Recently, a large international corporation made a significant decision to overhaul its real estate strategy, raising important questions about its potential impact on the company’s core business and long-term growth. Key questions include: What happens if this strategic shift disrupts crucial aspects of its operations? How can short-term cost savings be balanced with long-term value creation? Furthermore, as online ordering and food delivery reshape consumer behavior, the once-unquestionable mantra of "location, location, location" appears to be losing relevance. At the same time, an interesting observation emerges: While many local businesses and investors struggle with real estate losses, international corporations often thrive and sustain profitability. This stark contrast highlights the critical role of strategic foresight, scalability, and adaptability in navigating today’s real estate challenges in the food service industry.

For decades, industries like fast food and retail relied on securing high-traffic, highly visible locations near schools, shopping centers, or busy intersections. Physical proximity to customers was considered indispensable, and owning or leasing prime real estate was central to business success. However, the rise of online food ordering and third-party delivery platforms has shifted the focus. Today, many consumers prioritize convenience, delivery speed, and reliability over physical proximity. Instead of deciding where to dine based on visibility or accessibility, they now rely on mobile apps, algorithms, and customer reviews to guide their choices. As a result, the traditional emphasis on prime locations as the foundation of real estate strategy is being challenged.

In response, many corporations are investing in delivery-only “ghost kitchens,” which focus exclusively on food preparation for delivery orders. These facilities are often located in lower-cost, industrial, or suburban areas, far removed from the expensive, high-traffic urban locations that were once essential. By reducing real estate expenses while maximizing delivery efficiency, companies can better meet the expectations of modern consumers. This shift reflects a broader trend: Operational efficiency and digital accessibility are becoming as important as physical visibility.

Leasing lower-cost properties for ghost kitchens might free up capital for other operational needs, but it also increases dependence on third-party delivery platforms. These platforms often charge high fees, which can erode profit margins over time. Additionally, over-reliance on delivery services introduces vulnerability to platform policies, algorithm changes, and market competition. On the other hand, owning high-visibility flagship locations offers long-term benefits, such as reinforcing brand identity, building customer trust, and maintaining a tangible presence in key markets. Even in the delivery-first era, flagship locations serve as valuable marketing tools that enhance brand recognition and customer loyalty. Striking a balance between these two approaches—short-term cost savings and long-term value creation—requires an adaptable strategy.

Interestingly, while global corporations appear well-equipped to navigate these shifts, local businesses and smaller investors often struggle. This disparity stems from several advantages that international corporations possess. First, they have access to advanced analytics and market research tools, allowing them to make data-driven decisions about real estate investments and operational efficiencies. By contrast, local businesses often lack the resources or expertise to analyze market trends effectively, resulting in higher risks of poor investment decisions.

Second, international corporations benefit from economies of scale. They can diversify risks across a broad portfolio of properties and test innovative concepts, such as ghost kitchens, in select markets without jeopardizing their overall operations. Smaller businesses, constrained by limited resources, cannot afford the same level of flexibility and experimentation.

Third, global corporations possess strong, recognizable brands that dominate online delivery platforms. These brands often appear prominently in app search results, ensuring higher visibility and order volumes. Local businesses, with limited brand recognition and marketing budgets, struggle to compete in this digital ecosystem. The ability to leverage brand equity in both physical and digital spaces gives larger corporations a significant competitive edge.

Finally, access to global capital markets provides international corporations with financial resilience to weather short-term losses and invest in long-term strategies. Whether acquiring properties in emerging markets or adjusting to delivery-first models, these companies can fund their strategic pivots without endangering their overall stability. Local businesses, with fewer financial resources, face greater vulnerability to market fluctuations and economic downturns.

Despite the declining emphasis on physical location, it would be premature to dismiss its importance entirely. Strategic flagship locations continue to serve as essential brand ambassadors, signaling reliability and reinforcing customer trust. These locations remain vital in shaping consumer perceptions and creating a tangible connection to the brand. The future of real estate strategy lies in finding a balance between maintaining these high-visibility locations and adapting to the growing demands of the delivery economy. Many corporations are embracing hybrid models that integrate flagship stores with ghost kitchens and delivery hubs, enabling them to cater to both traditional customers and digital-first consumers.

The recent change in real estate strategy by a large international corporation underscores the ongoing transformation of property investment in the food service industry. As online ordering and delivery redefine consumer priorities, companies must rethink how they approach real estate decisions. Balancing short-term efficiencies with long-term growth remains a complex but critical challenge, particularly as the importance of digital platforms continues to grow.

Ultimately, the disparity between the challenges faced by some local businesses and the success achieved by numerous international corporations highlights the vital role of scale, data-driven strategies, and adaptability in navigating the complexities of today's ever-evolving retail landscape. While the traditional mantra "location, location, location" may no longer serve as the primary determinant of success, real estate remains a fundamental pillar of corporate strategy. We must now integrate seamlessly with the digital-first realities of contemporary commerce. McDonald's recent strategic decisions exemplify this transformation, representing not a politically motivated choice but rather a calculated business strategy that validates the insights presented in our previous analysis of Hong Kong's retail market challenges. As we previously argued, successful retailers must embrace change and adapt their operational models to thrive in an increasingly complex marketplace where physical presence and digital accessibility must work in harmony to create sustainable competitive advantages.

By Dr. Bankee Kwan

Member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and the Permanent Honorary President and Past President of Federation of Hong Kong-Shanghai Associations

Dr. Philip Wong

Deputy Director of STEAM Education and Research Centre, Lingnan University

The views do not necessarily reflect those of Orange News.

Cover Photo: AFP