<p>McDonald's is a fast food company, but actually gets most of its revenue from real estate.</p>
<p>Similarly, Hong Kong's Mass Transit Railway (MTR) makes &gt;50% of its revenue from real estate, rather than ticket sales.</p>
<p>In both cases, one could argue that the companies need to do their main jobs well in order to monetize using real estate. In the case of McDonald's, the marketing, operations and everything else that goes into fast food needs to be on point for franchisees to stay afloat and be able to afford the leases.</p>
<p>Similarly, the MTR's high quality services is what allows the city to function and for people to get around. Without the MTR and with private vehicles, the city would be gridlocked and sales in malls on MTR land would plummet.</p>
<p>Nevertheless, in both cases the revenues are clearly dependant on something external to the company's core business, to the extent that one can say that the core business is being subsidized by the other element. Is there a name for this phenomenon?</p>

CC BY-SA 4.0
2022-06-01T05:02:50.177Z
Not sure how you define "core business" here. McDonald's is a franchizing company, its core business is leasing. The core business of the franchise partners' is making food. So a word may be "misperception"?
Giskard
CC BY-SA 4.0
2022-06-01T13:48:38.037Z
One could argue that without the McDonald's brand and their efficient fast food operations, they wouldn't be so successful at leasing. After all, a leasing company doesn't have the expertise that McDonald's has at branding, advertising, logistics, food safety compliance etc. The core business of the franchise partners' is to follow directions laid down by McDonald's, so really McDonald's is doing the heavy lifting there.
Chaos
CC BY-SA 4.0
2022-06-01T16:39:36.717Z
Indeed, but in what are they doing this heavy lifting? How would you define "core business"? It seems like your question depends on the exact definition of this phrase.
Giskard
CC BY-SA 4.0
2022-06-01T20:54:22.703Z
I see that your argument is that what brings in money is the core business. My counterpoint is that if McDonald's hired a bunch of people who were bad at real estate management, the business would falter but not fail outright. If they hired people who were bad at food logistics, it would be a disaster. People would sue due to food poisoning and franchisees would steer clear. Perhaps there isn't a single core business and McDonald's needs both legs to stand on?
Chaos
CC BY-SA 4.0
2022-06-01T20:55:19.673Z
Would you call Hong Kong's MTR a real estate firm that dabbles in public transit?
Chaos
CC BY-SA 4.0
2022-06-02T05:12:33.350Z
I have no opinion on the matter, but without a precise (perhaps even sourced) definition, your question is unclear, and as such, not suitable for this site.
Giskard
<externalities><subsidies>
Is there a name for the phenomenon where a company supposedly in industry A actually gets most of its revenue from industry B?
Chaos
# Is there a name for the phenomenon where a company supposedly in industry A actually gets most of its revenue from industry B?

(Asked by: username_0 on 2022-06-01)

McDonald's is a fast food company, but actually gets most of its revenue from real estate.

Similarly, Hong Kong's Mass Transit Railway (MTR) makes >50% of its revenue from real estate, rather than ticket sales.

In both cases, one could argue that the companies need to do their main jobs well in order to monetize using real estate. In the case of McDonald's, the marketing, operations and everything else that goes into fast food needs to be on point for franchisees to stay afloat and be able to afford the leases.

Similarly, the MTR's high quality services is what allows the city to function and for people to get around. Without the MTR and with private vehicles, the city would be gridlocked and sales in malls on MTR land would plummet.

Nevertheless, in both cases the revenues are clearly dependant on something external to the company's core business, to the extent that one can say that the core business is being subsidized by the other element. Is there a name for this phenomenon?

**Tags:** externalities, subsidies

> **Comments:**
> **username_1**: Not sure how you define "core business" here. McDonald's is a franchizing company, its core business is leasing. The core business of the franchise partners' is making food. So a word may be "misperception"?  
> **username_0**: One could argue that without the McDonald's brand and their efficient fast food operations, they wouldn't be so successful at leasing. After all, a leasing company doesn't have the expertise that McDonald's has at branding, advertising, logistics, food safety compliance etc. The core business of the franchise partners' is to follow directions laid down by McDonald's, so really McDonald's is doing the heavy lifting there.  
> **username_1**: Indeed, but in what are they doing this heavy lifting? How would you define "core business"? It seems like your question depends on the exact definition of this phrase.  
> **username_0**: I see that your argument is that what brings in money is the core business. My counterpoint is that if McDonald's hired a bunch of people who were bad at real estate management, the business would falter but not fail outright. If they hired people who were bad at food logistics, it would be a disaster. People would sue due to food poisoning and franchisees would steer clear. Perhaps there isn't a single core business and McDonald's needs both legs to stand on?  
> **username_0**: Would you call Hong Kong's MTR a real estate firm that dabbles in public transit?  
> **username_1**: I have no opinion on the matter, but without a precise (perhaps even sourced) definition, your question is unclear, and as such, not suitable for this site.  

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