💰 🏠 Property or Franchising — Where Should Your $250K Go?

Welcome to the Franzy Five — your 5-minute fix on what’s moving in the franchise world.

This week, we tackle one of the most common investor questions we’ve received: Does capital go further in real estate or franchising? With rental returns squeezed by high rates and rising costs, franchises are standing out for stronger margins and cash flow. The tradeoff? The investment style and level of involvement are completely different.

Also in this edition:

🍩 Krispy Kreme scrambles after its McDonald’s deal collapses
🥗 Franchise menus evolve as health, tech, and social media drive change
🍟 McDonald’s subsidizes franchisees in a new value war

Let’s get into it.

💰 Franzy Insights: Franchises vs. Real Estate — The Cash Flow Showdown

For decades, single-family rentals were the default wealth-building play. But with interest rates stuck near 7% and housing prices at record highs, the math has changed. Meanwhile, franchises are emerging as a faster path to both cash flow and scale. Let’s break it down:

• Real estate is slowing: Nationwide, single-family rentals average just 4–8% cash-on-cash returns (MashVisor). With today’s mortgage rates, many properties are negative cash flow until rents catch up.
  

• Franchises deliver better returns higher: Solid service and food brands routinely deliver 15–30% EBITDA margins, with a single unit netting $50K–$150K+ in owner income.
  

• Scale looks different: It can take 8–12 rental homes to generate $50K a year (RentToRetirement). One strong franchise unit can hit that alone, and multi-unit operators often scale into six- and seven-figure incomes.

Our Take:
Both real estate and franchising are asset classes built on leverage, local market knowledge, and replication at scale. The difference is control and velocity. Real estate wealth compounds slowly — you wait for appreciation, refinance, or rent increases. Franchising is more active, but it can pay faster. Operators can reinvest cash flow into more units, grow resale value, and often exit at high EBITDA multiples.

And here’s the crossover most people miss: short-term rental owners often make excellent franchisees, especially in home services. Why? They already manage multiple “doors,” know how to market locally, and understand operational systems. The investor playbook is converging, but if you want bigger near-term cash flow and the ability to scale equity faster, franchising may be the better bet.

🍩 Krispy Kreme Melts After McDonald's Deal Collapse

Summary:

• Krispy Kreme stock has dropped 73% from its yearly peak after its partnership with McDonald's abruptly ended

• The failed rollout cost the company $30M in impairment charges and led to a quarterly loss of $441M, compared to just $5M last year

• To recover, Krispy Kreme plans to sell international units to franchisees, outsource logistics, and expand distribution through Walmart, Costco, and Kroger

Our Take:
Krispy Kreme is learning a hard franchising lesson: never put all your growth in one basket. The McDonald's partnership looked like a golden ticket, but when support fizzled, volumes collapsed, and the brand was left exposed. Now, Krispy Kreme is scrambling to cut costs and shift strategy back to retail distribution and refranchising.

For franchising, this is a cautionary tale. Partnerships can fuel rapid growth, but they can also unravel overnight. The strongest brands diversify their distribution and avoid leaning too heavily on a single channel. Krispy Kreme may bounce back, but the McDonald's flameout shows the risks of chasing a silver bullet.

Link to The Independent →

🥗 Franchises Race to Keep Up With Shifting Consumer Tastes

Summary:

• Consumers are demanding healthier options, sustainability, and personalization, pushing chains to diversify menus and rethink sourcing

• Franchisees are adapting with lighter items, smaller portions tied to GLP-1 use, plant-based additions, and grab-and-go formats

• Social media and tech are fueling faster change, from AI-driven demand forecasting to viral menu innovations like boba, smash burgers, and freeze-dried treats

Our Take:
Consumer tastes are evolving at a pace that is reshaping franchising. What worked a decade ago, big portions and cookie-cutter menus, now feels out of step with health-conscious and socially engaged diners. Operators like Jersey Mike’s, Pop’s Beef, and Jeremiah’s Italian Ice show how local franchisees can adapt: adding lighter sandwiches, gluten-free and vegetarian choices, and viral menu mashups that keep them culturally relevant.

The deeper trend is personalization plus experience. Guests want menus that reflect their values and lifestyles, and they want to share it online. For franchisors, that means giving franchisees enough flexibility to localize while maintaining system-wide consistency. For franchisees, it means staying nimble, using data and tech to predict demand, and treating the menu as a living tool for growth. Those who adapt fastest will capture the next wave — those who don’t risk fading into irrelevance.

Link to Franchising.com →

🍟 McDonald's Doubles Down on Discounts to Win Back Diners

Summary:

• Franchisees operate 93% of U.S. McDonald's locations and only agreed to price cuts after corporate pledged to subsidize losses and co-fund marketing

• Combo meal prices will drop about 15%, with Big Mac meals falling from $10 to $8.50 and breakfast staples like the Egg McMuffin hitting $5

• The push comes after reports of $18 Big Mac combos, a 73% traffic slump in Q1 vs 2024, and mounting pressure to restore the brand’s value reputation

Our Take:
We touched on McDonald's struggles in a recent newsletter piece. This latest move reveals just how delicate the corporate–franchisee relationship is. McDonald's could not force value pricing without operator buy-in, and that required subsidies. That’s unusual for a brand that built its empire on efficiency and franchisee profitability.

For franchising more broadly, it’s a reminder of the push and pull between corporate strategy and unit-level economics. Operators want volume, but not at the expense of margins. Corporate wants to protect the brand’s value perception, even if it means writing checks. If McDonald's, the most powerful franchisor in the world, has to pay its franchisees to discount, it signals how high the stakes are in today’s fast food “value war.”

Link to WSJ →

✂️ Snippets

👥 Reverse Franchising Turns Employees into Micro-Owners (Programming Insider)

💡 The Pivot That Put One Franchise on Track for $7 Million (Entrepreneur)

🌎 Global Franchises Set Their Sights on U.S. Expansion (Franchise Times)

🚁 Chipotle Tests “Zipotle” Drone Delivery (Mashable)