so it's kind of nice to reminisce in that way in terms of restaurants that we've worked on. You know, I think the 25,000th restaurant was an opportunity. It's there now that's part of McDonald's lore. So it's always nice to be part of McDonald's lore. I think more recently, I think one of the things that as we went through COVID and supply chain issues I think some of those stores that took a little bit longer to open also had a little bit a little bit slower start. So those are the ones that you kind of get, you get concerned about, but over time that they're going to be fine.

So I think those are the kind of the good ones From the bad side, I don't know that, because again, because of the analytics, I don't know that we've had too many dogs on our hands, but we had a couple of situations in some small towns where it's just it wasn't the customer base for us and there weren't enough customers. And so when you see those restaurants that you've worked on over time, spent a lot of time on them and they either don't open, or they open and then over time they just don't make it. And again, not too many closures in McDonald's world. But when you see those, it's a little disheartening.

[31:47] Chris Hatch: Do you find because of the cachet of your brand and who you are and like when I was speaking with Don Ikeler at Chick-fil-A I generally kind of assume that sometimes the doors, the barriers for some cities might be open, more open to them than they are to some other fast food operators. Did you feel that with McDonald's? Did you feel as though a lot of the time when you got to the city or the municipality that you were kind of starting at first base with them?

[32:15] Bob O'Connell: Well, I think we do enough homework that when we start to get in there, we start to understand the lay of the land. And I think one of the great assets that McDonald's has is McDonald's has its operators that are operating in these communities who can go in and they can have those conversations. You know, they can talk about the things that they've done in the community to help the community. And again, our operators at McDonald's best in the world community minded, they want to do the things that they do and help the community. So we always had a little bit of a foothold. Now, that's not to say that we haven't met with lot of barriers along the way.

You know, I think we probably meet with as much or more barriers than a lot of people because again, you used the term cachet. When the shiny penny comes into town, everybody wants the shiny penny. But at the end of the day, the shiny penny still is going to require a drive through is still going to have the conversation about the speaker post. Still going to have the conversation about the emissions. So, I think some of the shiny pennies actually have a little bit easier time than McDonald's. I think we're held to a higher standard in a lot of cases.

[33:24] Chris Hatch: Yeah, that's an interesting thought to think through. Here you are, kind of the gold standard, right, of the industry. And then to hold you to a higher standard, which is kind of interesting.

[33:30] Bob O'Connell: Mm Right. Right. Exactly. Exactly.

[33:37] Chris Hatch: I don't know if there's ever been a moment on earth where McDonald's brand presence was stronger. What do you think about that?

[33:48] Bob O'Connell: Yeah, I think there's, like every company, there's ups and downs. I think the rebranding that the company has done over the last several years, I mean, that was a major initiative. We had a US president, kind of an interesting story, who was sitting in our old office, which was in the western suburbs of Chicago, and was really kind of talking to his team about You know, there was a Sears in the shopping center across the street and they're talking about dying brands and everything. And they started talking about how are we going to bring this brand back? And that was really kind of our first foray into reinvestment.

And then over the years we would do reinvestment. But we didn't have every restaurant looking the same. This last reinvestment initiative, I think, got us there. And so I think that's really helped the brand. So from an ebb and flow standpoint, I think from a building and real estate standpoint, that's really been the key for us. And then there's little things that happen along the way. And again one of the greatest marketing companies in the world we don't miss a beat on anything. You know, we were there when it was Beanie Babies we were there with Minecraft. We were there with the adult happy meals the celebrity meals, all those things.

And, and again, I think you saw last week, you were saying, You know, the Grimace was at our booth at ICSC. Well, I don't know if you know this or not, but it was I don't know how it happened, but it's like Grimace became like the mascot of the New York Mets last season. Grimace was in. I don't know how Grimace got into the stadium, but he was there and they went on a winning streak. And, all the New York Mets fans were all over Grimace. So again, it's these resurgences and again, great marketing minds at McDonald's over the years. What they've done and the stuff they come up with and how they hit the consumer and the right consumer at the right time. It's amazing.

[35:48] Chris Hatch: Yeah, but that's what blows me away. I spend far too much time on Twitter than I probably should in life. Whether it's Twitter or the Reddit forums, it just seems like the customers over the last year and a lot of a lot of those marketing things kind of start in those places nowadays. Right. And it was like the customers started asking for Grimace. They started asking for the Hamburglar, started asking for some of these like iconic things of Ronald, et cetera. And your marketing team has been they've provided. It's been amazing watching it. And it was so fun having Grimace at the booth. That was amazing.

Yeah. Everybody was driving, walking by, getting shots with them. It was pretty entertaining. Pictures. So the company, let's see, I think you opened the first CosMc's about a year ago?

[36:16] Bob O'Connell: Yeah. Yeah, yeah. A little bit more than that. Yeah. Yeah.

[36:39] Chris Hatch: And then gave that a run here for whatever that was 12 to 18 months and then has recently decided to shut that down and I understand you're not at McDonald's anymore, but to me, McDonald's has a very good recipe for serving exactly what they serve. They own the breakfast market out of the drive-thru, hands down, undisputed. They've got a great burger game. Why try to go into the beverage industry? It just seems such an interesting thing to me to watch from the outside in.

[37:11] Bob O'Connell: That was a separate part of the business. Nobody in the US business had anything to do with it; that was more of a corporate initiative. So I can't speak to any of the things. But, it's you make an interesting comment of McDonald's does this and we do it so well. I don't know if you remember back several years ago. That we went and we've kind of expanded our business. We had an interest in Boston Market. You know, we had an interest in Donato's pizza. We had we were helping with some development on the Chipotle side. And we were taking our eye off the prize and the prize is selling McDonald's hamburgers.

And so I think back in those days, they they got rid of all that stuff and, again, focused on this. As far as the drink thing goes, I mean, it's going to be interesting to see. What I read in the paper was they're going to try to figure out how to do this with the existing location. So that's really all I know about is same as everybody else, what you're reading in the paper. So but it's interesting again, traveling around a lot, you see the Swig and all the things that you guys have out in Utah and, Dutch Bros, obviously has really stormed the market all over the country.

It'll be interesting to see how all this shakes out at the end. And Starbucks is not going away from that part of the business either, so, you know.

[38:33] Chris Hatch: No, if anything, I know they've moved around with the refreshers and some of that stuff. But if anything, it seems like they're doubling down with a lot of that frozen and blended beverage stuff, which really is a fascinating shift because we keep talking about coffee. Those companies serve 50% or more other stuff that is not coffee. It's really kind of interesting the way their whole menus have just evolved over time.

[39:01] Bob O'Connell: Actually, if you listen to the conference calls it's interesting to hear when they talk about that stuff. I think the number is actually greater than 50% from listening to a recent conference call in one of the companies.

[39:14] Chris Hatch: Yeah. Yeah. And yeah, for those, I think for those companies, you almost need to analyze as much about the energy drinks and you know, that entire market, which is huge and, virtually on tap through the drive thru right before some of these operators started doing it. You know, 34,000 stores and growing, right? McDonald's is the king. You know, they're the gold standard in the example I gave, where it's the first data point I go to. Part of the reason I do that is because I've sat in the car for days on end with operators from Wendy's and Arby's and you name it fast food competitors back to your point, right?

Dutch Bros, whatever it might be. And that's what everybody does in the car. That's what every site selection manager is doing is their first thing they're looking at is what is the McDonald's doing in the trade area? Where does McDonald's go from here?

[39:53] Bob O'Connell: I think it all goes back to the analytics. Again, talking about having a world-class analytics team right in-house who can start looking at things different ways and, cutting the pie different ways. That's really kind of been the way that we've been able to continue to grow. You know, it's kind of the, it's reach and frequency it's how many customers can we reach and how often can we get them? And so, we can do the real estate part of it, but we got to make sure, and they've always backed us up is, from operations to marketing and everything to be successful. But I mean, I really think they kind of do a little bit of a tension test to say, okay, if we said we could go this close, what would that look like?

And I think that's, again, the analytics team is doing all that work behind the scenes and giving that information to leadership and they're moving forward based on those recommendations. And so far, knock on wood, we've been pretty successful at it.

[41:07] Chris Hatch: Yeah. We have in my family, we hadn't developed a McDonald's since the 90s. And we've recently started working on a couple of new side opportunities. And so I had really not worked with McDonald's on the development side of the coin and watching the process work. And boy, it is a machine at McDonald's, right? Once the deal gets real... sometimes it's hard to get a sense of when the deal is real for the tenant. That wasn't my experience at all in the McDonald's deals. It was like we had turned a cruise ship around and then we were all going in the same direction, but you had the power of a cruise ship behind you, pushing our little dinghy along, right?

And it's interesting. So walk us through the process of what one of the real estate managers doing. So they're out with a broker, they've selected a site. What is their engagement and where do they sign off? Where do they start and where does their area of responsibility end?

[42:04] Bob O'Connell: So I think part of it is that site under investigation is getting out there, looking at the market, looking at what the opportunity is in the market. At a pretty high level, understanding the demographics of the particular market, taking a look at how, again, to your earlier point, how does that compare with other markets? We have some unique systems in place. that we use to assess what we call impact on existing restaurants. And so we want to make sure that we're not going to do this restaurant in favor of hurting somebody else. And so we want to be cognizant of the franchisee who's working the particular, who is in the adjacent market or whatever.

So there's a lot of upfront homework that goes on, looking at our demographics, doing the reports, the decision logic on why we should be there. Understanding the comparable approach to taking a look at these restaurants, using all the tools that we have. Then the real estate person is also responsible for working with our construction team and getting an estimate on what the costs could be. And from there, they're working on the letter of intent at the same time, and then putting actually putting the P&L together. So we're kind of a soup to nuts organization in that we do all the initial work, then we take it up for the approvals somebody with and our finance team looking at what the whole deal and how that deal makes sense in terms of the whole portfolio.

You know, we have, we go from the LOI and then we get, that goes over to our in-house legal team and they prepare the leases and contracts and get that back out. So that negotiation is going on. And then at some point in time, when everybody's pretty comfortable with what's going on, the associate director goes out, takes a look at the site, takes a look at the real estate package. Approves a site or talks about what needs to happen with the site. And then from there, we take to our real estate committee. And at that point in time, it's up to the lawyers to, to finish up the lease or the contract.

And we're off to the races. So the other thing that's really unique about McDonald's is early on in that process as I was talking to members of my team and they were talking about sites we would do a little bit of homework on the computer and take a look at stuff and try to figure it out. One of the other things that's helped McDonald's push things along is. Leadership is committed to opening up a budget early on in the process. And so, so our real estate managers can spend some money on some of these outside surveys and traffic studies or whatever they need in order to get to that answer.

And so that's a commitment that management has made and has really helped the process along. And over the last couple of years, this is just a recent occurrence. So that's why we've gone from very long periods of time to being able to shorten this up. You know, it's all based on what the current leadership has kind of directed. The team to do over the last couple of years.

[44:59] Chris Hatch: So when the associate director is out there and reviewing the site, and then is it you then in your role as associate director where you were then presenting to rec?

[45:11] Bob O'Connell: No, our real estate managers present to REC. And so the real estate manager. Yeah. And actually, again, another thing that again, under the current leadership one of the things that they've done is to really help the processes. There's a couple of metrics that we have to meet. And if the real estate managers deal doesn't meet those metrics, then they need to go to real estate committee and they need to explain what's going on and why it doesn't meet those metrics. And then let the committee decide whether or not we're going to go forward. If the real estate manager brings a deal in and meets all the metrics, there's no real estate committee.

There's a sign off on the real estate package, and then it's off to the races. So again, I think bringing some new blood into McDonald's and changing the way that we've done business for almost 70 years, the current team really has been able to help the people on the team on the ground get a lot more done with making some pretty substantial changes.

[45:48] Chris Hatch: Who is REC comprised of? Who sits in on REC?

[46:12] Bob O'Connell: Senior directors in legal, finance, and real estate.

[46:18] Chris Hatch: So a three-person REC. Would you also attend a REC meeting with your real estate managers if they were presenting? Are those weekly, biweekly?

[46:24] Bob O'Connell: Absolutely. It's once a week. And again, they used to do them where there's a lot of stuff, a lot of sites and so it will go on for hours and hours. A typical REC meeting, we can fly across the country and everybody presents their stuff in an hour and a half at the most. I mean, it's really become a lot more efficient, a lot more. It's a lot better use of people's times. And again hopefully everybody is kind of. Paving the way for what's going to go on in REC. So it's just it's an easier conversation. So, yeah.

[47:04] Chris Hatch: Are the metrics gross sales and cannibalization?

[47:09] Bob O'Connell: It's a number of things. It's return on investment is probably the biggest thing that happens. You know, return on investment and you know what the potential on other restaurants might be. Those are probably the two biggest issues.

[47:23] Chris Hatch: You know, everybody always likes to describe McDonald's as a real estate company first and an operational company second. And really, depending on how that ROI is looked at, it may not be how things are actually running there these days.

[47:37] Bob O'Connell: No, it's absolutely still that. I mean, that we look at we look at what the system is going to get, what our operators are going to get. And we want to make sure that if you ever saw the movie The Founder, about Ray Kroc, it's really kind of interesting how they lay that whole thing out. And, there was a clip in there that Michael Keaton talking about you know, he was talking to the finance guy and they were saying you're not in the hamburger business, you're in the real estate business. And Ray Kroc's whole basis of the business was the operator is going to make money first.

And if the operator makes money, the company will make money. And so that's the way we really still look at it today is, if we don't have an operator that's successful, there's no reason that we need to be there. So it's really taking a look at kind of that bucket of cash and how we split it up.

[48:28] Chris Hatch: So the ROI metric is not only franchise sales, it's also what the investment is into the real estate, whether that's a ground lease or whatever, but you're still going to build the building and get a return on that. Yeah. Did you ever interact with Ray?

[48:34] Bob O'Connell: No, he was gone before I got there. It's interesting if you think about it over 70 years at McDonald's there really haven't been that many CEOs. So Ray was gone and, Mike Quinlan was kind of at the end of his tenure and, Jack Greenberg and Jim Cantalupo and Charlie Bell. I mean, they're really over 70 years, you know. Steve Easterbrook, Chris Kempczinski, not a lot of CEOs over the period of time. It's been, you know.

[49:18] Chris Hatch: We have a lot of listeners that listen in on the podcast that are newer to the biz. And so, you've you're a wonderful executive you spend you've had a wonderful career in commercial real estate. If you were talking now to the people that are listening to this that are five years or less in the business, do you have any recommendations or any advice for them?

[49:40] Bob O'Connell: Yeah, I mean, I think, as we talked about earlier on in the conversation is it's a small community that we work in. And so making sure that the messages that you're putting out there are messages that you can live with and that you can back up as you go on over time. I think your word is your bond in this business as much as anything any other business that's out there. And, from a McDonald's standpoint the one thing that I always used to tell my team is tell the McDonald's story tell the developer or tell the landlord how long it's going to take us to do stuff and what it is we're going to do.

And if you do that at the end of the day, you can come back and you could say, do you remember when we were sitting at your coffee table and we were having this conversation and I told you, this was what I was going to do. And this is what I needed you to do. That's kind of the story that we have to tell. And if somebody's new in the business... I used to work with somebody who would get a little bit crazy over the fact that there was a lot of text messaging going on and there was a lot of emails going on, pick up the phone and talk to somebody.

This is a relationship business. You know, it's I mentioned earlier you know, I've known Dan for a long, long time. I've known Don Ikeler for a long, long time. The reason I know these guys is because because of relationships. It was very heartwarming, when it got out there, that I was retiring the number of phone calls and emails and things on LinkedIn that I got, yourself included, thank you. You know, from people who have, again, either started at McDonald's or I've had relationships over the years, John [Likin] at [All-Star Car Wash], Brian [Tab] at Valvoline. You know, Don Ikeler at Chick-fil-A. I mean, there's a ton of people out there.

And, I used to tell people one of the reasons that I've lasted so long at McDonald's is because I can pick up the phone and I can get an answer and I can talk to a lot of people. And if we don't have the answer in-house, we'll get it from people outside. So I think it's building relationship, having that one-on-one communication and really talking and being honest about what the business is and where the business is going.

[51:58] Chris Hatch: What great pieces of advice in there. So, and I love that message. You are, you do have one reputation, right? And it only takes a few minutes to ruin it. And a lifetime to make it really, right? Great words of advice. Great ending to this podcast. We appreciate your time. Thanks so much, Bob O'Connell for coming on the Dirt Dog Pod. We wish you well in your retirement and hope you're enjoying life. And we hope to catch you out there in Chicago or Florida sometime.

[52:31] Bob O'Connell: Great. I'll see you down the road, Chris. Thank you very much. Take care.