Company Focus – McDonalds

With all the incessant bad news we hear on a daily if not hourly basis it is always nice to find stories of success in the investment world – a follow up to my post on Blackberry showing the risks involved with doing business across borders and in Blackberry’s case the current struggles it faces. mcdvoice com

Regardless of where you live in the world McDonalds is a brand that most have heard of – whether it be the Big Mac or Ronald McDonald the burger restaurant has had a massive worldwide impact – the company is located in 119 countries with over 31,000 restaurants and serves and astonishing 47 million customers per day. In the last decade McDonalds has undergone a massive revamp of the brand – from the menu to the addition of cafe style options and wi-fi. The obesity epidemic saw McDonalds offer menu option considered more healthy and appealing to a wider range of consumers. The revamp has proved an incredibly success driving an increase in customer visits and sales resulting a share price that has gone up almost 147% over the last 10 years and an 18% increase in market share in the US. It is one of the few US companies that has shown growth during the current recession.

Arguably McDonalds has proved more successful overseas than in the US. In Europe, where the recession has been as intense (if not more) as the US, 41% of all sales now come from the region (up from 33% in 2000) – in fact France is home to the most profitable McDonalds in the world. France also has the distinction as being one of McDonald’s fastest growing regions. Over the last 15 years McDonald’s overseas revenues have steadily increased – today they are responsible for 65% of overall earnings. While it has been a later entrance in the developing world McDonalds is making quick headway. From my perspective there seems to be a McDonalds on every corner here in KL – and they are always full.

One reason McDonalds has always been a great stock is the fact it owns almost half the land and 70% of the buildings its franchises sit on. It makes McDonalds one of the world’s largest rental agencies – even if sales fall McDonalds has a steady stream of rent it collects from its franchises.