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The former. They choose the location.
It is incredibly hard to be selected to own a franchise. It takes a whole lot of money and a significant (nearly 2 years on and off) amount of unpaid work to even get the chance to be offered one including 6 months unpaid flipping burgers. The cost varies by location, but its not unheard of to need £2m cash.
EDIT: Just noticed that your 6 months unpaid restaurant experience happens after your first interview and before your second and third interviews, before you have even been approved to buy a franchise.
I am not a blind McDonalds fanboy, but from a business and maintenance of food standards perspective, they are simply phenomenal in what they do.
Stonehedge
I guess a lot of people would eat at a McDonald's because it's there but wouldn't actively do anything to get a new one approved.
Question about franchises - does McDonald's choose a location based on demand and then find a franchisee, or does a franchisee find somewhere and then ask McDonald's to become one?